Institute of Certified Bookkeepers

A suite of products generically referred to as ‘supply chain finance’ (SCF) were being offered to facilitate early payment to suppliers.  As a supplier to big business, your customer states their payment terms are 90 days or longer but you could get paid in 30 if you take out this "Supply Chain Finance".

Supply Chain Finance is not wrong but when a large customer forces delayed payments and promotes a Finance option in order to receive payment, is it right?

Have your say!

The Small Business and Family Enterprise Ombudsman are conducting a review

Draft recommendations

  1. Consistent small business definition The small business definition adopted across Government should be either to simply define small business as not including, say, the top 100 companies or “(a) a small business has fewer than 100 employees or (b) less than 100 employees, with satisfaction of either (a) or (b) being sufficient to qualify as a small business”.

  2. Enforceable payment times The Supplier Payment Code should be replaced by the Commonwealth Government’s Payment Times Reporting Framework with that Framework being administered and enforced by an appropriately funded, empowered and proactive entity.

  3. 30 day payment standard The minimum standard for all supplier payments (regardless of supplier size) should be 30 days.

  4. SCF as a real choice SCF should be available to small business to reduce payment times from 30 days to better.

  5. Appropriate coverage by accounting standards The accounting standards need to provide greater clarity and properly cover SCF to ensure that accounts cannot be manipulated, particularly to mask cash flow issues and insolvency.

  6. Further review from competition perspective The ACCC should review SCF provider activity from an Australian Competition Law viewpoint, including how data is applied through using artificial intelligence and algorithms.

  7. Further review from regulated financial product perspective Treasury and ASIC should review whether SCF should be a regulated financial product with coverage of rate setting.

Read the full paper Review Paper
 
Answer the questions
  1. Consistent small business definition

    1. For consistency, should there be a single definition of small business for payment terms?

    2. If so, what should that definition be? (For example, $10m turnover?)

  2. Enforceable payment times

    1. Is there a need for a mandatory Supplier Payment Code?

    2. What role does the proposed Commonwealth Government’s Payment Times Reporting Framework have in:

      1. Assessing payment terms performance when SCF is utilised; and

      2. Auditing and issuing fines or other sanctions for non-compliance?

  3. 30 day payment term standard

    1. For consistency, should there be an economy wide 30 day payment term mandated?

    2. For government contracts, how could 30 day payment terms be made to flow down supply chains to small business suppliers?

  4. SCF as a real choice

    1. Should SCF be available to small business to reduce payment times from 30 days to

      better?

    2. What forms of SCF are of the greatest benefit to small business?

  5. Appropriate coverage by accounting standards

    1. Should the Australian Accounting Standards Board (AASB) be consulting with its international counterparts to provide clarity as to how to capture and treat SCF in financial reporting?

    2. Should auditors be given formal guidance to ensure consistency in the financial reporting (by note or otherwise) of entities using any form of SCF?

    3. How do small and family business accountants become educated as to what SCF is and what its implications are for reporting?

  6. Further questions from competition & regulated financial product perspectives

    1. What protections are required for small business that have their business performance

      data captured and stored by big business that may be shared with third parties?

    2. Should a small business receive a copy of the contract between the finance provider or platform provider and the other party to the supply chain transaction (buyer)? With the goal of transparency, what data should be shared between the provider and the buyer?

    3. Is there a role that the ACCC needs to play in regards to unconscionable conduct or third line forcing? Are there any other areas that the ACCC should consider?

    4. Should a contract providing SCF in any form be regulated as to how it is implemented/utilised by a big business?

    5. What mechanisms could protect small business users of SCF from the costs and administrative burden of having to engage with several buyer-led SCF providers?

    6. Should the SCF provider report the effective annualised rate of interest charge/discount?

    7. Should the effective annualised interest rate/discount be reported publicly as a “comparative rate”?

    8. Is there a role that the Australian Securities and Investments Commission (ASIC) needs to play?

    9. Is there a role that the Australian Financial Complaints Authority (AFCA) needs to play?

Submissions can be made by emailing to inquiries@asbfeo.gov.au and are due by close of business, 28 February 2020.

  • 18 February 2020
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