Large builders throughout Australia are hoarding cash owed to suppliers and subcontractors and are using muscle to pay invoices later than their smaller counterparts, according to the latest report.
Unveiling its first quarter analysis of payment trends for the first quarter of 2017, credit reporting outfit Dunn & Bradstreet reported that where small businesses (less than 500 employees) within the construction sector were late in paying invoices to large suppliers, the average period of late payment was only fourteen days.
However, where large construction companies were late in paying smaller subcontractors or suppliers, the average late payment time was around 20 days – six days more longer.
Contractors Debt Recovery managing director Anthony Igra describes a power dynamic whereby large construction companies pay their smaller suppliers and subcontractors late because they are able to do so with impunity and no penalty.
He says Australia needs a late payment code or legislation which would penalise companies late paying companies.
Igra says there have even been stories of large contractors placing money owed to smaller suppliers on the short-term money market in order to make a return before paying the money out.
“That is fair to say and has been going on for a very long time, especially in construction” Igra said, asked whether or not it was fair to say that larger contractors were hoarding money at the expense of smaller suppliers.
“Large companies have the luxury of referring the contractor to ‘the accounts department’ and that is where the contractor remains…for months. The accounts person blames the project manager, and the project manager refers back to accounts. In my view this is deliberate and a planned strategy.”
“It’s a pure reflection of the power dynamic. They pay late because they can; and at no risk and AT NO COST. They suffer nothing out of holding all that money for months.”
Across all industries, 40.2 percent of Australian businesses are late to pay their bills, with average late payment times for those who did pay late standing at 15.3 days.
Overall, construction was the sixth highest industry in terms of late payment times by sector, behind mining, utilities, manufacturing, retail trade and wholesale trade.