'Good for economy': Gladstone refinery makes payment change
SMALL businesses have thanked Queensland Alumina Limited for its recent change to payment terms from 45 days to 30 days for some suppliers.
While its standard terms are 45 days from the end of the month after an invoice has been received, the organisation recently changed the terms for contractors with an annual spend of less than $1 million.
Now those businesses will be paid within 30 days.
QAL chief financial officer Chantelle Essa said the change was implemented on November 1 and affected 95 per cent of suppliers.
"We recognise that cash flow can be a barrier for some businesses, so we wanted to ease this burden for our suppliers," Ms Essa said.
"Our procurement spending is vital to many small businesses in Gladstone and we understand that lengthy payment terms can create cash flow pressures for small to medium sized suppliers."
She said faster payment terms would help smaller suppliers manage cash flow.
"A supply chain of strong local suppliers is good for our business, good for local communities and good for the economy," she said.
Ken Corfield, Gladstone Engineering Alliance president and owner of Corfield's Electrical, has been affected significantly by late payment terms with a north Queensland miner. Mr Corfield said even though QAL already had reasonable payment terms of 45 days, the announcement of 30-day terms needed to be applauded.
"There has been strong concerns from the supply chain about the adverse impact of extended payment terms on businesses who may need to carry the cost of work in progress for several months before receiving revenue for their work," he said.
"The ongoing viability of businesses has been threatened by extended payment terms especially if they are unable to secure finance for their operations to cover their regular and unavoidable outlays such as wages, superannuation, and taxation payments."
A recent parliamentary inquiry into how the mining sector can better support regional suppliers highlighted the significant problems with 90-day payment terms.
Similar issues were also highlighted in the Economic Analysis Of Impacts Of Extended Payment Terms report, which revealed difficulties in raising finance to cover extended payment terms.
It said this had led to some firms cutting back on planned employment, reducing investment in new equipment and deferring investment in research and development.
"Most of the major industries in the Gladstone region have reasonable payment terms; however, further out into the central Queensland region there has been major issues where businesses have even closed down their operations due to not having cash flow," Mr Corfield said.