Carnell slams supply chain finance schemes as exposé reveals Rio Tinto, Telstra pushed “dynamic discounting” on SMEs

Small business ombudsman Kate Carnell has issued a warning to big businesses using supply chain finance arrangements to force SMEs to choose between faster payments or a dock in their pay, amid new reports some of Australia’s largest companies have been using the tactics.

A set of comprehensive reports in The Australian over the last week have shone a light on the use of supply chain finance arrangements at telecommunications giant Telstra and mining business Rio Tinto, renewing industry concern about late payment terms for small businesses.

The paper revealed last weekend that Rio Tinto was pushing a “dynamic discounting” program on its 10,000 Australian suppliers, proposing to cut invoices by about 2% if a supplier wants to be paid within 30 days.

The fallout over the story came to a head on Wednesday when Rio Tinto agreed to dump the scheme amid widespread criticism from suppliers.

The revelations come amid an ongoing Australian Small Business and Family Enterprise Ombudsman (ASBFEO) investigation into the effects of extended payment terms on SMEs.

“Recent reports of big businesses using supply chain finance platforms that use artificial intelligence to calculate the discount a supplier may be willing to accept, are disturbing,” Carnell said in a statement circulated Thursday.

“These types of reverse factoring products that vary based on how desperate the supplier is, are being closely looked at as part of our ongoing Supply Chain Financing Review.”

Carnell said big firms were using their “dominant position” to squeeze small business margins, saying the only way to level the playing field would be new laws.

The call puts additional pressure on the Morrison government to step in and protect small businesses from supply chain financing arrangements.

Small Business Minister Michaelia Cash told Senate Estimates in October last year that it was “unacceptable” for big businesses to take longer than 30 days to pay SME suppliers when the government had adopted a 20-day timeframe.

But Cash stopped short of officially referring an inquiry into supply chain finance arrangements to ASBFEO, which has limited its investigative powers.

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