The ASBFEO has announced a review of supply chain finance to uncover its impact on SME and family enterprise cash flow and to investigate whether larger businesses are inappropriately using the product.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, has announced the launch of a review into the impact that supply chain finance has on the small business and family enterprise sector.
The review will examine the ways in which small and family businesses can use supply chain finance as a means to better manage their cash flow and fund business growth.
It will also look at the products being utilised by larger entities to offset extended payment times.
It has reportedly been brought to the Ombudsman’s attention that supply chain finance arrangements have been utilised by large businesses as an option for earlier payment to suppliers.
Since then, a significant number of small businesses have contacted the Ombudsman’s office in relation to supply chain financing issues, the ASBFEO said.
Ms Carnell stated that she disagrees with big businesses utilising supply chain financing in this manner.
“Supply chain finance is a legitimate and effective tool to free up cash flow for small and family businesses,” she said.
“However, it is totally unacceptable for big businesses to use supply chain financing arrangements as a replacement for reasonable payment terms being offered, 30 days or less from invoice.”
She highlighted that the review will look into what options are currently available for small businesses using supply chain finance and is urging small buisiness who have had experience with supply chain financing to contribute to the review via the Ombudsman service.
“This review will provide a clearer picture on the range of supply chain finance options available on the market and which industries are using these products.
“More large businesses are offering supply chain finance to small businesses, and we are keen to find out what’s driving that,” she said.
However, it will also focus on discovering if and how larger businesses are manipulating the system.
“The review will investigate whether supply chain finance is being used by big business as a means to stretch out formal payment terms and as a strategy to manipulate the reporting of working capital and cash reserves.”
An initial report on the reviews findings is expected to be completed by the Ombudsman by March 2020, with a full report to be released in April 2020.
The review comes as the ASBFEO office increases its gaze on small business finance.
Earlier this year, the ASBFEO released a Business Funding Guide, an “industry first” guide created to help brokers, accountants, bookkeepers and financial advisers understand the plethora of SME financing options available.
The first edition of the guide was launched by the ASBFEO in partnership with Scottish Pacific Business Finance in July of this year to “tackle the access-to-funding crisis” being faced by SMEs.
It came with a supplementary guide for SMEs that aims to help small businesses become “finance fit” in order to give them their best chance at securing the funding they need.
[Related: Invoice financing: A win-win]
Hannah Dowling is a journalist for The Adviser and Mortgage Business.
Prior to joining Momentum Media, Hannah worked as a content producer for a podcast catering to property investors. She also spent six years working in the real estate sector at a local agency.
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