Queensland Alumina Limited (QAL) has recently made a significant change to their payment terms, a move which has been applauded by the Gladstone Engineering Alliance. The change sees payment terms move from 45 days to 30 days for all suppliers with an annual spend of $1 million.
QAL’s current standard terms are 45 days from the end of the month after an invoice has been received. These terms remain in place for larger organisations with expenditure in excess of the annual spend limit; however, for suppliers with an annual spend of $1 million those terms are now 30 days.
GEA President Ken Corfield, whose own business has been affected significantly by late payment terms from a North Queensland miner said even though QAL already had reasonable payment terms of 45 days, the announcement of 30-day payment terms for suppliers needs to be applauded.
“There have 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,” Mr Corfield 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.”
Mr Corfield said a recent parliamentary inquiry into how the mining sector can better support regional suppliers highlighted the significant issues surrounding 90-day payment terms. “For QAL to move from 45-day payment terms to 30-day payment terms is a great move which will better support the local supply chain,” Mr Cofield added.
A recent report “Economic Analysis of impacts of extended payment terms” revealed the difficulties in raising finance to cover extended payment terms which have led a number of firms to cut back on planned employment, reduce investment in more productive new plant and equipment, and defer 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. “Rio Tinto has been leading the way for some time now in reducing payment terms across Australia and with QAL now reducing their payment terms to 30 days I believe there will be a significant increase in cash flow for businesses across the region.”