Rio Tinto commits to 20-day payment terms for SMEs

17 February 2020

Mining giant, Rio Tinto, has commited to pay its small Australian suppliers within three weeks of invoicing.

The move - which will apply to SME suppliers with an annual turnover of less than A$10m - is an improvement of ten days, and will see Rio Tinto promising to pay its suppliers after just 20 days. 

The commitment will be a vital boost to small businesses, who frequently suffer the scourge of late payment. According to latest data from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Australian SMEs are paid late 53% of the time - amounting to A$115bn - with the average invoice taking more than 36 days to process. 

Rio Tinto’s chief commercial officer, Simon Trott said: “Small businesses are often the lifeblood of the communities in which we operate, and being paid quickly is important for their cash flows. 

“That is why we are shortening our payment terms to less than three weeks in order to further strengthen our partnership with smaller Australian suppliers - suppliers that are a vital part of Rio’s supply chain.”

As part of the new policy, Rio Tinto changed its definition of small suppliers from being those who supply up to A$1m of goods and services to those with annual turnover of up to A$10m. The new payment terms will benefit 90% of its suppliers, the firm said. 

The new payment terms reflect a desire to simplify its procurement terms and improve its relationship with suppliers, Rio Tinto said. 

Ombudsman Kate Carnell welcomed the changes, suggesting that unless others follow suit, she may well be forced to legislate to better protect SMEs.

She said: “Australia’s big businesses have had more than enough chances to do the right thing, so if they can’t follow Rio’s lead, I will have no choice but to recommend legislation requiring 30-day payment terms across the board.”

Positive news on payment terms comes after Radio New Zealand reported the New Zealand government was threatening to sue the mining giant, accusing it of failing to deal with hazardous waste at a disused paper mill it owns.

Environment minister, David Parker, said he was considering legal action against the company, claiming it had reneged on a verbal agreement to remove waste stored in Southland for the past six years.

The legal threat was prompted after 10,000 tonnes of ouvea premix in a disused paper mill came close to releasing a cloud of toxic ammonia gas when flood waters recently came near it.

Parker said Rio Tinto needed to live up to the corporate responsibility it pledges on its website and clean up its "mess".

"For Rio Tinto to try and escape some responsibility for cleaning up the mess that comes from their own smelter, it's outrageous,” he was quoted as saying. "You know, it talks about preserving grizzly bears in Canada and migrating birds in Australia. Well perhaps Rio Tinto could take the same stance when it comes to the people and the environment of Southland."

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