Prime minister, WA premier slam Rio’s new payment terms

The heads of WA and the country have waded into the Rio Tinto supplier payment debate, slamming the miner’s new payment terms.

Last week Rio Tinto announced they would double their terms of payments from 45 days from receipt of invoice to 90 days, an unprecedented period which could see invoices received at the start of the month paid 120 days later.

This is the second change to terms of payment dictated by Rio Tinto in nine months, when Rio Tinto shifted the goalposts from 30 to 45 days for payment of accounts.

A spokesman for Rio Tinto said the change was intended to “free up cash and reduce working capital so that we can preserve and maintain jobs and suppliers in tough global environment for commodities”.

BHP changed their terms of payment shortly after Rio’s last change, from 30 days to 60 days, leaving Fortescue the most prompt paying iron ore major in the Pilbara, keeping their terms at 30 days.

Current Rio Tinto CEO Sam Walsh said the increased payment deadline would free up company cashflow as a way of dealing with low commodity prices, while the West Australian suggested the move would increase the company’s cash balance at the time of Walsh’s departure from the company at the end of the financial year.

The decision immediately drew flak from West Australian MLA, and for WA Nationals leader Brendan Grylls, who has considered a motion to parliament to establish an inquiry.

Now Barnett has dubbed Rio’s moves as neither “fair nor reasonable”, and plans to register the state’s objections directly with Rio Tinto’s iron ore head Andrew Harding.

“Rio Tinto is a big company, a global company, and it makes, even at low iron ore prices, very good profits in WA,” he told the West Australian.

“To shift that financial burden on to local contractors including many small businesses, I don’t think is a good policy and I’m hoping Rio Tinto will reverse that.

“I don’t think it is a fair or reasonable thing to do.

“I hope Rio reconsider. Long term operations depend on having local contractors for maintenance work, expansion, whatever else.”

Prime minister Malcolm Turnbull also commented on Rio Tinto’s new terms after he met with contractors and suppliers in the Pilbara.

“I met yesterday in Karratha with many of those small businesses … and this was one of several issues that they raised with us and I will raise that concern, as I undertook I would, with Rio Tinto,” he told reporters during his tour of the Pilbara earlier this week.

  • The Grafter

    I am very impressed that the Government do gooders, are now looking at company payment terms. This is and has been going on for many years with big large multi national and Government company’s, this is nothing new to small suppliers its only news to government do gooders because it is now going to affect them and there votes. Start to look after the small company’s as well as just the large company’s or just get out of our life’s and let us get on in voting who is really interested in all our issues on going forward.

  • rbj1503

    One wonders whether this is a result of Rio outsourcing their accounts payable to India. In all my years in business I have yet to see a successful outsourcing of what is a basic function for any business. Some half wit thinks it will save a few dollars but the real cost in terms of reputation and greater inefficiencies far outweighs any small benefits (if there ever were any). I can just imagine the numerous queries going back and forth between Aust and India trying to resolve issues that could have been fixed immediately if handled locally. And in the meantime the poor contractor, who has already been screwed financially, has to bear a further burden because of Rio’s incompetence.

  • Jim

    Have you people been hiding under a rock – I can remember when I had a product to sell more than 30 years ago it was going on then. The answer is simple, add the interest the bank charge you -plus and or do not supply the service. If you need the business that bad then your already in trouble, to many eggs in one basket?
    If the any government was for small business then they should act.