Rio Tinto will reduce the payment terms for smaller suppliers to 30 days in a bid to improve cash flow for those businesses.
The 30-day payment terms will apply to Australian suppliers under $1 million of expenditure and will begin on July 1.
Rio’s current payment terms are 45 days from the end of the month after a correct invoice has been received, and this will remain for larger businesses.
Rio said nearly 300 existing suppliers including Aboriginal businesses and charities are on payment terms of less than 30 days, which will remain unchanged.
It added that several businesses that have negotiated payment terms will not be affected by the change.
Rio Tinto managing director Australia, Joanne Farrell, said, “Faster payment terms will help our smaller suppliers manage cash flow and help our local business partners to grow.
“A supply chain of strong local suppliers is good for our business, good for local communities and good for the economy.”
Last year, Rio came under fire from State and Federal Governments for increasing its payment terms from 45 days to 60-90 days due to the tough commodity market.
The new terms come after Rio announced a new procurement programme for Western Australian and Pilbara Aboriginal businesses, providing them more opportunities to bid for contracts with the company’s iron ore business.