‘Very scary’: Payment terms of 120 days now common for trucking operators
FBT Transwest boss says more and more end customers are pushing out payment terms.
A growing number of the trucking industry’s customers are trying to force operators to accept 120-day payment terms, the managing director of FBT Transwest says.
Cameron Dunn told a recent road safety summit that 120-day terms are now a common feature in contracts put out to tender.
This comes despite efforts by the Road Safety Remuneration Tribunal (RSRT) to improve the situation. It last year mandated 30-day payments for sub-contractors and owner-drivers.
"It is more common now that contracts will come out that’ll push for 120 days," Dunn, whose business is involved in dangerous goods, says.
"I’ve mentioned it to some people and they are aghast. Well that’s actually quite factual and more and more, as day goes by, end companies are pushing us out."
Dunn says companies are employing logistics experts during the contract tendering process and ordering them to reduce transport costs — a move that has led Dunn to refuse work to avoid agreeing to harsh terms and conditions.
"I won’t be pushed to not do the right thing," he says.
Dunn’s comments caught the attention of federal Labor senator Glenn Sterle, who attended the summit which was organised by the Transport Workers Union (TWU).
Sterle raised concerns about payment terms and says he knows of a large food manufacturer attempting to institute 90-day payments.
"This is a monster and all this will do is crush competition and it will squeeze the living daylights out of a lot of operators," he says.
While small-time trucking operators with limited cashflow stand to suffer from lengthy payment terms, Dunn says large transport firms are agreeing to 120 days.
"Now why do you think the larger companies are saying yes? They’re saying yes because they’ve got the ability to be able to cover that cashflow with their other contracts," he says.
"They have some of their contracts at 120 [days], some at 14, some at seven. But they also then push out payments to their suppliers, so it’s ever revolving. They’ll push the tyre supplier out, possibly, to 120 days.
"It’s happening. It’s more and more. It’s certainly out there and its scary, it’s very, very scary."
Dunn also touched on the addition of key performance indicators (KPIs) in contracts and the effect they are having on freight rates.
He says contracts generally include KPIs relating to the environment, safety and tonnage and that if a trucking company does not meet them then the customer has the ability to reduce payments.
"There are some contracts when you actually read them, you can actually start off carting for $1 a tonne and and up after two years at 80 cents because you failed to meet the different KPIs. And they are out there. That’s no bullshit, it’s happening."
Dunn was a feature participant at the road safety summit, which was held in conjunction with the TWU’s National Council earlier this month.
The day-long event discussed road transport safety and included representatives from Victoria Police, the RSRT, the Roads and Maritime Services (RMS) and Toll.