Have you ever dealt with a government owned enterprise (GOE) let alone a government agency and been frustrated to tears by the level of bureaucracy encountered… You don’t have to be in business for yourself to answer yes to this, but the impact is certainly greater and ultimately impacts everyone in society as it slows down our economy.
Now I have to start off with saying I understand why the level of paperwork and compliance is so much higher in government entities, they are dealing after all with what is seem as “our” money. A similar situation also arises in large corporations and what happens is the “system” is developed to ensure that every dollar is accounted for. A whole level of activity, some call it employment arises with a layer of people busily checking the forms, approving payments and sending the documentation off to another Department to raise and send the cheque.
It is only two years ago that the fake prince, Joel Morehu-Barlow was sentenced to 14 years for theft of $16m from Queensland Health and the outcome from the public outcry would have been more checks and balances to ensure that it doesn’t happen again. The downside in that sorry saga is that more people would have been added to the system and the net cost would have been significantly higher to prevent a fraud that the cost of the fraud to begin with.
Governments are notorious for the efficiency drives to try and balance their budgets, we even have a Productivity Commission are the national level. I find it an interesting conundrum that in the interest of efficiency we institute more institutions and bureaucracy that in and of itself slows down and makes transactions more costly.
I was chatting with a business owner who recently re-signed a maintenance service contract with a GOE, it was a 2+2+2 contract and they have been delivering an excellent standard over the previous 12 years that the customer is very happy with. Cashflow is paramount to any small business and because of the bureaucracy in the system, this business raises invoices in the first week of the month. What that means is that customers receive an invoice in the middle of the month, when half of the service has been delivered and they have the second half of the month to confirm that they are happy with the service. That’s fair as the small business has outlaid almost all of the cashflow necessary to deliver the service by the end of the month ie wages cannot be paid “on terms” to employees. The customer in this example processes the cheque payment at end of month and the business receives their payment towards the middle or end of the next month.
So, where is the problem!
Well, a new contracts manager picked up that you cannot invoice in advance for services, giving the business a three day window at end of month to not only raise and deliver an invoice, but to also produce a Statutory Declaration which has to accompany every invoice. A supplier that sinks or swims on its cashflow now has to wait another 30 days on top of the 60 days the system already creates as it is just not practical in a small business to have the internal bureaucracy to deal with this demand.
What message does it send to suppliers that we are want you to continue delivering the excellent service we have received for over a decade but the rules are the rules and we can’t pay you in a reasonable time now…
A little bit of understanding that Rules are for the Guidance of the Wise and the Blind obedience of Fools would however serve us all well.
Yours in Small Business,
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