The transport sector ranks equal fastest for settling bills, but businesses are still waiting 52 days
May 23, 2013
Businesses in the transport sector are taking more than seven weeks to settle accounts, but the lengthy waiting time still ranks better than the national average.
Dun & Bradstreet’s latest Trade Payments Analysis covering the first quarter of 2013 shows the average invoice payment time nationwide has increased to 55 days.
The figure represents a three-day increase over the previous quarter and two-day increase compared to this time last year. However, businesses from the transport and fishing sectors were the fastest to pay their bills at 52 days.
Dun & Bradstreet blames weak sales activity, a high Australian dollar and concerns about operating costs for affecting businesses’ ability to pay on time.
The slow payment times are having ramifications, with 56 percent of businesses surveyed telling Dun & Bradstreet they expect cash flow to be an issue in the quarter ahead.
“The state of late payments in Australia is a handbrake on business activity at a time when greater investment and productivity is needed,” Dun & Bradstreet CEO Gareth Jones says.
“In this environment, a slowing cash flow cycle further hits businesses. Their ability to spend money and invest in the growth of their business, and by consequence the economy, is limited when they’re kept waiting for payments.”
Jones says poor cash flow is responsible for 90 percent of small business failures.
The majority of all invoice payments in Australia are being paid late, with 48 percent of accounts settled between one and 30 days beyond standard payment terms (30 days), while 38 percent are made on time.
Dun & Bradstreet economic advisor Stephen Koukoulas says the rise in payment times fits with broad themes unfolding elsewhere in the economy, such as slower growth, soft business confidence and weaker investment and hiring intentions.
However, he points to some positives for businesses to look forward to.
“The increase in average payment times is another reason why the Reserve Bank is likely to deliver at least one more interest rate cut in the months ahead. For firms with debt, a further interest rate cut would help free up cash and contribute to improved payment times,” Koukoulas says.
“The recent fall in the Australian dollar, if it is sustained, might help parts of local industry, but that will take time.”
Those waiting for payments from the country’s largest companies were worse off in the first quarter of 2013. The analysis shows those employing more than 500 people averaged more than 57 days to pay their bills, whereas firms with fewer than 20 staff took 53 days to pay.
The fastest paying companies at the moment are medium-sized operations employing between 50 and 199 people, which are settling their accounts in 50 days.
Businesses based in the nation’s capital were the slowest to pay their invoices (59 days), followed by the Northern Territory (58 days).
Western Australian businesses topped the list as the fastest paying, taking on average 54 days. Payment times in Tasmania, South Australia and Queensland are at the national average of 55 days.
All industries experienced slower payment times compared to the previous quarter, with the forestry sector the slowest to pay their bills, at 69 days.
Businesses from the mining, utilities, and retail sectors were the next slowest to make payments, increasing from 55 days to 57 days.
