Businesses are kept waiting 52 days for payment, according to the latest Trade Payments Analysis by Dun & Bradstreet.
The research shows 62 per cent of accounts are settled late, producing an unhealthy cash flow cycle for Australian businesses. As a result, more than 68 per cent of business executives believes this makes day-to-day operational a challenge for firms looking to stimulate growth in an environment affected by soft sales activity and conservative consumer sentiment.
The national average for payment times has declined since the height of the global financial crisis, however it has not been less than 52-days since the third quarter of 2009. The relative consolidation at this payment range is reflective of other indicators showing the economy in a period of subdued growth. It also suggests the nation’s businesses will continue to struggle with cash flow at a time when they are already facing challenging trading conditions and higher input costs.
According to Dun & Bradstreet’s CEO, Gareth Jones, late payments produce a negative knock-on effect for the broader economy.
“Trade credit is an essential form of non-bank finance, and when bills are paid late it withholds essential operating money that businesses need day-to-day, but also to invest and grow,” he said.
“If businesses are waiting 52 days to be paid it impacts their ability to pay their own bills, creating an unhealthy cash flow cycle in the economy that removes millions of dollars from the system. While the long-term picture shows payment times in Australia coming down since the GFC, they have stalled at more than three weeks past standard terms (30 days) and have remained at this level for the past seven quarters.
“Given we typically see bills paid more slowly after the Christmas period, we expect there will be an increase in average trade payment times for the March 2013 quarter.”
At a state level, average payment times remain highest in the ACT, at 56 days, an increase of two days compared to the same time last year. Businesses in New South Wales are the second-slowest payers, at 53 days, while Tasmanian companies are settling their accounts in the shortest time, at 51 days.
Across industries it is the larger companies that continue to take the longest amount of time to make their payments. Companies employing more than 500 workers are taking an average of 55 days to pay their bills, and have been the slowest payers throughout 2012. Companies with between 50 and 199 staff made their payments the most promptly, at an average of 47 days, an improvement of two days compared to a year earlier.
According to Stephen Koukoulas, economic advisor to D&B, the mixed signals of the economy continue to show up in trade payments data.
“Firms, on average, are still tardy in paying their bills. This is another sign, along with the findings from the recent Business Expectations Survey, that the economy remained soft through the course of 2012,” he said.
“While there are clearly positive signals coming through in the recent sharp gains in the stock market, and better news in the global economy, this is yet to flow on to much of the business sector in Australia, with many firms yet to break the shackles of the GFC.”