Businesses from the retail sector were among the slowest to make payments, increasing from 55 days to 57 days from Q1 2013, according to Dun & Bradstreet’s latest Trade Payments Analysis.
Businesses are waiting nearly eight weeks to be paid by other companies, with the average invoice payment time rising to 55 days during the first quarter of 2013. This figure compares to a national average of 52 days in the previous quarter and 53 days a year earlier.
“The rise in average payment times fits with the broad themes that have been unfolding elsewhere in the economy recently,” said Stephen Koukoulas, economic advisor to Dun & Bradstreet. “We are seeing slower economic growth, soft business confidence and as we saw in this month’s Business Expectations Survey a clear weakening in business investment plans, hiring intentions and expected selling prices.”
Operational costs were identified as the biggest barrier to growth for businesses in the quarter ahead according to the latest D&B Business Expectations Survey. The slow payment cycle, as revealed by analysis of millions of accounts-receivables records, is being felt by the nation’s businesses, with D&B finding that 56 per cent of businesses expect cash flow will be an issue for their operations 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,” said Gareth Jones, Dun & Bradstreet’s CEO.
“While we’re seeing more positive signs for consumers, in terms of a strong sharemarket, rebounding house prices and lower debt balances, businesses expectations remain low,” he said.
“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.
“More significantly, however, late payments are impacting a business’s ability to cover its own costs of operation. We know that 90 per cent of small businesses failures are caused by poor cash flow.”