Payment terms hit seven year high

The credit crunch and the slowing economy are forcing businesses to stretch payments terms well beyond the limit, a new survey by Dun & Bradstreet has found.

The credit crunch and the slowing economy are forcing businesses to stretch payments terms well beyond the limit, a new survey by Dun & Bradstreet has found.

The latest figures from D&B’s quarterly trade payment analysis reveals that payment terms across all industries hit 55.6 days in the June quarter. That’s almost four weeks past the standard payment term of 30 days, an increase of three days since the June quarter of 2007.

Big businesses with 500 employees or more continue to be the worst payers, averaging double the standard term (60.7 days) to settle accounts. Small businesses (with up to 50 employees) take about a week less to pay their bills.

Private companies are now slower to pay than their public counterparts. Private companies averaged 60.9 days to settle accounts in the June quarter, an increase of around six days since the June 2007 quarter. Public companies took 58 days to settle accounts, which is actually 1.7 days shorter than the June 2007 quarter but a deterioration of around two days since the March 2008 quarter.

Payment terms are at the highest point in seven years, although are still just under the 63.5 day level reached in 2000.

Payments by employee size

Payment term trend

D&B chief executive Christine Christian says the payment term data underlines the pressure the slowing economy has placed on Australian businesses. “The impact of the credit crunch on business’s ability to access funds adds another layer of strain to organisations trying to manage their cashflow amidst a significantly delinquent payment environment.”

That data shows that the electricity, gas and sanitary services sector is slowest to pay at 58.7 days, while the fishing industry saw the biggest increase in payment terms, up by more than a week on the June 2007 quarter to 53.4 days.

The only sector to improve its payment terms as compared to the June 2007 quarter was forestry, down 1.6 days to 54.9.

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