Business planning, Finance, Legal

Business payment terms hit 53 days: Report

Michelle Hammond /

Australian businesses are taking almost a month longer than average to pay their bills, according to Dun & Bradstreet, with national payment terms reaching 53 days in the September quarter.

 

According to Dun & Bradstreet’s Trade Payments Analysis, which examines the ability of firms to pay their bills, two-thirds of businesses took longer than 30 days to pay their accounts.

 

“Although payment terms have improved since the beginning of 2011 when they blew out to 56 days, performance still remains worse than this time last year,” Dun & Bradstreet chief executive Christine Christian says.

 

The report also found the number of severely delinquent payments – those 90 days or more overdue – rose by 15% compared with the 2010 September quarter.

 

This means businesses are being forced to wait more than three months for cash; a position that no start-up wants to be in.

 

According to the report, the number of businesses paying trade accounts between 61 and 90 days late also rose by 22% since last year.

 

“This trend of delinquent payment is hitting the cash flow of firms, with 50% of executives noting negative impacts stemming from their slow-paying customers,” Christian says.

 

With regard to size, payment terms have barely fluctuated year-on-year, with smaller firms (one to 49 employees) maintaining a two-year average of 51.3 days.

 

The forestry sector was the slowest to pay during the September quarter, with payments above 60 days, while the construction, retail, finance and services sectors remained flat over the quarter.

 

In contrast, the transportation sector was the fastest-paying group, taking less than 50 days to make payments.

 

On a state-by-state basis, firms in the ACT and NSW recorded the worst trade payment terms during the quarter, at 55.2 days and 54 days respectively.

 

ACT firms also experienced the only increase in payment terms between the June and September quarters, while all other states and territories reduced payment times by around 1.5 days.

 

Likewise, firms in this area have endured the longest year-on-year trade payment terms in Australia, at an average of 54.9 days.

 

NSW firms struggled to pay their bills during 2011, according to the report, maintaining an average 55-day payment cycle throughout the year to date.

 

Meanwhile, Tasmania was the best location to do business, with a trade payment term of 51.5 days during the September quarter, while maintaining the second lowest two-year average of all states and territories at 51.8 days.

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