Australian businesses are unlikely to be paid on time, with more than 60% of invoices settled beyond the 30-day payment period.
The late payment endemic is revealed in the latest Dun & Bradstreet Trade Payments Analysis, which sees payment terms fall only one day from their 54-day average last quarter.
The average invoice takes 53 days to be paid, which is more than three weeks beyond standard 30-day terms.
Last week, ASIC figures revealed business insolvencies were up as inadequate cashflow put pressure on the SME sector.
This is borne out by Dun & Bradstreet’s figures, which recently showed 41% of companies have had money owed to them by a customer or supplier that became insolvent in 2013.
Late payments have been the norm for businesses since 2011, leading Dun & Bradstreet CEO Gareth Jones to comment that like many measures of economic or business performance, “trade payment terms have been in something of a holding pattern”.
“The absence of a significant and sustained improvement in business conditions, and high operating costs, continue to place a strain on company finances and profitability,” he said. “As a consequence, businesses are delaying their payments, which in turn slows the movement of money through the economy and limits the stimulus effect that trade credit can provide.”
Dun & Bradstreet’s analysis showed that businesses in the retail and construction sectors were the most affected by late payments, recording a notable year-on-year increase in payment times. There was a 19% jump in the time taken for the average invoice to be paid in retail, and a 25% increase in construction payments made after 60 days.
Construction and retail were the sectors that saw the most collapses, according to last week’s ASIC figures. Construction companies made up 24% of collapses in 2012/13, while retail companies made up 10%.
Large companies were the most likely to delay payment, regardless of the industry. Those employing more than 500 staff took an average of 56 days to pay an invoice, which is more than three days longer than any other business size.
Mark Cleaver, the Australian managing director of debtor finance specialist Bibby Financial Services, says his advice for small businesses kept waiting for payment is to deal with the problem as soon as they become aware it. “Early action… can overcome difficulties later, and you’re more likely to get paid if you chase an invoice rather than simple hope for the best,” he said.
Stephen Koukoulas, economic adviser to Dun & Bradstreet, said despite low interest rates and a steady expansion in the economy, payment terms had yet to fall to the levels seen before the global financial crisis.
“As the pace of economic growth accelerates into 2014, we would expect to see payment times fall as cashflow benefits from firms’ willingness and improved ability to pay their bills more quickly,” he said.
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