Companies chase debts aggressively as payments slow again

Payment terms continue to slow as customers begin to hoard cash and experience more difficulty paying bills.

Payment terms continue to slow as customers begin to hoard cash and experience more difficulty paying bills.

The latest figures from Dun & Bradstreet for the September quarter shows that payment terms across all industries are at 55.3 days, almost four weeks above the standard term and a jump of four days from September 2007.

Christine Christian, D&B’s CEO, says that she expects the payment terms to blow out further. In the early 1990s and then again in 2000, before GST was introduced, payment terms blew out to 60 days, she says. “If credit continues to be tight, then we expect people to pay later.”

Christian says that D&B has witnessed a spike in business as more people are now chasing outstanding debts.

“We see that consumers are experiencing more financial difficulty as they maxed out credit cards, interest rates have gone up, living costs have gone up and we are seeing the affects of this in outstanding telco debts and utilities debts. We are seeing now what we have heard for a while anecdotally in the market.”

Christian also says that debts are being chased earlier as cash and receivables are now a company’s most valuable asset.

“There is less urgency before because you could always have got funding from the bank, but now people are quicker to refer problems to a debt collection agency,” she says.

She says another recent trend is that people are now aggressively chasing smaller debts. “A lot of companies would call only on the large accounts and leave small accounts to make their way through the system, but the small accounts represent a lot of profitability. So now companies are not just managing 20% of large customers, but all of them as the smart ones understand you have got to show customers you have got teeth so you are not seen as the soft one and left at the bottom of the line,” she says.

Medium-sized businesses are now getting their entire portfolio monitored, she also noted. “We provide a monitoring alert service for a small fee that traditionally big businesses have used. You can load customers on to databases to detect any change to performance. We then send out a quick alert so that your company is not the last to find out whether a customer is in trouble. We are seeing smaller companies use that service.”