28 July, 2010

More than half of Australian executives are being negatively impacted by late payments even though payment behaviours improved slightly during the June quarter.  This equates to a 17 percent increase in the number of firms negatively impacted by lagging payments since April.

The latest business-to-business payments figures - which examine the more than nine million current accounts receivable records contained on the Dun & Bradstreet database - reveal that Australian firms took an average of 53.4 days to settle their accounts during the June quarter. However, despite firms now being four days quicker to settle their accounts than they were during the height of the Global Financial Crisis, payments exceed the standard 30 day term by more than three weeks and remain above pre-crisis levels.         

                  

Average payment days

According to Christine Christian, Dun & Bradstreet's CEO, the latest data provides a clear sign that businesses must continue to focus on the fundamentals of cash flow management throughout the global recovery.

"Business-to-business payment data provides a strong indicator of the cash position of firms," said Ms Christian.

"The latest data suggests that the cash position of businesses is strengthening however, Australian executives are indicating that the small improvement in terms experienced during the June quarter is not enough.

"Access to cash is vitally important during a recovery period as firms seek to meet growing demand. Consequently, if we are to experience the significant improvement in terms which is required to positively affect the cash flow of firms, executives need to take prompt action to collect their bills." 

Business size

All groups improved payment terms compared to the previous quarter and the June quarter 2009. Firms with 50-199 employees were the biggest improvers compared to the previous year, with payments dropping by 4.1 days. This move made the group the fastest to pay during the June quarter (at 49.4 days) and the only group to pay its accounts in less than 50 days.

Conversely, firms with 500+ employees were the biggest improvers compared to the March quarter, reducing the time taken to settle accounts by 2.3 days. Despite this decline in payment days, the group continued to be the slowest to settle its accounts during the June quarter (at 56.9 days). This marks the group's 15^th consecutive quarter as the slowest to pay.

Industry

The finance sector was the quickest paying group during the June quarter and the only industry to pay its accounts in less than 50 days. Conversely, the public administration sector was the slowest paying group (at 56.6 days). Despite being the biggest improver compared to the previous quarter, the electric, gas and sanitary services sector was the second slowest paying group and was only slightly quicker to settle its accounts ( 56.4 days) than firms in the public administration sector.

Firms in the mining industry experienced the most significant improvement in payment performance compared to the June quarter 2009, taking 3.3 days off the time taken to settle its accounts. Firms in the majority of sectors improved their terms during the June quarter however, fishing and communications organisations experienced a deterioration compared to the March quarter 2010 and the June quarter 2009. The payment behaviours of public administration firms deteriorated year on year.

Public | private

Public companies are consistently slower payers than their private counterparts however, both groups improved payments during the June quarter. Public companies took 56.5 days to pay their trade accounts, while private firms took 53.3 days. Public companies improved their payments more significantly than private firms, narrowing the gap between the two groups. Public firms were 3.2 days quicker to pay during the June quarter than the same time a year ago.

State

Firms based in the Australian Capital Territory averaged 55.5 days to settle their trade accounts during the June quarter, making them the slowest paying group for the 2^nd consecutive quarter. Conversely, firms based in Western Australia were the quickest to pay at 51.5 days.

Firms in Queensland were the only group to experience a deterioration in payments compared to the March quarter 2010, while those based in the Australian Capital Territory, New South Wales, Tasmania and South Australia were all slower to pay during the June quarter 2010 than they were the year prior.

International payment data

Dun & Bradstreet's global payment data reveals that 19 countries within the Asia-Pacific region settled in excess of 20 percent of their accounts at 30+ days past due during the March quarter 2010. Just four countries settled less than 20 percent of their accounts at 30+ days past due.

Five countries - Afghanistan, China, Fiji, Myanmar and Singapore - were slower to settle their accounts during the March quarter than they were 12 months ago.

Fiji and Malaysia accounted for the greatest percentage of accounts settled in a severely delinquent manner, with both countries above 40 percent. Australia ranks as the 6^th worst paying country in the region, with 27.7 percent of accounts settled at 30+ days past due during the March quarter 2010.

"Australian firms need to recognise the value of their accounts receivable," said Ms Christian.

"A solid receivables process, which is dependent on firms taking action to collect their bills promptly, can generate significantly more operating cash for the business.

"To aid Australia's recovery and return the economy to the level of business strength that existed prior to the onset of the global crisis we need to make accounts receivable a key priority. This approach will allow firms to free up funds for business investment and to pay down debt or rely less on borrowed funds."