Australian businesses are taking almost a full month longer than average to pay their bills, with national payment terms reaching 53 days during the September quarter 2011.
According to Dun & Bradstreet's Trade Payments Analysis - which examines the ability of firms to pay their bills, and pay them on time - two-thirds of businesses took longer than the standard 30 day period 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 and below levels seen prior to the onset of the global financial crisis," CEO of Dun & Bradstreet, Christine Christian said.
The report also found the number of severely delinquent payments, those 90 days or more overdue, rose by 15 per cent compared with the September quarter 2010, meaning businesses were forced to wait more than three months for much needed cash. The number of businesses paying trade accounts between 61 and 90 days late also rose by 22 percent since last year.
"This trend of delinquent payment is hitting the cash flow of firms, with 50 per cent of executives noting negative impacts stemming from their slow paying customers."
The D&B Trade Payments Analysis for the September 2011 quarter, found that:
The Forestry sector was the slowest to pay, with payments above 60 days. Conversely, the Transportation sector was the fastest paying group, at less than 50 days - more than ten days quicker than the Forestry sector;
Publicly listed firms were slower to pay than their private counterparts at 54.5 and 53.0 days respectively. Private firms, however, have seen payment terms deteriorate since 2009, while public companies saw some marginal improvement;
Large firms of 500 or more employees were the slowest paying group, recording repayment times of 56.0 days. Businesses with 50-199 employees were the quickest to pay, averaging 49.4 days to settle their accounts; and
Firms based in the Australian Capital Territory took the longest to pay, with average payment days at 55.2. Tasmanian businesses took 51.5 days to settle their accounts, making them the fastest paying state.
Elements of Australia's two-speed economy were also evident in the analysis with the construction (54.5 days), retail (54.4 days) and services (51.7 days) sectors each recording a deterioration in payment terms of more than 1.5 days over the last 12 months. In contrast, the mining sector has experienced significantly less volatility, recording a shift of just 0.2 days over the same period.
"The continuing high rate of delinquency from Australian businesses is concerning given the importance of trade credit to the health of the nation's economy," Ms Christian said.
During the September quarter, Australian businesses waited for over $21 billion dollars worth of delinquent payments to be processed.
"Individual businesses are the unsung bankers of our economy. Business to business lending through the extension of trade credit amounts to billions of dollars a year and the rate at which these micro-loans are being paid back is a leading indicator of cash-flow performance and financial stability."
Detailed results for the Dun & Bradstreet Trade Payments Analysis are below.
Dun & Bradstreet - Trade Payments Analysis
September Quarter 2011
Industry
Of the fourteen sectors examined, ten saw trade payment terms improve during the September quarter 2011, while Construction, Retail, Finance and Service businesses were flat over the last three months.
The Forestry sector was the slowest to pay during the September quarter 2011. This group took 60.7 days to settle its accounts following an increase of over two days year-on-year.
Over the last 12 months, however, a large number of key industries saw payment terms deteriorate, most noticeably in the Construction and Retail sectors where terms grew an average of almost two days. Retail saw a significant deterioration in terms over the last 12 months, during which time average payment days deteriorated from 52.8 to 54.4. The Construction sector saw similar deterioration, from 52.8 to 54.4 days over the last 12 months.
Conversely, Transportation, Communications, Electric, Gas & Sanitary Services (EG&S) and Wholesale all saw year-on-year improvement in payment terms; none more so than the EG&S sector, where terms reduced by nearly two days.
During the September quarter 2011, Transportation firms were the quickest payers at 49.2 days followed by Agriculture with an average 51.1 day payment term and Services at 51.7.
Public vs. Private
Private companies are traditionally quicker to pay their accounts than their public counterparts, and they have maintained this trend throughout the last two years.
On average it takes publicly listed companies an additional 1.5 days to pay trade accounts compared with private firms. A gap of approximately three days has separated the two categories over the last nine quarters, however by the September quarter 2011 private and public trade payment days sat at 53 and 54.5 days respectively.
The private sector has also seen the most improvement in terms quarter-on-quarter since 2009 although payment terms remain elevated compared with the third quarter 2010. Public firms have remained flat over this period, reducing average terms by less than one day over the last two years.
Size
Payment terms have fluctuated little year on year, with smaller firms (between 1 and 49 employees maintaining a two year average 51.3 days and larger firms (200 or more employees) remaining between 56 and 58 days during the same period.
Businesses with 20-49 employees saw the most improvement in payment terms since the beginning of 2011, dropping from 54.1 days in the March quarter to 50.9 during the September quarter this year. However, firms of all sizes saw improvement during 2011, and those with between 50 and 199 employees experiencing the lowest payment terms of the September quarter 2011 at 49.4 days. This demographic has also maintained this figure as an average over the last two-years, making it the fastest paying size bracket of the six categories.
State
Firms in the ACT and those based in New South Wales recorded the worst trade payment terms during the September quarter 2011, at 55.2 and 54 days respectively. ACT-based business also experienced the only increase in payment terms between the June and September quarters 2011, while all other states and territories were able to reduce payment times by approximately 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.
New South Wales firms struggled to pay their bills during 2011, maintaining an average 55 day payment cycle throughout the year to date, and the second highest term during the September quarter 2011, at 54 days.
Conversely, Tasmania was the best location to do business with a trade payment term of 51.5 days during the September quarter 2011 and maintained the second lowest two-year average of all states and territories at 51.8 days. Western Australia was the second-best performer during the September quarter this year, with a 51.7 day payment term but with the lowest overall term during the last two-years, at 51.6 days.
