Australian businesses are failing to pay their bills on time more often than not, with 60 per cent of invoices settled beyond the standard 30-day payment period.
Dun & Bradstreet ' s latest Trade Payments Analysis shows that this high rate of late payments has resulted in businesses paying their bills in an average of 53 days during the third quarter of the year; more than three weeks beyond standard terms.
While payment times have improved marginally compared to the previous quarter, they are a day slower than during the same period last year, indicating that the financial position of many companies remain s fragile as a result of the year ' s soft business conditions.
Highlighting the challenges of t he current trading environment, D&B's most recent Business Expectations Survey found that 41 per cent of companies had a customer or supplier that be came insolvent or was otherwise unable to pay them during 2013.
Additionally, one – in – two companies (48 per cent) expect that cash flow will be an issue for their operations in the final quarter 2013.
Businesses ' ability to regulate their cash flow and pay their expenses in a timely manner has been impacted by the economy's static performance this year.
The absence of a significant and sustained improvement in business conditions, and high operating costs, continue to place strain on company finances and profitability.
As a consequence, businesses are delaying their payment s which in turn slows the movement of money through the economy and limits the stimulus effect that trade credit can provide.
A healthy trade credit system injects millions of dollars into businesses; small organisations in particular, which can find it more difficult to access mainstream finance to fund their operations.
The Trade Payments Analysis of past quarter invoice payments shows that retailers and construction sector companies recorded a notable year – on – year increase in the number of very late payments.
There was a 19 per cent jump in retail sector payments and a 25 per cent increase in construction sector payments that were made at 61–90 days.
The construction sector has found business conditions difficult this year, with the downturn in Australia's mining investment activity forcing greater competition for fewer projects.
Meanwhile, retailers have been impacted through much of 2013 by weak sales growth and a strong Australian dollar, with consumers also displaying a preference for financial prudence above discretionary spending.
Significantly, retail sector payments made at between 90–120 days increased by 36 per cent year-on-year, while there was a 43 per cent jump in payments made beyond 120 days.
The jump in severely lat e payments indicates a weakening of retailers' financial position and their capacity to manage their cash flow. Total payments by the retail sector slowed by three days compared to the third quarter of 2012.
Across industries , large companies have been the slowest to pay their bills during the past quarter, with those employing more than 500 staff taking an average of 56 days. At this rate, the nation's largest companies are taking three days longer than any other business size to settle their accounts.
Small businesses employing fewer than five staff paid their invoices at the national average of 53 days during the third quarter, while the fastest paying companies were those employing between 50 and 199 people, at 49 days.
If the pace of economic growth accelerates into 2014, payment times are expected to fall as cash flow benefits from businesses' willingness and improved ability to pay their bills more quickly.
