According to credit information company Dun & Bradstreet (D&B) invoices are being paid quicker than ever as Australian businesses record exceptionally healthy cash flows on the back of sustainable low interest rates.
Quarterly Trade Payments Analysis survey data stated that it took an average of 45.1 days for Australian businesses to pay an invoice in the last quarter of 2015, down from 49.2 days in the previous quarter and 51.7 days in the same period last year.
D&B said the result indicated the Australian economy is in “sound shape” and believes there is no need for further interest rate reductions from the Reserve Bank.
The analysis, which covers all business sectors and sizes, also shows where bills are paid fastest – and slowest. If you run a business in Tasmania and the Northern Territory, you have the fastest invoice payments in the nation, averaging 41.3 and 41.6 days respectively.
D&B says this is mainly because these businesses tended to be smaller than those in the larger cities. The businesses were also likely to be family-run.
“Smaller and family-run businesses tend to not have the financial clout to demand longer trading terms,” said D&B spokesman James Malkin. “In Sydney or Melbourne, for example, trade times can be longer because of the style of large businesses.”
Mr Malkin said it was also possible smaller communities had a shorter payment time because they put creditors and debtors in regular contact, although this was not recorded.
Queensland came a close third at 42.7 days while New South Wales businesses averaged 46.5 days, in Victoria it was 45.8 days, in Western Australia it was 43.3 days and in South Australia it takes an average of 44.2 days to receive payment.
But if you do business in the Australian Capital Territory, your payment is held up the longest at 49.4 days.
Mr Malkin said Canberra’s business was heavily influenced by government that was perceived as being a more trustworthy payer, so payment times could be extended.
D&B economics adviser Stephen Koukoulas said the decline in invoice payment times since 2014 was “spectacular”.
“A combination of savings from record low interest rates, reasonable income growth and ongoing economic expansion mean that firms are well placed to pay their bills more quickly than at any time in many years,” he said.
“The invoice payment times are often viewed as a measure of financial stress for the business sector.
“When firms are slow to pay their bills, they are generally experiencing financial pressures and when payment times fall – as is the case in the past year – they are clearly cashed up.”
Invoice payment times for the third quarter of 2015 showed 66 per cent were paid “promptly” (less than 30 days) and 26 per cent were paid in the period of 31 days to 60 days after the invoice was received.
But though speed was noted by the majority of businesses, there were some laggards.
D&B said five per cent of invoices were not paid until 61 to 90 days after receipt, two per cent were stalled and finally paid in the period 91-120 days and one per cent were paid after 121 days or not at all.
The slowest-paying industry sector was utilities, with an average of 53.7 days – 1.7 days slower than the previous quarter and equal to the same period in 2014.
But if you were involved in the fishing industry, you would have received payment quicker than other industries. It posted the fastest average payment time for the fourth consecutive quarter and is the only one to break into the 30s with an average payment time of 37.2 days.
Mr Malkin said there was no specific data relating directly to the automotive industry, with its data grouped with retail and manufacturing.
Historically, average income payments times for Australian businesses as recorded by Dun & Bradstreet have been around 54 days.
Peaks included the first quarter of 2009 when on the back of poor business and consumer sentiment eroded by the global financial crisis, the payment times averaged close to 58 days – the highest since the start of data collection in late 2006.
It dropped to 52 days in the last quarter of 2009, partially on the protection of bank-secured funds assured by the (then) federal Labor government’s Financial Claims Scheme.
The average peaked to 56 days in early 2011 and again in the first quarter of 2014 but, since then, has taken only a year to slide in its biggest retraction since 2006.
By Neil Dowling