12 December 2005

Continuing cash flow woes for business

Australia Trade Payment Analysis.pdf (448KB)

Media Release

The dramatic decline in business-to-business trade payments this year is continuing, keeping the pressure on businesses as they head into the New Year.

The October figures, released today in the Dun & Bradstreet (D&B) Australian Trade Payments Analysis (APTA), show trade payments remain almost double standard trading terms.

The October figures, analyzing payments over the past two months, reveal the average trade payment period is 55 days, still a week longer than at the beginning of the year. Standard payment terms are 30 days.

Once again, the slowest paying industry in November 2005 was Mining followed by Transport and Communications. The fastest was Agriculture, Forestry & Fishing.

D&B Australasia Chief Executive Officer, Christine Christian, said the continued dramatic increase in trade payments was an ominous sign, particularly for small and medium sized businesses.

"The Christmas and New Year period are the most difficult times for SMEs chasing outstanding debts and balancing their cash flows," Ms Christian said.

"The large break that many companies take over the festive period can put a lot of pressure on businesses waiting for outstanding payments.

"SMEs always tend to be paid last by the larger companies which is why they in particular must remain vigilant about cash flow.

"There's no doubt companies will have to become smarter as we continue to face uncertain economic times and the continuing decline in trade payments.

"Over the last few months we have seen signs of a wait and see approach about the economy. This cautious approach is reflected in our business expectations surveys and our trade payments analysis.

"The figures indicate businesses are holding onto their cash for longer periods before paying their bills. However this approach to cash flow is a vicious cycle.

"It is a timely warning for business to assess their payment terms and broader business practices."

Ms Christian said this approach was particularly important when 90 per cent of businesses failed because of poor cash flow and debt management practices. Company insolvencies number about 6,000 in Australia every year.

"The cost of bad debt is more costly than most people think. Bad payers reduce the cash flow of a business, cash flow which could be used for growing the business," Ms Christian said.

"Bad payers also make a business use internal resources, not only to recover overdue amounts but also by putting pressure on the need to make increased sales to make up the loss.

"Credit risk is a constant process. Acquiring pertinent information is the key to assessing credit risk.

"None of us can be 100 per cent about the economy moving forward, but businesses can implement practices that limit their own level of risk."

For further information, or to arrange an interview please contact:

Danielle Woods
D&B PR Manager
(02) 8270 2926

About D&B

D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.

Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.

The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.

Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.

Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.