22 August 2005
Cash flow crunch for business
Media Release
There has been a dramatic decline in business to business trade payments this year, signalling greater cash flow and credit risks for business, with small business the most likely to feel the impact.
The June figures, released today in the Dun & Bradstreet (D&B) Australian Trade Payment Analysis (ATPA), show trade payments now almost double standard trading terms.The June figures reveal the average trade payment period is now 56 days, over a week longer than at the beginning of the year. Payments had been a consistent 47-48 days since May 2004. Standard payment terms are 30 days. The slowest paying industry in June 2005 was Mining followed by Transport and Communications.
The fastest was Agriculture, Forestry and Fishing. D&B Australia Chief Executive Officer, Ms Christine Christian, said the dramatic increase in trade payment periods was consistent with other data showing that Australian businesses are watching the economy closely before making any financial decisions, including when to pay their bills. However this approach to cash flow management can become a vicious cycle.
| Industry | Jun 05 (Days) |
| Agriculture, Forestry & Fishing | 52.6 |
| Mining | 60.2 |
| Construction | 55.2 |
| Manufacturing | 56.6 |
| Transportation & Communications | 57.0 |
| Wholesale Trade | 55.6 |
| Retail Trade | 56.0 |
| Finance, Insurance & Real Estate | 55.7 |
| Services | 55.3 |
| Public Administration | 54.8 |
| Total | 56.0 |
"When businesses delay payments as a way of better managing their own cash flow, it creates a vicious cycle, as most businesses are both debtors and receivers.
"D&B believes that small business is at the greatest risk from the payment period blow out, especially those that heavily rely on big business for the bulk of their revenue.
"This can be a much bigger problem for small business, particularly when their market strength makes them so reliant on larger companies and affects their capacity to demand quicker payment.
"If businesses don't call in their debts faster, they will put too much pressure on their cash flow and may suffer as a result."
"While some economic forecasts improved this month, this sharp increase in trade payment times demonstrates that business is still watching its outgoings very carefully," Ms Christian said.
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.
