6 February 2007
Trade Payments Create Cash Flow and Credit Risk for Australian Businesses
Australian businesses are under pressure early in the New Year, due to continually lagging business-to-business trade payments.
Despite a three day improvement since the beginning of 2006, the latest figures in the Dun & Bradstreet Trade Payment Analysis reveal that the average trade payment period in December across all industries, was almost 54 days, or more than three weeks above the standard 30 day payment term.
D&B Australasia Chief Executive Officer, Christine Christian, said the reduction is positive, but a significant improvement is required to ease the ongoing burden on business.
"Trade payments have been more than three weeks above the standard payment term since January 2005," Ms Christian said.
"The continued lag in payments over a prolonged period signals cash flow and credit risks for all businesses, with small business most likely to feel the burden."
The Mining and Manufacturing industries continue to be the slowest paying sectors, taking 56.8 and 54.4 days respectively to pay accounts. Both industries have improved payment periods by three days from the consecutive period in 2005 however; they have been the slowest paying industries for four consecutive quarters.
Agriculture continues to be the most prompt paying industry, with an improvement of five days on December 2005. At its current payment period of 48.2 days, although still close to three weeks over the standard payment term, it is almost 5 days (4.6) quicker to pay than any other industry.
Public Administration was the only industry to have increased its payment period since December 2005, with payments now 34 days above the standard term.
According to Ms Christian, the current payment climate being faced by Australian companies is not new and it needs to be addressed.
"The cycle is difficult to break, with the delay of payment by one business in turn affecting many more. The extension of trade payment periods has negatively impacted the stability of Australian businesses for too long and it must be addressed," Ms Christian said
Businesses, particularly SMEs, need to concentrate on cash flow and debt management to prevent a dramatic increase in company insolvencies.
Australian Trade Payment Analysis.pdf (57KB)
Media notes
For further information and comment please contact:
Danielle Woods,
Hill and Knowlton
Ph: (02) 9286 1258
Christine Christian,
D&B Australia
Ph: (03) 9828 3540
