Impacts of credit crunch reinforced by debt paying behaviours
30 July 2008
The pressure on Australian businesses continues with payment terms at a seven year high and almost four weeks past the standard term.
The latest figures in Dun & Bradstreet's (D&B's) quarterly trade payment analysis reveals that payment terms across all industries are at 55.6 days, an increase of three days since the June quarter of 2007.
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Private companies are now slower to pay than their public counterparts however the difference between the two groups has narrowed. Private companies averaged 60.9 days to settle accounts in the June quarter (double the standard term) following an increase of around six days since the June 2007 quarter. Public companies took 58.0 days to settle accounts, an improvement of 1.7 days on the June 2007 quarter but a deterioration of around two days since the March 2008 quarter.
Suppliers of big business are facing the greatest burden as those companies with 500+ employees continue to be the worst payers. Like private companies, big businesses are averaging double the standard term (60.7 days) to settle accounts, a period which is around a week longer than small Australian companies (up to 50 employees).
Businesses of all employee sizes have increased their payment terms as compared to the same period last year, those with 200-499 and 500+ employees saw the most significant increases at 4.1 and 4.0 days respectively.
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"The pressures that have emerged in the Australian economy over the past 12 months are showing through in an increasing number of economic indicators," said Ms Christian.
"Trade payment trends are just one example, with the increase in payment periods to a seven year high a clear sign that these pressures are being felt by Australian organisations.
"The impact of the credit crunch on business' ability to access funds adds another layer of strain to organisations trying to manage their cashflow amidst a significantly delinquent payment environment."
Examining the data by sector reveals that Electricity, Gas and Sanitary Services is slowest to pay at 58.7 days, following an increase of more than three days on the same period last year. Meanwhile the Fishing industry saw the biggest increase in payment terms, up by more than a week on the June 2007 quarter to 53.4 days.
The Agriculture sector continues to be quickest to pay and is the only industry to pay its bills in less than 50 days however it did see a slight increase in terms. The only sector to improve its payment terms as compared to the June 2007 quarter was Forestry, down 1.6 days to 54.9. At a state level NSW has been joined by Victoria in taking the longest time to pay bills - both states increased their payment periods as compared to the June 2007 quarter with NSW up 2.9 days and Victoria up by 4.0. Tasmania continues to be the quickest paying state however its 3.5 day increase on last year has pushed it above the 50 day mark. Dun & Bradstreet's Global Risk Report shows that payment problems are not unique to Australia - a number of countries around the world pay a significant percentage of payments at 30 days or more past terms. Twenty seven countries globally pay 30% or more of their bills at 30 days plus past terms. Meanwhile the 33.6% of payments that Australia pays significantly past terms make it the 6th worst payer in the Asia-Pacific region. According to Ms Christian poor payment behaviour has a strong inhibiting effect on the economy. "Delinquent payment cycles are very difficult to break as their impact forces more and more companies to hold onto their cash in an attempt to manage cashflow. "Liquidity issues in an environment where borrowing continues to be difficult and costly can have dramatic effects on economic development as it often results in the postponement of business investment." |  |
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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.
