Businesses are continuing to pay their invoices at the fastest rate on record despite ABS figures showing that growth in the Australian economy slowed to 0.2% in the June quarter.
Dun & Bradstreet’s Trade Payments Analysis reveals that average invoice payment times were 49.2 days during the second quarter of the year, down from 53.2 days a year earlier, and 50.4 days in the previous quarter. The current rate is the fastest on record in Dun & Bradstreet’s eight-year history of the data, with an improvement of 1.2 days on the previous quarter, compared to an improvement of 2.8 days between the March and June quarters of 2014.
The rate is in line with a sharp increase in the number of invoices being paid on time (1-30 days), with the percentage increasing to a four-year high of 68 per cent for the June quarter, compared to 48 per cent a year earlier. Meanwhile, the percentage of invoices settled within 31-60 days has fallen from 40 per cent in the previous year to 21 per cent.
Dun & Bradstreet’s September Business Expectations Survey found that 43 per cent of businesses would choose to miss a payment to a trade supplier if they were unable to cover all of their expenses. The survey also found that 34 per cent of businesses have had a customer or supplier become insolvent or otherwise unable to pay them in the past 12 months.
Businesses with between 20 and 199 employees paid their accounts in an average of 42.5 days during the second quarter of the year, one week faster than the five-year low national average of 49.2 days. Overall, businesses paid their invoices four days faster than in the same period last year.
Tasmanian businesses had the fastest average payment time of 42.1 days, a further improvement on the 46.6 days it recorded in the previous quarter, and eight days faster than the previous corresponding period. While all states experienced faster average payment times when compared to the first quarter of the year, the ACT and New South Wales continued to record the slowest average payment times of around 51 days.
The Fishing industry paid invoices at the fastest average rate of 39.4 days, while the Finance, Insurance and Real Estate sector lagged behind the national average of 49.2 days at 53.1 days.
While businesses across all sectors settled their accounts on an average of four days faster than the same period last year, the Forestry industry experienced the biggest improvement with an average rate of 44.4 days, 11 days faster than the previous year.
About Trade Payments Analysis
Business-to-business payment information is a highly predictive data set and a critical element in credit risk scores and business failures forecasting.
The distinct advantage of trade information over other forms of company data is its ability to provide insight into current performance. Company financials, which are considered to be critical to effective decision making, are reported relatively infrequently and as a consequence, organisations may be required to make decisions using data that is up to 12-months old. Conversely, because trade information is reported monthly, it reveals how an organisation is paying its existing obligation.
Trade data is also effective across all business sizes, being the most predictive element in SME scores and the second most predictive (behind financials) in other credit scores. The predictive nature of trade data combined with its timely availability enables businesses to properly assess credit risk.
This includes the identification of both high and low risk customers, thereby enabling firms to minimise the risk of late payments and bad debts and identify the good credit accounts that will create long-term, profitable credit relationships.