Payment terms blow out again

Payment terms have blown out to an average 57.6 days as Australian companies hold on to their cash in order to improve cashflow and working capital.

According to data from Dun & Bradstreet, average payment terms increased from 55.9 days at the end of 2008 to 57.6 days at the end of March. Payment terms have increased steadily since September 2007, when the average was 52.6 days. 

Small businesses remain the quickest payers, with companies in the six-to-19 employee range settling accounts in 53.9 days.

That’s a full week quicker than big businesses, with companies with 500 or more employees taking 62.1 days to settle accounts. That is an increase of 2.8 days on the December quarter of 2008.

D&B chief executive Christine Christian says the increase in payment terms is worrying.

“Our findings continue to show that Australian companies are holding on to their cash for longer in an attempt to manage their cashflow and improve liquidity.

“However the flow-on effect of this trend is a reduced focus on business development and investment, and consequently a further decline in economic growth. If Australia is to avoid the extent of pain that other nations are experiencing, we need to ensure that payment terms do not continue along the same trajectory.”

Victoria continues to be the slowest paying state, averaging 59.2 days to settle accounts in the March 2009 quarter. NSW and the ACT follow closely behind at 58.8 and 58.5 days.

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