Small firms put on notice as late bills hit 12-month high

Businesses are being urged to prioritise trade payments as they stare down the barrel of another challenging year, with data showing severely delinquent bills are at a 12-month high, jumping 28% over the Christmas period.

According to the latest Dun & Bradstreet Trade Payments Analysis – which examines the ability of firms to pay their bills, and pay them on time – firms are becoming increasingly neglectful.

During the December quarter last year, the number of bills left unpaid for 90 days or more grew 20% compared with 12 months ago.

While overall payment terms fell to 52.3 days during the quarter – a fall of 0.7 days – terms remain elevated by 0.5 days compared with the previous year.

This represents an average trade payment term almost a month beyond the standard 30-day payment period.

Australian businesses also recorded a year-on-year 42% spike in the number of bills 61-90 days late, with a rise of 10% during the December quarter alone.

The jump in severely delinquent bills (90 or more days) was particularly evident among the finance, insurance and real estate sector, where the number of accounts grew by more than 50% during the fourth quarter.

Likewise, businesses in the services sector recorded a jump of 28% in the number of severely delinquent payments over the same period.

“The rate at which these micro-loans are being paid back is a leading indicator of cashflow performance and financial stability,” Dun & Bradstreet chief executive Christine Christian says.

“Businesses forced to wait up to three months or more for payment are being placed under tremendous financial stress to the point where day-to-day operations… can be compromised.”

According to the report, bigger businesses (employing 500 or more staff) consistently maintain longer payment terms than smaller firms, averaging 56.5 days since the December 2009 quarter.

This is in comparison to 50.8 days for those with six to 19 members of staff, while those with 1-5 staff are slightly out in front, recording an average of around 51.2 days.

“During the December quarter 2011, firms of all sizes were able to reduce payment terms… [including] a 1.4 day improvement for firms with one to five members of staff,” the report said.

Meanwhile, the majority of the 14 sectors examined also saw some improvement in payment terms during the quarter, from 0.1 of a day in manufacturing to 2.9 days in the forestry sector.

“Transportation firms were the quickest payers at 50.3 days followed by services, with an average 50.4 day payment term, and wholesale at 50.7,” the report said.

With regard to the states, firms in the ACT and NSW recorded the worst trade payment terms during the December quarter, at 54 and 53 days respectively.

Although this is an improvement on the previous quarter, both states have maintained the longest average trade payment terms over the past two years.

The best performers were WA with an average term of 51.2 days, and Victoria at 51.5 days. WA firms also maintained the lowest two-year average of all states and territories, at 51.8 days.