Late payment times rose during the fourth quarter of 2016, marking a fitting end to a year which saw payment times after the due date track a jagged path following two years of sustained falls.
“The recent up-tick in late payments appears to reflect a slowing in the overall rate of economic growth and the general sluggishness of the business sector,” observes Stephen Koukoulas, Dun & Bradstreet economic adviser.
“Since the low point in the September quarter 2015, late payment times have edged higher but they remain low relative to the historical experience. Helping to offset these negative influences are record low interest rates and solid profits levels which improve business cash flows and lower the level of late payments” observed Mr Koukoulas.
Dun & Bradstreet’s payment analysis provides a health check of Australian business examining sector, location, size, age and long-term trends. A high-level look at the late payment data shows a clear pattern of larger firms paying suppliers later than small to medium-sized businesses.
“There is a well-established trend that larger firms (over 500 employees) are the slowest to pay invoices with smaller firms tending to be the fastest. That said, the overall trend showing a moderate increase in late payments over the past year has been evident across firms of all sizes,” said Mr Koukoulas.
During the past five years, Tasmanian business has gone from making the slowest late payments to top of the class. ACT companies have distinguished themselves as being consistently tardy over the same period.
“The ACT experienced the sharpest deterioration in late payments, linked to the persistently slow rate of payments from government entities, while Tasmania bucked the national trend to record a decline in the last two quarters,” said Mr Koukoulas.
Mining may have been the slowest paying sector for the quarter, but communications stood out as the only industry to record a year-on-year decrease in payment times. The result represented a sharp turnaround from third quarter 2016, during which communications was the slowest paying sector.
“All industries, other than communications, experienced an increase in late payment times over the past year, with the mining, utilities, manufacturing and retail sectors paying slowest. It is interesting that after that initial spike, the longer firms have operated, the lower the late payment times, until they have been operating for more than 50 years,” said Mr Koukoulas.
About Late Payments
Late Payments analyses trade information from Dun & Bradstreet’s Commercial Bureau, the largest database of business-to-business payment information - capturing 778,000 entities - in Australia. Monthly trade transaction files are collated and advanced analytics is used to provide a summary of how late entities pay for goods and services after payment is due. Previously released as Trade Payments Analysis, Late Payments now provides a quarterly report with a breakdown according to sector, size, age and location of entities. Business-to-business payment information reveals how an organisation is paying its existing obligations. It is a highly predictive data set and a critical element in credit risk scores and business failures forecasting. The predictive nature of trade data combined with its monthly availability enables businesses to properly assess credit risk with real time information.
The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.
By Michael Bennet
Editor, Westpac Wire