SMEs the fastest invoice payers

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New research from Dun & Bradstreet has revealed SMEs are the quickest invoice payers, while big businesses are slowest.

The company’s latest Trade Payments Analysis for the March quarter shows businesses with between 6 and 19 staff settle their invoices at the fastest average rate of 40.2 days – compared to businesses with more than 500 employees that are the slowest payers at an average of 52.4 days.

Overall, the average invoice settlement time for Australian businesses is 43.7 days, which is a slight improvement on the previous quarter’s average of 44.1 days. Interestingly, the March quarter result is nearly seven days faster than the same time one year ago, when payment times hit 50.4 days.

The analysis shows in the first quarter 68% of businesses paid their invoiced in a prompt timeframe (up from 56% recorded a year earlier), while 26% paid within 31 to 60 days.

However, 5% of businesses took between 61 and 90 days to pay, while 3% stretched out to 91 days plus.

Stephen Koukoulas, economics adviser to Dun & Bradstreet, believe interest rates aren’t having much of an impact on businesses in terms of cash flow.

“The fall in the trade payments times suggests that firms are cashed up and are able to pay their bills in a more timely manner,” he says.

“These results, which pre-date the most recent interest rate cut from the RBA, suggest that interest costs were not a problem for most businesses and that further interest rate cuts, if there are any, will not help the business sector all that much from a cash flow perspective.”

Koukoulas highlights the conflicting news in the economy currently.

The favourable news on trade payments times is in sharp contrast to the slump in business expectations and the softer tone evident in the economy in the past few months.”

By state, Tasmanian businesses were the fastest payers (41.5 days), followed by South Australia (41.6), Victoria (41.9 days), Northern Territory (42.5 days) and Queensland (43 days). Canberra businesses were the slowest payers (50 days), followed by Western Australia (46.1 days) and New South Wales (45.6 days).

“Most states and territories recorded slower average payment times compared to Q4 2015, with West Australian businesses increasing their average payment rate by almost four percentage points to 46.1,” the analysis notes.

“Businesses in Victoria experienced the most improvement on the previous quarter, with an average rate of 41.9 compared to Q4 2015’s 44.1. However, all states and territories, excluding Western Australia, reported significantly faster rates on the same period last year.”

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