Aust second slowest at paying suppliers

Australian businesses are the second slowest to pay their local suppliers, at an average 11 days late, with domestic customers taking two days longer to pay Australian businesses than their international counterparts, a new global survey has revealed.

The Atradius Payment Practices Barometer ranked Australia just behind Mexico in paying businesses.

The survey also found that the average credit terms for customers varied significantly for the different countries surveyed.

At 25 days, Australia has one of the shortest payment terms, with Spain and Italy having the longest payment cycles of 67 days.

Atradius managing director of Australia and New Zealand, David Huey said he was surprised that Australian businesses are so slow to pay their own.

"In effect, overdue payments create a self perpetuating problem as late payments from customers' impact a company's cash flow and they then struggle to pay their suppliers on time," added Mr Huey.

"Whether it's our culturally laid-back attitude or companies struggling to meet payments during the economic downturn, late payments aren't good for business."

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Aussies appalling payers

Sydney, 29 October 2009 - Despite being relatively unscathed by the global financial crisis, Australian businesses are the second slowest to pay their local suppliers, paying these invoices on average 11 days after the due date, according to a new global survey.

The Atradius Payment Practices Barometer also found that for Australian businesses, local customers are worse payers than international customers; with overseas customers typically paying up to nine days past the agreed credit terms; two days faster than domestic customers.

David Huey, Managing Director of Atradius, Australia and New Zealand said, "I'm surprised that Australian businesses are so slow to pay their own. The only country surveyed who exceeded Australia's late domestic payment record was Mexico.

"In effect, overdue payments create a self perpetuating problem as late payments from customers' impact a company's cash flow and they then struggle to pay their suppliers on time.

"Whether it's our culturally laid-back attitude or companies struggling to meet payments during the economic downturn, late payments aren't good for business," added Mr Huey.

The survey also found that the average credit terms for customers varied significantly for the different countries surveyed. At 25 days, Australia has one of the shortest payment terms, with Spain and Italy having the longest payment cycles of 67 days.

"Australia's relatively short payment term may contribute to late payments from international business partners who are used to longer payment cycles."

Different payment practices, trading terms, delays and defaults are a significant insolvency risk for Australian businesses. Companies can protect themselves against bad debt by credit checking, requesting advanced payments, having active collection procedures as well as using credit insurance," said Mr Huey.

Other key findings of the survey:

- Australian companies favour payment behaviour of overseas customers

Australian companies rated the payment behaviour of international customers better than domestic partners with 79 per cent ranking international buyers as "good", "very good" or "excellent" payers compared to 62 per cent for local customers.

- Chinese business partners most likely to change payment terms

The survey found that the average payment terms from the countries surveyed ranged from 22 to 67 days. Almost all Chinese companies (93 per cent) applied different trading terms depending on the country or industry of their business partners.

- Danish the best domestic payers, Mexicans the worst

When it comes to paying their own, Danish companies settle their domestic debts an average of two days early while Mexican companies typically pay 13 days overdue. Australia joins Ireland and Italy at 11 days late, followed by the USA who averaged payment 9 days past the contract term.

- Countries offering longer credit terms benefit from early payments

The longer credit terms offered to international customers by Spanish companies has resulted in Spain having the best record for receiving international payments (11 days early). US companies have the worst record with their international customers typically paying 15 days late.

- Oceania companies assessed as 'good' payers by foreign business partners

When evaluating the payment practices of businesses from foreign countries the surveyed businesses ranked their Finish and Danish customers as the best payers and African and Portuguese customers as the worst, typically taking 58 days to settle debts. Oceania partners are considered good payers, settling their accounts within 38 days.

"The insolvency risk of a company is largely dependent on the payment practices of its customers. We want to make sure that Australian businesses are aware of the risks of trading with international and domestic markets and enable them to properly assess these risks and reduce the losses from non-payment," said Mr Huey.