Creditors pay in debt delay
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Tuesday, 8 May, 2001 - 22:00
PRESSED by economic necessity, businesses are taking an average 10 per cent longer to pay their bills than they were two years ago.
The figures revealed by Dun & Bradstreet’s Australian Trade Payment Analysis for two years to February show that trade payment periods blew out to 66 days from 60 days as business increasingly uses debt as a cash flow tool.
But the longer repayment periods coincided with a dramatic drop in trade credit and debt, as creditors acted to rein in costs on their side of the ledger.
According to the survey, the biggest trade payment lags featured in the lead up to the GST’s introduction and around the times quarterly GST payments were due.
Dun & Bradstreet Australia and New Zealand managing director Christine Christian said an increase in average payment days at such times was expected but so too was a return to lower levels soon after.
“However, since November this has not been the case – average trade payment days are continuing to rise,” Ms Christian said.
“Our latest Business Expectations Survey shows businesses continue to experience cash flow difficulties in the first quarter of 2001.
“On this basis it seems likely that trade payment levels will have increased further since February.”
The survey also showed that, after the GST, the average amount owing on trade credit shrunk from $17,500 to $5,000. The average amount of debt past its due date fell from $8,200 to $1,500 in the same period.
Finance specialist Kaizen Corporate director David Breaky said he had spoken to about 100 WA businesses which had extended their credit terms recently.
“Debtors’ ledgers are certainly feeling the pinch at the moment, the problem is getting cash back through the door,” Mr Breaky said.
He said the cashflow tightening was due to a number of factors, such as the GST and an economic downturn.
Debt collector Receivables Management regional manager Keith John said the amount of work for debt collectors was increasing.
“As people have been through tough times recently, they know to refer unpaid bills for collection a lot sooner now,” Mr John said.
“Part of the problem is because things are tight, companies that are trading well are taking advantage of the situation and extending their payment terms to creditors and blaming it on the tight conditions.”
Small Business Development Corporation head George Etrelezis said small business operators could take some positive steps to manage their cashflow such as:
p being firm about payment terms;
p ensuring adequate follow-up action for overdue payments;
p ordering early in the month and pay creditors no earlier than the due date;
p reviewing stock levels, keeping an eye on slow moving stock and avoiding overstocking; and
p making use of terms and discounts offered by suppliers especially offers of extension of credit.
The figures revealed by Dun & Bradstreet’s Australian Trade Payment Analysis for two years to February show that trade payment periods blew out to 66 days from 60 days as business increasingly uses debt as a cash flow tool.
But the longer repayment periods coincided with a dramatic drop in trade credit and debt, as creditors acted to rein in costs on their side of the ledger.
According to the survey, the biggest trade payment lags featured in the lead up to the GST’s introduction and around the times quarterly GST payments were due.
Dun & Bradstreet Australia and New Zealand managing director Christine Christian said an increase in average payment days at such times was expected but so too was a return to lower levels soon after.
“However, since November this has not been the case – average trade payment days are continuing to rise,” Ms Christian said.
“Our latest Business Expectations Survey shows businesses continue to experience cash flow difficulties in the first quarter of 2001.
“On this basis it seems likely that trade payment levels will have increased further since February.”
The survey also showed that, after the GST, the average amount owing on trade credit shrunk from $17,500 to $5,000. The average amount of debt past its due date fell from $8,200 to $1,500 in the same period.
Finance specialist Kaizen Corporate director David Breaky said he had spoken to about 100 WA businesses which had extended their credit terms recently.
“Debtors’ ledgers are certainly feeling the pinch at the moment, the problem is getting cash back through the door,” Mr Breaky said.
He said the cashflow tightening was due to a number of factors, such as the GST and an economic downturn.
Debt collector Receivables Management regional manager Keith John said the amount of work for debt collectors was increasing.
“As people have been through tough times recently, they know to refer unpaid bills for collection a lot sooner now,” Mr John said.
“Part of the problem is because things are tight, companies that are trading well are taking advantage of the situation and extending their payment terms to creditors and blaming it on the tight conditions.”
Small Business Development Corporation head George Etrelezis said small business operators could take some positive steps to manage their cashflow such as:
p being firm about payment terms;
p ensuring adequate follow-up action for overdue payments;
p ordering early in the month and pay creditors no earlier than the due date;
p reviewing stock levels, keeping an eye on slow moving stock and avoiding overstocking; and
p making use of terms and discounts offered by suppliers especially offers of extension of credit.