14/10/2003 - 22:00

Debtor payments faster

14/10/2003 - 22:00


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TRADE payments by Australian industry have fallen to an average of 47 days, the lowest level in four years.

Debtor payments faster

TRADE payments by Australian industry have fallen to an average of 47 days, the lowest level in four years.

This is 20 days below the July 2000 peak of 67 days, according to the latest D&B Australian Trade Payment Analysis, released this week.

Businesses in the agriculture, forestry and fishing sectors were fastest to pay their bills, with an average payment period of 45 days.

At the other send of the scale, mining continues to be the slowest paying industry on 53 days.

This is well down from a peak of 68 days in 2001.

D&B Australia & New Zealand chief executive Christine Christian said the fall in trade payment levels reflected a renewed focus by corporate Australia on effective cash flow management.

“Businesses have put renewed energy into their receivables management processes and in turn, reduced average trade payment days,” she said.

Ms Christian warned that businesses needed to remain vigilant.

“With a possibility that the housing boom could come off the boil in 2004, average personal household debt exceeding income by 30 per cent and the global economy still less than robust, debt management must remain a key priority for all businesses.”

Payment terms in construction appeared to reflect the ongoing strength of the housing construction sector and the large amount of work that remained in the pipeline to keep cash flow turning over, she said, adding that many companies still failed to recognise the value tied up in their receivables.

“Without a healthy cash flow, businesses will at best stagnate and at worst stop functioning altogether,” Ms Christian said.

“D&B’s data shows that most businesses under-perform or fail because they don’t generate consistent levels of cash over the long-term.

“In fact, 90 per cent of businesses that fail, do so because they run out of cash. It’s as simple as that.

“Businesses need to ensure that their payment terms are as short as the market will bear and are clearly stated.

“They should offer discounts for prompt payment, tighten up credit procedures and put bad debtors on COD terms only. 

“For many companies with limited resources, outsourcing receivables is the best option,” she said.

The D&B Australian Trade Payment Analysis found the average payment terms by industry were: agriculture, 45 days; services, 46 days; construction, 46 days; finance, insurance and real estate, 46 days; wholesale, 48 days; retail, 49 days; transport and communications, 49 days; manufacturing, 50 days; and mining, 53 days.


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