31/05/2016 - 14:01

SMEs pay invoices faster than big businesses

31/05/2016 - 14:01

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Small and medium-sized businesses are settling their invoices about 12 faster than large corporations on average, a report by Dun & Bradstreet has found.

Small and medium-sized businesses are settling their invoices about 12 faster than large corporations on average, a report by Dun & Bradstreet has found.

Australian businesses paid their invoices within 43.7 days on average for the first three months of the year, a record pace according to Dun & Bradstreet, which revealed the findings in its quarterly Business Expectations survey today.

The survey found that businesses with between six and 19 staff settled their invoices at the fastest average rate of 40.2 days, while companies with over 500 employees paid at the slowest average rate of 52.4 days.

That’s not surprising, given that mining giant Rio Tinto recently attempted to double its payment terms to 90 days, but quickly reversed the decision after copping backlash from the industry.

It still maintains a 45-day payment term, while BHP Billiton has a 60-day payment policy.

Perth-based iron ore giant Fortescue Metals Group, however, pays its bills within 30 days of them being processed.

The average of 43.7 days was a slight improvement on the previous quarter, but was nearly seven days faster than the first three months of 2015.

That being said, on a state-by-state basis, Western Australia was the second-worst performer with an average settling time of 46.1 days.

“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,” Dun & Bradstreet economics adviser Stephen Koukoulas said.

“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.

“The economy is clearly seeing a lot of conflicting news at the moment. 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”.

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