Slow bill payment concerns

John Christie
John Christie
Small and medium-sized enterprises were at risk of serious cash flow problems if their customers did not pay their bills on time, Otago Chamber of Commerce chief executive John Christie said.

He was particularly concerned that a Dun and Bradstreet survey out this week showed that publicly listed firms took nearly seven days longer than private firms to pay their bills during the December 2011 quarter.

That was the largest disparity in the past four years.

"Those large firms could be making it easier for their suppliers by paying on time, or ahead of time.

"Cash is key in business. You have to have cash to survive. It doesn't matter if you have good orders or good sales if those orders and sales are not converted to cash."

The payment terms for listed firms averaged 51 days, two days longer than in the September quarter and 5.8 days longer than a year ago, the Dun and Bradstreet survey showed.

The spike brought payment terms for listed companies to their worst level in 10 quarters after steadily rising for the past two years.

Payment terms for private firms were on a par, with the national average 44.6 days, half a day longer than in the same quarter last year.

The data indicated large firms - 500 or more employees - were the slowest payers at nearly 49 days. Firms with one to 19 employees took 43 days to pay their bills.

Businesses averaged a payment term of 45.2 days in 2011, an increase of nearly a day on 2010.

More than half of businesses were more than a day late in settling their accounts, with nearly 5% of all firms 30 or more days late.

Mr Christie said, as a matter of principle, the chamber paid its accounts on time. If everyone did that, it would improve the cash flow situation throughout the business community.

He was aware some consultants advised clients not to pay until they received the final reminder notice.

"But that doesn't assist anyone. It just defers other people from paying their bills on time. In tough times, we see the cash collections going out. The longer you take to pay, the longer someone else takes to pay."

Smaller enterprises were at risk of bad credit ratings for failing to pay and were more likely to try to get their bills paid on time, he said.

However, if large corporations or government departments delayed their payments, there was a danger those smaller enterprises would lose their buying power.

Dun and Bradstreet data showed the slowest-paying industries were the electric, gas and sanitary services and the communications industries.

The fastest-paying industry was forestry at 39.3 days, down 2.7 days in the past 12 months.

The transportation and public administration sectors did not record any change in payment terms from the last quarter.

North Island firms were slower payers at 44.9 days compared with South Island firms at 43.5 days.

 

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