Low interest rates behind fastest invoice payment times on record
Article by Kirsty Timsans
New research has shown that Australian businesses are paying their invoices at the fastest rate on record in eight years, despite the sluggish growth of the Australian economy reported in the latest ABS figures for the March quarter.
Credit information bureau Dun and Bradstreet’s analysis revealed that the average invoice payment times were 50.4 days during the first quarter of the year, compared with 56 days in the same quarter of the previous year.
This record pace can be attributed to the positive impact of the low interest rate environment on cash flow for businesses and the improved efficiency of the business sector post-GFC said Gareth Jones, CEO of Dun and Bradstreet.
“The lower cost of debt is certainly helping businesses to manage their repayments and control their cash flow in an operating environment of soft demand,” he said.
However businesses are still faced with certain challenges that hinder their capacity to pay their invoices promptly, revealed in the latest Business Expectations Survey that found 34% of businesses have had a customer or supplier become insolvent or been unable to pay them during the past year.
“Despite the improvement, 44% of commercial invoices in Australia are still being paid late which withholds significant amounts of money from the financial system and places financial strain on supply chains,” said Jones.
State-by-state analysis revealed that ACT recorded the slowest average payment time of 53.3 days, while Tasmanian businesses were the fastest to pay their invoices averaging 46.6 days which is a significant improvement from 54.9 days at the same time last year.
Businesses operating in the utilities sector were the slowest to pay their invoices at 55.2 days followed by the retail and mining sectors which averaged 52.6 days and 52.2 days respectively. Meanwhile fishing, agriculture and forestry industry businesses recorded the fastest times to make their repayments at 43.7, 45.7 and 46.5 days respectively.