Payment terms stretch to 53.2 days as cashflow worries continue

The recovery might be well and truly underway, but new figures from credit agency Dun & Bradstreet have highlighted the need for companies to continue to closely watch cashflow.

D&B’s latest analysis of payment terms shows it now takes an average of 53.2 days for a business to get its invoices paid, up from 52.1 days this time last year.

As usual, it’s smaller companies getting hit hardest. Firms with one to five employees saw payment terms increased by two days in the September quarter to 53.2 days, while large companies (500 or more staff) were once again the slowest to pay, averting 56.5 days to settle accounts.

The best payers were firms with 50-100 staff, who took 49.3 days to pay up and were the only group to settle accounts in less than 50 days.

Public firms took 58.6 days to settle their accounts, up from 55.7 days during the September quarter 2009, while private companies paid in 53.1 days, up 1.1 days on the previous year.

The industries that were slowest to pay were the electricity, gas and sanitary services sector, the forestry sector and the mining sector, while the best payers were in the agriculture, wholesale trade and services sectors.

D&B Australia chief Christine Christian says firms need to be aware that cashflow remains a big issue in a recovering economy.

“As demand rises, firms need to be able to access funds to take on new staff, increase their inventories and invest in their business,” she says.

“Accounts receivable is typically the largest liquid asset on an organisation’s books and mismanagement of this crucial asset has the potential to bring a business to its knees.”

Christian says payment terms remain more than three weeks above the standard 30 day payment terms used by most firms, and are still at pre-GFC levels.

“Overcoming this challenge in an environment where cash remains difficult to access requires vigilant cashflow management.”