Small businesses are paying their invoices faster, with Tasmania and NT SMEs leading the way

Australian businesses are getting better at settling their invoices, according to research published yesterday by Dun & Bradstreet.

During the third quarter of this year, businesses in Australia settled their invoices at 45.1 days on average, down from 51.7 days during the same period in 2014.

The research found small and medium businesses are the quickest to pay invoices, with an average payment time of just over 41 days, while businesses with between one to five employees recorded the most improvement over the last quarter – shaving on average of nearly four days off their payment times.

Businesses in Tasmania and the Northern Territory are the fastest when it comes to paying invoices, with an average settlement time of 41.3 and 41.6 days respectively.

Queensland and West Australian businesses are hot on their heels, with average payment times of 42.7 and 43.3 days respectively.  

The fishing industry is the fastest sector when it comes to paying invoices, according to the research, while the communications sector posted the best improvement – narrowing the settlement of invoices from an industry-wide average of 49.8 days to 43.8.

Economics advisor to Dun & Bradstreet, Stephen Koukoulas, told SmartCompany the drop in average invoice payment times shows the economy is in sound shape.

Koukoulas also says the results show there is no need for further interest rate cuts from the Reserve Bank.

“The speed at which firms are paying their bills is really quite rapid,” Koukoulas says.

“It’s the lowest level in the past decade.

“It’s telling us firms have plenty of cash, are paying their bills quickly and the constraints on businesses spending and investment is not a cashflow problem. When you get paid quickly, you pay your next creditor quickly and so the merry-go-round goes around.”

Koukoulas says it is interesting to see how businesses with between six and 199 employees paid their invoices, on average, the most quickly, as well as how the NT and Tasmania were the best performing states in Australia.

“We’ve noticed that over time, you see small businesses get the money in and pay the bills quite quickly,” he says.

“Big businesses tend to wait until the last minute. I’m wondering if the prominence of small businesses in Tassie and the NT might account for that.”