Payment terms fall to 51.8 days – lowest point in two years

Payment terms have fallen for the second consecutive quarter in another sign that the economy is getting back on track.

According to data from credit ratings agency Dun & Bradstreet, average payment terms fell three days in the last quarter to 51.8 days. Payment terms have now fallen 5.6 days in the last six months and are at the lowest level since the third quarter of 2007.

Small firms (between six and 200 employees) were the quickest to pay, averaging less than 50 days to settle accounts in the September quarter.

Those with 50 to 199 employees were the biggest improvers, with their reduction in terms moving them into the quickest paying spot. This group averaged 48.4 days to settle accounts, an improvement of 5.5 days quarter-on-quarter and 5.3 days year-on-year.

Big business (companies with over 500 employees) remain the slowest payers at 56 days, although this fell by three days quarter-on-quarter and 3.5 days year-on-year.

Damian Karmelich, Dun & Bradstreet’s Director of Corporate Affairs, says the downturn has refocused many companies on the importance of cashflow.

“As banks tightened their lending books firms tried to squeeze more cash from their day-to-day operations and consequently, many firms are now taking action to collect their bills more quickly.

“If this renewed focus continues it will allow executives to free up funds for business investment and to pay down debt or rely less on borrowed funds.”