B2B payment terms improve but cashflow concerns are growing stronger

Dun & Bradstreet’s latest report on business-to-business payment terms shows the average time for an invoice to be paid fell in the June quarter from 54.1 days to 53.4 days, but cashflow concern show no signs of diminishing, with the number of firms feeling the impact of late payments jumping 17% to more than 50%.

While payment terms remain well outside the 30-day standard terms most companies trade on, D&B says the average payment term has now fallen more than four days since the height of the global financial crisis.

Small, medium and large companies all improved their payment terms, with medium-sized firms (with between 55 and 199 employees) posting an improvement of 4.1 days to 49.4 days, the only group under the 50-day mark.

Largest companies (with more than 500 employees) remain the slowest group with average payment terms of 56.9 days.

D&B chief Christine Christian says cashflow remains vitally important even as the economy improves.

“The latest data suggests that the cash position of businesses is strengthening, but Australian executives are indicating that the small improvement in terms experienced during the June quarter is not enough,” she says.

“Access to cash is vitally important during a recovery period as firms seek to meet growing demand. If we are to experience the significant improvement in terms which is required…executives need to take prompt action to collect their bills.”

The finance sector was the quickest paying group during the June quarter and the only industry to pay its accounts in less than 50 days, while the public administration sector was the slowest paying group at 56.6 days.

At a state level, firms based in the ACT were the slowed payers at 55.5 days, while the booming economy of Western Australia helped firms there pay their bills in 51.5 days.