Cash flow will remain tight for Australian businesses in 2011, according to new research.
Financial reporting company Dun & Bradstreet has revealed that an additional 4% of Australian firms failed to pay their trade credit accounts in Q4, 2010.
Of greater concern, the number of businesses with severely delinquent accounts (90+ days past due) increased by more than 7%.
Australian firms took, on average, 51.2 days to settle accounts in Q4 – well above the standard 30 day payment term.
Dun & Bradstreet CEO Christine Christian said delayed business-to-business payments had the potential to create knock-on cash flow difficulties for firms.
“This is a worrying trend as it can draw more and more businesses into the late payment cycle, making it increasingly difficult for firms to escape the pressures associated with slow paying customers,” Ms Christian said.
“The rise in severely delinquent accounts is particularly concerning as it means businesses are being denied access to their cash for more than four months. For small businesses in particular, this type of delay in receiving payment for products or services could push a business into severe financial stress.”
Dun & Bradstreet’s findings showed that larger businesses (500+ employees) were the biggest culprits when it came to late payments, averaging 56.4 days to settle their accounts. Firms with between 40 and 199 employees were the promptest to pay, with an average settlement of 48.1 days.
Some industries were found to be tardier than others. The electric, gas and sanitary services sector took 60.8 days to settle its accounts in Q4 – more than twice the standard 30 days. The services sector was best in group, settling accounts in just 50.7 days. State by state, Western Australia was the quickest, on average, while the ACT was the slowest.
Ms Christian said the importance of businesses adhering to the 30-day standard payment terms could not be underestimated.
“Australian firms need to recognise the value of their accounts receivable as it is typically the largest liquid asset on an organisation’s books – mismanagement of this crucial asset has the potential to bring a business to its knees.”
