Evidence abounds that a tentative global economic recovery is well under way, yet many economists still identify the unemployment rate – a lag indicator – as the truest gauge of the state of an economy at any given moment. However, another indicator is quite revealing: the average number of days businesses take to pay other businesses.
According to Dun & Bradstreet’s (D&B) latest trade payments analysis, the payment terms of Australian firms have declined for the second consecutive quarter. A fall of three days since the previous quarter and 5.6 days in the past six months has reduced terms to 51.8 days – just above pre-crisis levels.
While B2B payment terms are at the lowest level since Q3 2007, they remain well above standard 30-day terms and, according to D&B’s analysis, continue to detrimentally impact 43 percent of firms. Public companies are slower to pay than private companies.
Companies from Tasmania and WA are fastest to pay, while NSW companies are once again ranked as the slowest to pay other businesses.