Australian firms face the prospect of renewed cash flow pressures in the months ahead, according to the latest business-to-business trade payments figures.
Credit reporting agency Dun & Bradstreet say their findings reveal a deterioration in payment terms (2.1 days) in the December 2009 quarter, taking terms to 53.9 days and largely reversing the gains made in the September 2009 quarter.
A further deterioration of the size recorded in the December 2009 quarter could put payment days back near the levels experienced during the height of the global crisis.
Christine Christian, D&B’s CEO, says access to cash is absolutely critical to Australia’s economic recovery.
“The outlook for Australia in 2010 is promising,” said Ms Christian.
“Businesses have begun to upgrade investment plans and confidence levels bode well for domestic demand in 2010. However, liquidity and access to cash are absolutely critical in an upturn. Consequently, the decline in payment terms and expected further deterioration are cause for concern.
“If payment terms continue to deteriorate in the months ahead, firms may find themselves battling the cash flow pressures that impacted business growth and stability during the height of the credit crisis.”
The data revealed that smaller businesses (1-5 employees) demonstrated the worst decline in payment days, with an increase of 2.7 days, taking average payments for small firms to 53.2 days during the December quarter.
Smaller firms are however quicker to settle their accounts than their larger counterparts. It took large companies (more than 500 employees) an average of 56.8 days to settle accounts during the December quarter, marking their 13th consecutive quarter as the slowest paying group.
Firms based in NSW and the ACT were the worst performers in payment terms, with a steady decline also in the Northern Territory and South Australia. Western Australia came out on top, as the quickest to pay despite a deterioration in terms as compared to the previous quarter.
Within the Asia-Pacific region, Australia is the fourth worst payer behind Singapore, Malaysia and Fiji.
Across the region an average of 26.4 percent of payments were made at 30 plus days past terms, with nine countries paying in excess of 30 percent of their bills delinquently.
“Australian executives need to ensure they have a strong cash position by taking prompt action to collect their bills,” said Ms Christian.
“This will allow firms to free up funds for business investment and to pay down debt or rely less on borrowed funds.
“If executives take their eye off the ball and allow their vigilant focus to waver, the economic recovery will falter.”