Business paying bills faster: study

Small businesses remain the most reliable on-time bill-payers, but all firms and even the public sector lifted the game in the three months to June, according to international debt collection agency Dun & Bradstreet.

In the latest sign of gradual economic recovery in New Zealand, D&B said "cash flow pressures are showing signs of abating" and payments on bills payable occurring almost a week faster than they were at the hight of the global financial crisis.

The findings are based on analysing millions of accounts receivable records on the D&B database and found the average time to pay a bill fell to 44.3 days in the June quarter from 46.6 days in the first three months of this year.

Their most recent peak was at 50.8 days average time to pay in the December quarter of 2008.

If previously observed trends continue, D&B is forecasting that payment times could drop close to 42 days in the September quarter, the same level as the same period in 2007, before the global crisis hit and just ahead of the domestic recession which took hold in early 2008 in New Zealand.

All sizes of firms improved their payment behaviours in the June quarter, although the smallest businesses continued to be the fastest payers at an average 42.8 days for firms with six to 19 staff, about two days faster than the previous quarter and the same period a year ago.

Firms with more than 500 employees continued to be slow payers, at 46.1 days, although medium sized firms with between 200 and 500 employees were the slowest at 46.8 days.

Still, both firm types improved over the March quarter by more than two days each.

Among industry groups, electricity, gas and telecommunications were all slow payers, with payment terms over 50 days, while the booming forestry sector was the only industry to pay on average in less than 40 days.

The tendency for South Island firms to pay more quickly than North Island firms remained intact, with Wellington firms the slowest payers, taking an average 46 days to settle their accounts.

Compared with 19 other countries surveyed in the Asia-Pacific region - ranging from Afghanistan to China, and Australia - New Zealand firms were the 13th slowest payers.

D&B's country general manager, John Scott, warned New Zealand firms to pay more attention to collecting invoices in a timely way.

"Firms need to keep an eye on their debtors in the months ahead to ensure that payment days don't blow out," he said.

"A solid receivables process, which is dependent on firms taking action to collect their bills promptly, can generate significantly more operating cash for the business."