At long last, the burden of late payments on SMEs may soon come to an end, as increased attention on the effective abuse of market power begins to see an improvement in payment times.
Research by credit agency illion (formerly Dun & Bradstreet) suggested that the average late payment for Australian businesses fell 9.1 per cent in the September quarter to 12.6 days.
While that pre-dates the federal government’s recent mandate to introduce 15-day payment terms for SME suppliers, it was the first full quarter since more than 30 of Australia’s biggest companies signed up to a new code to improve payment terms to SMEs.
According to illion’s CEO Simon Bligh, falling late payment volumes suggest a strengthening of the wider economy.
“Payment behaviour helps us track the health of business in real time”, he said.
“If a company’s annual report is like the yearly medical check-up, then payment data is like Fitbit data. Timely payments are a crucial sign of business health. They are critical to small businesses running on slim margins, reducing the risk of job cuts and business failures.”
At a state level, Tasmania had the most prompt payers, with average late payments sitting in the single figures (9.5 days).
This was followed by South Australia (11.9 days), the Northern Territory (12.0 days), Queensland (12.1 days) and Victoria (12.2 days), while NSW was lightly higher at 13.1 days.
Unsurprisingly, given the weakness of the WA economy, it was the only state to see a year-on-year increase in payment terms, up 4.1 per cent to 14.1 days.
Yet it was the nation’s capital that fared worst on payment terms, with an average of 15.3 days.
The problem of late payments was highlighted in August by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), which found that almost one in 10 firms was still chasing payment more than 60 days past the due date.
Interestingly, a separate research conducted by ezyCollect on over 3,500 businesses nationally identified the exact time of day that most invoices were paid, making the job of chasing overdue payments somewhat easier.