Payment times have fallen markedly over the last year, new analysis suggests, with the average overdue invoice now standing at 11 days – although there is significant variation by state and industry.
Data analytics firm illion has been tracking payment times in Australia since 2011, and found that in June 2018, the average outstanding time for payments fell by 25 per cent to reach a new low of 11 days.
That has roughly halved since the series began, when late payment times sat fractionally below 22 days.
It also marks a rapid fall over the last 12 months, when the average was 14.6 days in June 2017.
“A healthy cash flow is important to all companies, but even more so for small business, so an improvement in late payments across sectors and regions is a positive sign for the Australian economy,” said illion CEO Simon Bligh.
“Late payment times resumed their long-term downward trajectory in FY2018, having increased during the preceding 18 months.”
An economic adviser at the firm, Stephen Kokoulas, suggested a combination of factors are making it easier for businesses of all size to pay their invoices closer to their due date.
“A solid pace of economic growth, low interest rates and low wage costs are giving firms ample cash reserves to pay their accounts in a timely manner. In comparison, from 2011 to 2013 when the economy was weaker and interest and wages growth were higher, late payment times were almost double the current time, averaging 21 days,” he said.
The retail sector continues to experience the slowest rates of payment, at 14.5 days. However, other industries, including finance, insurance, construction and real estate, all saw improved payment time frames.
On a state-by-state basis, there is very little separating the mainland states, which average between 10.2 days in Queensland and 11.3 days in NSW. Businesses in the ACT face the longest wait for the monies owed, at 12.1 days.
Conversely, it is Tasmania that leads the country for speediness of payment, where the average sits at just 8.5 days.
The figures from illion come just days after the NSW Government unveiled plans to mandate five-day payment terms to its SME suppliers.
Average late payments by sector, as at June 2018
- Retail: 14.5 days
- Utilities: 13.7 days
- Mining: 13.5 days
- Manufacturing: 12.3 days
- Wholesale: 11.8 days
- Construction: 10.7 days
- Finance, insurance and real estate: 9.7 days
- Transportation: 9.7 days
- Services: 9.5 days
- Fishing: 8.8 days
- Agriculture: 7 days
- Forestry: 6.3 days
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.