“Encouraging” is how an apparent reduction in the length of late payments to SMEs has been described, and while drought-stricken farmers are struggling, agriculture is far from being the worst sector at paying invoices on time.
These are the findings of the Trade Late Payments Report for the June 2019 quarter by illion.
Year-on-year, illion’s research found that late payments have fallen to 10.1 days — the lowest recorded by the report since it began in 2011.
“Improved late payments overall is encouraging, but Australian farmers are facing troublesome conditions,” the group’s CEO, Simon Bligh, said, after the report found payment times had deteriorated by 26 per cent in the agriculture space.
“We have noticed a silver lining though, even for farmers, with a small improvement during the quarter indicating that drought relief initiatives are starting to improve farmers’ situation.”
He said that much of the reduction in late payments has been due to government pressure on big businesses to pay SME suppliers more promptly, and actions to improve the payment times of federal government agencies.
However, Mr Bligh said the digitisation of payments is also driving a reduction in late payments.
“Payment methods, linked to technological changes in the banking sector, are influencing the time firms take to pay their bills. The increased use of direct debit, for example, rather than posting cheques, is likely to have had a significant effect on late payments over the past few years,” he said.
Slowest industries to pay
Despite Mr Bligh’s upbeat assessment of late payments, most industry sectors analysed by the report have actually gone backwards year-on-year.
And while the drought-induced slump hit farmers in the June quarter, agriculture was still one of the most prompt payers, and it still managed to post the largest year-on-year improvement in late payments of any sector measured.
The slowest to pay invoices remains the retail sector, with late payments averaging 12.9 days, the report found, closely followed by the mining sector on 12.7 days.
Forestry was the best performing sector, with late payments averaging 6.2 days — less than half of the delay seen in retail.
The full breakdown, according to the report, looks like this:
- Retail: 12.9 days, deteriorating by 11 per cent year-on-year
- Mining: 12.7 days, deteriorating by 6 per cent year-on-year
- Manufacturing: 11.8 days, deteriorating by 4 per cent year-on-year
- Utilities: 11.2 days, deteriorating by 19 per cent year-on-year
- Communications: 11 days, improving by 7 per cent year-on-year
- Wholesale: 10.7 days, deteriorating by 10 per cent year-on-year
- Construction: 10.5 days, deteriorating by 1 per cent year-on-year
- Transportation: 9.7 days, no change year-on-year
- Finance, insurance and real estate: 9.5 days, deteriorating by 3 per cent year-on-year
- Fishing: 9.4 days, deteriorating by 7 per cent year-on-year
- Agriculture: 8.9 days, improving by 26 per cent year-on-year
- Services: 8.7 days, deteriorating by 9 per cent year-on-year
- Forestry: 6.2 days, deteriorating by 1 per cent year-on-year
Meanwhile, illion economic adviser Stephen Koukoulas was quoted in the report as stating that “the efforts of the Commonwealth and state governments to streamline payments to suppliers appear to have produced a 15.6 per cent fall in late payments in the public sector”.
Tasmanians are the most prompt to pay their invoices of any Australian state or territory. Late payments in the island state were 7.9 days, according to the report.
The ACT was the next best, at 9.2 days, driven by a hefty 23.8 per cent fall in the rate of late payments, largely attributed to the federal government’s commitment to improve the speed with which its agencies pay SME invoices.
Next was Queensland at 9.9 days, followed by Victoria at 10 days, NSW at 10.2 days, SA at 10.3 days and WA at 10.4 days.
Conversely, though, the Northern Territory has the longest average late payments at 11.9 days. It was also the only place in Australia where late payments actually blew out, to the tune of 1.4 per cent, the report found.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.