Australian businesses are settling outstanding bills faster, with illion’s Late Payments analysis showing a new record low at 11.7 days at the end of March 2018.
Illion’s Late Payments analysis uses the largest database of business-to-business payment information in Australia, capturing more than one million entities.
Small businesses, particularly those with less than 50 employees, are the country’s best payers, while big businesses with more than 500 employees are the slowest. In fact, they have been the slowest for 18 consecutive quarters.
The analysis also found that one third (31.2 per cent) of businesses fail to pay their bills on time.
Illion CEO, Simon Bligh, said a new trend has emerged.
“Late payment times have fallen to a record low in our latest analysis,” he said.
“This reveals more invoices than ever are being paid on time. The March quarter results confirm the underlying strength in the economy. While payment times dropped annually across all regions, sectors and business sizes, the big end of town are still squeezing the small guys and there is no sign of a culture change.”
Illion economic adviser, Stephen Koukoulas, said the new low builds on a long run of decline.
He said this reflects the business sector’s strong cash flow position and generally buoyant conditions.
“Many businesses are cash rich as a result of record low interest rates and low wage growth, even if the average level of firms selling prices remains contained.
“It is noteworthy that the decline in late payments in recent years reflects broadly the decline in interest rates over those years.”
While late payment times fell in every state and territory in the 12 months to March 2018, the ACT remains the laggard at two days slower than the second-slowest region, Western Australia.
Late payment times are lowest in Tasmania at just 8.6 days.
Mr Koukoulas said Tasmania continues to show improving economic conditions, while the “generally tardy” nature of the government sector is dragging on the ACT’s standing.
He said that while late payments fell across all sectors, the smallest inroads were seen in the retail industry, with late payment times falling just 4.6 per cent year-on-year to 15.5 days.
“This reflects the generally poor conditions in the sector because of weak growth in consumer spending in the past year.”