KEY POINTS:
Kiwi businesses are steadily becoming worse at paying their bills on time.
The average gap between the invoice date and the actual payment being made has reached a record 48.2 days.
And that means many businesses are being forced to take another hit to their cash flow as
business-to-business payment terms blow out amidst tougher economic conditions.
The latest figures in Dun & Bradstreet's (D&B's) quarterly trade payments analysis reveal that the average payment period across all industries has risen by more than five days since the December 2007 quarter.
Now at 48.2 days (almost three weeks above the standard payment term of 30 days), business payments have reached the highest figure recorded since 2002.
According to John Scott, D&B New Zealand's General Manager, the increase in the time businesses are taking to pay each other is placing additional pressure on company cash flows in an environment where access to credit has already tightened.
"The impact of the credit crunch and the tougher business environment is evident in D&B's payment trends data," said Mr Scott.
"It is clear that some businesses let their collections practices slip during stronger economic conditions and were caught off guard when the cycle began to turn.
"These businesses are now being denied access to funds at a time when cash is of paramount importance simply because they don't have the processes in place to maximise cash flow."
Dun & Bradstreet's Global Risk Report shows that New Zealand's payment problems are not unique (see table below). A number of countries in the Asia-Pacific region pay a significant percentage of payments at 30 days or more past terms, with New Zealand seventh on the list of bad payers.
In the December quarter of 2007 New Zealand paid 37.9 per cent of payments significantly past terms.
According to Mr Scott, many businesses are being denied access to their cheapest source of funding - their own.
"With the credit markets effectively closed businesses are finding it increasingly difficult to source credit to invest in their business.
"With a significant portion of business failures the result of poor cash flow, any increase in payment periods could have severe detrimental impacts or result in irreversible financial difficulty."
- NZHERALD STAFF
