|According financial analyst firm illion, late payment times for Australian business dropped to their lowest level on record in Q4 2017, with the average late payment time at 11.9 days during Q4, down 17.5% from 14.4 days during the prior corresponding period.
In a further sign of a broad shift in payment behavior, the percentage of businesses paying their bills on time rose from 60% to 68% during the same period.
Outstanding invoices for the 12 months to December 2017 totalled AU$89.6 billion.
“These record lows reflect the more buoyant conditions in the business sector and the favourable cash position of many firms,” said Stephen Koukoulas, illion Economic Adviser. “Late payment times have fallen from around 22 days in 2013 to just 11.9 days in Q4 quarter.”
Simon Bligh, illion CEO added: “Each month our trade bureau processes one million lines of data at a match rate of 94% and totalling over $10 billion of spend. It is the biggest data set of its kind in Australia, and it is also a highly predictive measure for business failure. During 2017, a combination of regulatory pressure, cashed up businesses, and fintech developments in invoicing and transaction clearing resulted in historically low late payment times across all industries.”
Late payment times fell during every quarter of 2017, in marked contrast to the trend of sideways or increasing days late which began at the end of 2015 and continued throughout 2016. Some gains were bigger than others, however, as the struggling Retail sector saw minor changes to the average late payment time on an annual basis. Similarly, Western Australia produced the lowest reduction in the quarter, down 12.5% compared to the prior corresponding period.
Koukoulas continued: “These favourable finances are being driven by low interest payments as official interest rates remain at record lows. Another factor likely to be behind the steady decline in late payments is the record low wages being paid, which is also helping to lower running costs and aid cash flows.
“While late payments remained the highest in the ACT, largely as a result of the government being tardy in paying its bills, there was a marked decline of 25.8% in late payment times during 2017. Unsurprisingly, the smallest improvement in late payments was in Western Australia, where the economy remains weak as a result of the slump in mining sector activity.”
Agriculture has had the best late payment time since the beginning of 2015, so it was surprising to see payment times rise 3.1% between quarters for this industry. Construction saw the biggest annual change, with late payment times dropping by 17.4% in Q4 2017, compared to the prior corresponding period. Embattled retailers had the lowest annual reduction at 3.5%.
The Late Payments report analyses trade information from illion’s Commercial Bureau, capturing more than one million entities. Monthly trade transaction files are collated and analysed to summarise how late entities pay for goods and services after payment is due.
Business-to-business payment information reveals how an organisation is paying its existing obligations. It is a highly predictive data set and a critical element in credit risk scores and business failures forecasting.