Australia’s late payment times continue to plummet across most sectors, reaching a new record low of just 10 days in Q2 2019, despite economic conditions remaining subdued.
According to illion, as recently as 2011, late payments averaged 20 days. The current fall in payment times mirrors a steep decline recorded around 2014.
This is in stark contrast with the nation’s agriculture sector, which experienced a 26% rise in payment times, due to its financial distresses over the past year, largely resulting from droughts in rural areas.
Commenting on the positive trend across the majority of industry sectors, illion Economic Adviser, Stephen Koukoulas said: “Payment methods, linked to technological changes in banking, 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.
“Late payments fell sharply in electricity, gas and sanitary services, where prices are falling. The efforts of Commonwealth and State governments to streamline payments to suppliers appear to have produced a 15.6% fall in late payments in the public sector.”
Looking at the data by industry, payment times were broadly down both on the previous year and previous quarter. The most noteworthy falls were for electricity, gas and sanitary services, public administration and retail trade. Only three sectors recorded higher payment times than the previous year: agriculture up by 26%, communications up by 7%, and fishing up by 7%.
In Q2, 72% of invoices were paid ‘promptly’, with the forestry sector, services and fishing leading the way at 75%. Sectors with historically long payment times such as retail and construction remained low, both around 66%.
Illion noted that payment times in the construction sector had been impacted recently by the slump in residential construction, causing prompt payment rates to remain low.
The broader fall in late payments was spread evenly across most firm sizes, with medium-sized firms dropping late payments by 12% over the past year, big business dropping by 9.5%, and micro-businesses dropping by 9%.
Koukoulas concluded: “The fact that the falls were spread across most firm sizes suggests companies are seeing the effects of improved cash flow and low interest rates. The fall in large business payment times can be linked to pressure from the government to cut payment times from its providers and the increasing automation of payments via online banking facilities.”