27 Janary, 2010
The payment terms of New Zealand firms have stalled, putting an end to three consecutive quarters of recovery however; further improvements are expected in the months ahead.
Dun & Bradstreet's (D&B) latest trade payments analysis - which examines the millions of accounts receivable records contained on the D&B database - reveals that payment terms in the December 2009 quarter rose to 44.6 days, an increase of 0.3 days on the previous quarter.
The analysis also reveals that although business-to-business payment terms have improved since the height of the Global Financial Crisis (when terms rose above 50 days), they remain two weeks above the standard 30 day term. However, D&B's trend data shows that over the past three years, payment terms have improved by an average of 2.1 days from the March to June quarters, indicating that further improvement could be on the horizon. An improvement of this size would take terms to 42.5 days, the fastest terms recorded since the September quarter of 2007.
According to John Scott, General Manager of Dun & Bradstreet New Zealand, despite the stalling of payment days, 2010 looks set to be a relatively promising year for New Zealand firms.
"2010 certainly looks more promising than last year and if economy growth progresses as expected we should see further improvements in payment terms," said Mr Scott.
"Payment terms are a strong indicator of a firm's cash position so the recent improvements are a positive sign that liquidity is improving. However, there is still some distance to go before we return to the level of business strength that existed prior to the crisis.
"New Zealand executives need to ensure they have a strong cash position by taking prompt action to collect their bills. If they take their eye off the ball and allow their vigilant focus to waver, the economic recovery will falter."
Sector
All sectors improved their payments over the past twelve months, however just eight (from fourteen) sectors improved on a quarter-on-quarter basis. Payment terms in the fishing and manufacturing sectors improved by more than a week, down 8.2 and 7.0 days respectively. Meanwhile, the agriculture sector maintained its position as the fastest paying sector, a position it has held since the September quarter of 2008. Payment terms in the December quarter were at 40.1 days, following a fall of 0.8 days from the previous quarter and 5.0 days year-on-year.
Conversely, the electrical, gas and sanitary services sector was the slowest payer at 52.0 days. This was a 0.8 day improvement from the previous quarter and a 5.7 day improvement over the past twelve months. Despite the improvement, this sector has been the slowest to pay for the past two years.
The communications industry had the largest rise in payment days quarter-on-quarter, increasing by 1.5 days to 46.8 days. This was in contrast to the forestry sector which had the biggest improvement in the December quarter, improving from 45.3 days to 42.7 days.
Business size
Firms of all sizes were quicker to settle their accounts than at the same time last year however, companies with 20-49 and 6-19 employees were the only two groups to reduce payment terms from the previous quarter. Terms fell by 0.1 and 0.3 days respectively for these two groups.
Companies with 6-19 employees were the quickest to pay in the December quarter at 43.0 days, while companies with 500+ employees were the slowest at 47.1 days (unchanged from the previous quarter). Big business has held the slowest paying spot for three consecutive quarters. Meanwhile, payment terms for companies with 200-499 (1.6 days), 50-199 (0.6 days) and 1-5 employees (0.1 days) deteriorated in the December 2009 quarter as compared to the quarter prior.
Location
Firms based on the North Island continue to be slower payers than their South Island counterparts. An increase of 0.2 days quarter-on-quarter had firms based on the North Island averaging 45.0 days to settle accounts and firms based on the South Island taking 42.0 days to pay their bills in the December 2009 quarter.
Continuing this trend, firms located in Christchurch were the quickest to pay in the December quarter. An improvement of 1.1 days since the September quarter of 2009 had this group averaging 43.6 days to settle accounts. Meanwhile, Wellington based firms maintained their position as the slowest payers with terms at 46.8 days, an improvement of 0.1 days since the September quarter. This compares to 46.1 days for Auckland based companies who increased payment time by 0.1 of a day quarter-on-quarter. Auckland firms were however 6.6 days faster to pay their bills than they were twelve months prior.
Public | private
Public companies continue to be slower payers than their private counterparts, with terms at 49.2 and 44.4 days respectively. The gap between the two groups has remained relatively steady over the past two years even with an increase of 0.7 days in the past quarter for public companies and 0.2 days for private companies. Both groups are paying their bills faster than the same period one year prior.
International Payment Data
Within the Asia-Pacific region New Zealand is the fifteenth worst payer behind counties including Singapore, Malaysia, and Australia. New Zealand paid 25.3 percent of its accounts at 30 days or more past terms in the September quarter 2009. At the same time, Australia paid 33.9 percent of its accounts past terms, while Singapore and Malaysia paid 35.3 percent and 40.3 percent of payments respectively well past terms.
Korea was bumped out of its position as the quickest paying spot by Japan - 17.0 and 15.8 percent of accounts were paid at 30+ days past terms in Korea and Japan respectively.
Across the region an average of 26.4 percent of payments were made at 30+ days past terms, with nine countries paying in excess of 30 percent of their bills delinquently.
"New Zealand's executives need to ensure they have a strong cash position by taking prompt action to collect their bills," said Mr Scott.
"This will allow firms to free up funds for business investment and to pay down debt or rely less on borrowed funds.
"If executives take their eye off the ball and allow their vigilant focus to waver, the economic recovery will falter."
| Sectors |
Average Days
(Dec 09) |
Average Days
(Dec 08) |
| Agriculture.pdf (33KB) | 40.1 days | 45.1 days |
| Forestry.pdf (37KB) | 42.7 days | 47.6 days |
| Fishing.pdf (36KB) | 48.3 days | 56.5 days |
| Mining.pdf (34KB) | 40.4 days | 43.9 days |
| Construction.pdf (36KB) | 56.8 days | 51.7 days |
| Manufacturing.pdf (35KB) | 47 days | 54 days |
| Transportation.pdf (33KB) | 46.3 days | 52.4 days |
| Communication.pdf (34KB) | 46.8 days | 52.9 days |
| Electric.pdf (35KB) | 52 days | 57.7 days |
| Wholesale Trade.pdf (33KB) | 44.4 days | 51.1 days |
| Retail Trade.pdf (34KB) | 42.6 days | 47 days |
| Finance, Insurance and Real Estate.pdf (36KB) | 42.1 days | 48.5 days |
| Services.pdf (34KB) | 43.1 days | 48.2 days |
| Public Administration.pdf (34KB) | 48.1 days | 49.8 days |
| All Industries.pdf (33KB) | 44.5 days | 50.8 days |
About D&B's Trade Payments Analysis: D&B's trade payments analysis utilises the accounts receivable records of New Zealand firms. The D&B database contains millions of trade references, which are analysed and segmented by location, business size, structure and sector. The analysis is not based on survey data .
For further information and comment please contact:Danielle Woods,
D&B Australia
Ph: +61 2 8270 2926
About D&B
D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 150 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than 1.5 million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.
The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.
Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.
Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.
