New Zealand firms have slightly lowered trade payment terms from their highest level in seven years, dropping back below the 50 day mark that was exceeded in the December quarter of 2008. Dun & Bradstreet's (D&B's) Quarterly Trade Payments Analysis reveals that businesses averaged 48.4 days to settle accounts in the March 2009 quarter, following a drop of 2.4 days since the previous quarter. The slight drop follows an increase of more than one week over 2008.

The decline also increases the gap between local payment terms and those of New Zealand's primary trading partner - Australia, which continued to increase terms in the March 2009 quarter. Australia's terms are now just shy of the 60 day mark (57.5 days) making the gap between the two countries 9.3 days.

Worsening economic conditions have affected businesses around the globe, forcing a number of countries to experience a rapid deterioration in payment terms. Western Europe and the Asia-Pacific region in particular have experienced a significant decline in payment terms, with eight and nine countries respectively paying 30% or more of payments at 30 days+ past due.

According to John Scott, General Manager of Dun & Bradstreet New Zealand, the slight improvement in payment terms in the March quarter is not an indicator that the economic crisis is abating.

"Our findings indicate that New Zealand companies slightly improved payment terms in the first quarter of 2009 however we believe this is largely due to seasonal factors. It is common for businesses to hold onto their cash as they head into the Christmas break and this can allow them to pay more promptly early in the New Year," said Mr. Scott.

"Although the marginal improvement in payment terms is a positive sign, arresting the global trend would require a sustained period of continual improvement. Cash-flow and liquidity will continue to be a key concern throughout the year and consequently pressure on payment terms will persist. The flow-on effect of this trend is a reduced focus on business development and investment, and consequently a further decline in economic growth. Therefore, any actions that can be taken to reduce payment terms will assist New Zealand to avoid the extent of pain that other nations are experiencing."

Geography

Businesses located on the South Island are faster payers than their North Island counterparts with firms in the south averaging 44.4 days while those in the north are taking 48.6 days. Continuing this trend, Christchurch is the fastest paying city, with businesses based there taking 48.5 days to settle accounts. Wellington follows closely behind at 49.9 days while Auckland businesses are up above the 50 day mark (51.3 days).

Big | Small

Big businesses (companies employing between 200-499 employees) were the slowest paying group (at 52.5 days), a spot they secured at the end of 2008. Big businesses increased 6.2 days year-on-year (y/y) and decreased 0.1 days q/q. Firms with 500+ employees were marginally quicker to pay (at 51.9 days) despite recording the biggest year-on-year (7.5 days) jump in terms.

Meanwhile businesses with 20-49 employees were the quickest to pay at 47.2 days, (a 0.5 day drop q/q), marginally faster that than the 50-199 group at 47.3 days (a 1.6 day drop q/q).

Public | Private

Public companies have been slower to pay than their private counterparts for four consecutive quarters. Public companies finished the March 2009 quarter at 52.5 days, a one day drop from the December 2008 quarter and 6.1 days year-on-year. Meanwhile private companies dropped further to 48.3 days, a drop of 2.5 days from the December quarter but the same payment term as Q1 2008.

Industry

The Electric, Gas & Sanitary Services sector has been the slowest to pay for four consecutive quarters. An increase of 4.9 days y/y took this sector to an average payment term of 57.7 days (almost double the standard term) in the March 2009 quarter. Examining the data q/q reveals no change in terms for this sector.

Despite an increase of 0.6 days, the Mining sector bumped the Forestry industry out of its quickest paying spot. The Mining sector averaged 46 days to settle accounts in the March quarter while the Forestry sector jumped 7.5 days y/y to 48.8 days. Both sectors have increased terms since the previous quarter, with Mining up by 2.1 days and Forestry up 1.2 days.

According to Dun & Bradstreet's Global Risk Report, payment problems have become a significant issue across the globe since the start of the credit crisis. Payment terms in Western Europe and the Asia-Pacific region in particular, deteriorated substantially during the fourth quarter of 2008.

New Zealand is the currently the sixth worst payer in the Asia-Pacific region behind India, Malaysia, Indonesia, Australia and Pakistan and having paid 32.2% of its accounts at 30 days or more past terms in Q4 2008. The percentage of payments in the Asia-Pacific region that were made at 30+ days past due in Q4 was 25.7%.

In Western Europe, the percentage of payments made at 30 days or more past due rose by 5.6% in Q4 to reach 28.5% of payments.

Average payment days March 2009 quarter

Consequently, 42 countries globally - including nine in the Asia-Pacific region - now pay in excess of 30% of their bills at thirty days or more past terms. An additional nine countries joined this group in Q4.

"The rapid slowdown in the global economy coupled with a drop in commodity prices, increased volatility in exchange rates and a fall in global trade indicate that payments performance will most likely decline in coming quarters," said Mr. Scott.

"This situation will further exacerbate the challenges New Zealand firms are facing and will act as an additional brake on growth in the New Zealand business sector. This is an issue for both exporters and companies that trade locally. Slowing payments are a global problem, we have only now reached the levels we were at twelve months ago, to meet the challenge of late payments we need to see that trend continue."

Regardless of an organisation's size or sector, strong cash flow is a critical success factor. If New Zealand businesses are to stem the tide against global economic issues then continuing to reduce payment cycles must be seen as a priority.

For further information and comment please contact:

Danielle Woods,
D&B Australia
Ph: +61 2 8270 2926

John Scott,
D&B New Zealand
Ph: 9359 8045

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 140 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.