New Zealand businesses paid their invoices at the fastest rate on record during Q2 2015, despite Statistics New Zealand reporting that weaker exports, stronger imports and a soft transport sector had dragged on the quarter’s GDP growth result of 0.4%.
Dun & Bradstreet’s Trade Payments Analysis shows that the average time taken by businesses to pay their invoices in the second quarter of 2015 fell to a record 35 days, compared to 37 days in the previous quarter and 41.6 days in the same period last year.
The result for Q2 2015 was driven by a decrease in the percentage of businesses paying their bills in 31-60 days and a jump in the percentage of invoices paid within 30 days, which increased to 86% from 79% in the previous quarter and 66% in the same period last year.
Across New Zealand, the Agriculture, Forestry, Utilities and Services industries paid their invoices faster than the national average rate of 35 days. While most industries lowered their average payment times from the first quarter of the year, businesses operating in the Fishing industry paid invoices at a slower rate of 35.3 days, compared to 33.8 days in the first quarter.
Notable improvements were seen in the Communications and Utilities sectors, which paid their invoices around 5 days faster than the previous quarter. When compared to the same period last year, the Transportation industry recorded the biggest improvement with an average payment time of 37.3 days, compared to last year’s 52.3 days. The Utilities sector followed closely behind, with its average payment time 14 days faster than the previous year.
Across all sectors, businesses with between 6 and 19 employees were the fastest to pay their invoices at a record rate of 34.7 days, followed closely by businesses with between 20 and 49 staff, which paid their invoices at an average rate of 35.3 days during the second quarter.
Large companies took the longest to settle their invoices, with an average payment time of 37.4 days for companies with 200 to 499 staff, and 38.7 days for companies with 500 or more staff. However, businesses across all ranges improved considerably compared with the same period last year, when the overall average payment time was 41.6 days.
Businesses in the South Island paid their invoices in an average of 33.9 days, compared to 39.7 days in the previous year. Businesses based on the North Island were slower, at 35.5 days, while both Wellington and Auckland averaged marginally higher payment times of around 36 days.
About Trade Payments Analysis
Business-to-business payment information is a highly predictive data set and a critical element in credit risk scores and business failures forecasting.
The distinct advantage of trade information over other forms of company data is its ability to provide insight into current performance. Company financials, which are considered to be critical to effective decision making, are reported relatively infrequently and as a consequence, organisations may be required to make decisions using data that is up to 12-months old. Conversely, because trade information is reported monthly, it reveals how an organisation is paying its existing obligation.
Trade data is also effective across all business sizes, being the most predictive element in SME scores and the second most predictive (behind financials) in other credit scores. The predictive nature of trade data combined with its timely availability enables businesses to properly assess credit risk.
This includes the identification of both high and low risk customers, thereby enabling firms to minimise the risk of late payments and bad debts and identify the good credit accounts that will create long-term, profitable credit relationships.