Invoice payment times in New Zealand flatlined in Q3 2015 after declines in the previous three quarters, with recent economic data suggesting GDP growth is slowing.
Dun & Bradstreet’s Trade Payments Analysis shows that the average time taken by businesses to pay their invoices in the third quarter of 2015 was steady at 35.3 days, compared to 35 days in the previous quarter. The result is an improvement of 5 days on the same quarter last year.
The result for Q3 2015 was reflected in a one percentage point decrease in businesses that paid their bills within 1-30 days, coampared to 86% in the previous quarter. Meanwhile, 13% of businesses paid their bills within 31-60 days, compared to 12% in the second quarter of the year.
Across New Zealand, the Agriculture, Forestry, Fishing and Services industries paid their invoices just under the national average rate of 35.3 days, despite the Forestry and Services sectors recording slower payment times than the previous quarter.
While payment times within the Communications and Utilities industries were on average 5 days faster in Q2 2015 than the first quarter of the year, both sectors paid their invoices around 3 days slower in Q3 2015 compared to the second quarter.
The New Zealand Institute of Economic Research's Quarterly Survey of Business Opinion found business confidence fell to its lowest level since March 2011 during the third quarter. A seasonally adjusted net 9% of firms expected business conditions to deteriorate over the next six months, down from a net 6% that had expected conditions to improve in the second quarter.
According to Kevin de Beer, Director of Dun & Bradstreet’s Consumer and Commercial Bureau, the latest Trade Payments results are not unexpected given the considerable falls seen in the previous quarters.
“The rapid falls in payment times seen throughout the first half of the year were unsustainable, so a levelling off was to be expected as businesses balance priorities, assess cash flow and consider how best to allocate surplus capital,” said Mr de Beer.
“The widely predicted downturn in the dairy sector does not appear to have impacted the New Zealand agriculture industry as much as anticipated, which is good news for both the dairy industry and the broader economy.
“However, given the unpredictable nature of environmental conditions in an El Nino year, combined with local uncertainty surrounding the Auckland housing market and global concerns of an economic slowdown, it would be unwise to expect record payment times to continue across all industries as we head into 2016,” Mr de Beer added.
Across all sectors, businesses with between 6 and 19 employees were the fastest to pay their invoices at a rate of 35 days, followed closely by businesses with between 20 and 49 staff, which paid their invoices at an average rate of 35.2 days in the third quarter. The only businesses which settled their invoices at a slightly faster rate than the second quarter were those with between 1-5 staff.
Large companies took the longest to settle their invoices, with average payment times increasing slightly on the previous quarter for companies with 200 staff or more.
Businesses in both the North Island and South Island paid their invoices at a similar rate to the previous quarter, with Wellington firms recording the most significant change with an average payment time of almost one day slower than in the second quarter.
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.