Paying your business’ bills is not just a goodwill gesture; it is about meeting your obligations in a trade relationship. In New Zealand, we are falling short on fulfilling this obligation.
In a recent report released by leading credit reporting and debt collection company, Dun & Bradstreet, it was that revealed New Zealand firms took on average 43.9 days to settle their trade accounts in the December quarter — a figure which remains two weeks above the standard 30 day payment term.
The latest business payments research from Dun & Bradstreet which examined the millions of current accounts receivable records contained on its database revealed that an additional four percent of New Zealand businesses failed to pay their trade credit accounts during the December quarter 2010 compared to the prior year.
“Payments days are still significantly above the standard 30 day term, which means businesses are being denied access to their funds for around two weeks longer than they should be,” Dun & Bradstreet general manager John Scott says. “New Zealand firms need to recognise the value of their accounts receivable as it is typically the largest liquid asset on an organisation’s books — mismanagement of this crucial asset has the potential to bring a business to its knees.”
Nine of the fourteen sectors examined by Dun & Bradstreet experienced a deterioration in their payment times compared to the previous quarter and the report noted that larger firms (200–499 people and 500-plus employees) are consistently slower payers than smaller businesses.
North Island based businesses were slower to pay than South Island based firms and of the three major cities, Auckland was the slowest to pay during the December quarter taking 45.2 days to pay accounts. The fastest payment business group was the agricultural sector followed by the mining sector and the fishing industry was the most improved group on its payment times.
Commenting on the serious potential financial implications of delayed bill payments Scott says, “A four percent increase in the number of entities paying their accounts late has the potential to inflict cash flow difficulties on a number of large firms. This is a worrying trend as it can draw more and more businesses into the late payment cycle, making it increasingly difficult for firms to escape the pressures associated with slowing paying customers.”
He says it is important for commercial organisations to recognise that businesses are not run on charitable basis and businesses need to make sure they are creditor number one not 21 and the terms and conditions are sound.
“Getting the money you are owed is the most important thing you should be doing. People have to prioritise this as a key function of their business’ operation and not just after the fact. Take emotion and sentiment out of the equation, it is a business transaction.”
For more information on Dun & Bradstreet visit www.dnb.co.nz