SMBs struggle to pay bills on time

Business bills

Over two-thirds of small businesses aren’t paying bills on time, with the number of organisations paying invoices more than three months late jumping to 20 percent.

According to new Dun & Bradstreet figures, Australian businesses are taking almost a full month longer than average to pay their bills, with national payment terms reaching 53.4 days during the June quarter 2011.

While business-to-business payment times improved marginally during the June quarter, two-thirds of businesses took longer than the standard 30-day period to pay company accounts.

The D&B ‘Trade Payment Analysis’ report found the number of severely delinquent payments (those 90 days or more overdue), jumped 20 percent compared with the June quarter 2010 – meaning some businesses are being forced to wait over three months for much needed cash.

The number of businesses paying trade accounts between 61 and 90 days late has also jumped, increasing by 36 percent since last year.

Smaller firms have struggled the most over the last 12 months, with payment terms blowing out by an average of two days compared with the June quarter 2010.

Although larger businesses are slowest payers, payment terms for bigger firms have deteriorated at a significantly slower rate than their smaller counterparts.

Payment terms reduced by three days during the June quarter, but remain at alarming levels compared with 12 months ago – indicating Aussie businesses are again exhibiting signs of financial strain.

“Individual businesses are the unsung bankers of our economy. Business to business lending through the extension of trade credit amounts to billions of dollars a year. The rate at which these micro-loans are being paid back is a key indicator of the health of Australian businesses,” Dun & Bradstreet CEO Christine Christian said.

  • I would argue that there is a role to be played by Australian Government organisations – Federal, Sate and Local here.

    In the UK there is a concerted push to reduce the time taken by Government to pay suppliers. Leading Government organisations are paying bills within 5 days of their receipt See: http://www.basware.com/resources/basware-customer-success-national-offender-management-service-noms.

    In Australia the Federal Government maintains a “…30 days from receipt of a correctly rendered invoice…” payment policy to SME’s and compliance with this is remarkably high – perhaps ‘too high’. Given that most government agencies are manually processing ‘paper’ even the time taken to advise busines that their invoice is not “correctly rendered” can at times exceed 30 days. Other State and Local Government agencies don’t even have a similar policy in place – much more could be done in Australia…

    Another technology which needs much more focus in the Australian context is e-invoicing. Australia is perhaps 5-7 years behind the EU in the use of e-invoicing for B2G procurement transactions (including invoices). Many central governments overseas have already mandated e-invoicing, and many others have made it commonplace without mandating it.

    E-invoicing enables Straight-through-Processing (STP), reduces B2G procurement carbon footprint, speeds up the flow of money, enables complete visibility and control of the Procure-to-Pay (P2P) and Order-to-Cash (O2C) cycles, and costs as much as $10-$18 AUD less overall to process.