What you need to know about late payments

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Late payments are the single biggest issue for the small business community. According to Dun & Bradstreet, late payments have increased since the start of 2017 reaching its highest level since 2014. On average, 59.8% of Australian businesses pay their bills on time, while 9.5% pay in excess of 60 days.

Here’s what you need to know.

1. ‘Weak economy’

“Late payment times have continued to increase, this suggests that some of the weakness evident in the economy early in 2017 has impacted the time it takes firms to pay their bills. Low interest rates are likely to have had a positive effect in reducing payment times, but this is likely to have been offset by less robust trading conditions in the economy more generally.” – Stephen Koukoulas, Dun & Bradstreet Economic Adviser

2. Average late payment time

Australian businesses on average pay their bills 15.3 days late.

3. Sector with the slowest pay time average

The Mining sector was the slowest to pay averaging 18.3 days late.

4. Rise in late payment terms

“The rise in late payment times is not yet a concern for the economy, but if there is any further deterioration it will emerge as a further issue that will impact on the deliberations of the Reserve Bank of Australia and could lead to lower interest rates. The rise in late payments is consistent with the recent softening in the D&B business expectations data.” – Stephen Koukoulas

5. Late payments by company size

These figures illustrates that bigger businesses are delaying payments to smaller businesses. However, they are paying other larger companies even later. This pattern is clear across all regions and implies a long-standing culture in the bigger businesses.

6. Late payment trend

“There is an established trend that larger firms (over 500 employees) are the slowest to pay invoices while smaller firms are the fastest. That said, the overall trend showing a moderate increase in late payments over the past year has been evident across firms of all sizes , with marked variation across industries.” – Stephen Koukoulas

7. Late payments across states and territories

Western Australia was recorded as the state that rose the highest with an annual increase of 37%. This compares to the national increase of 11.9%.

8. Significant increase in Western Australia

Late payment times in Western Australia have risen 37% from Q1 in 2016. “The general economic weakness in WA is reflected by a marked rise in late payments, particularly for the Mining and Construction industries. That said, late payments have risen in all states in Q1 2017 compared with the same quarter in 2016” – Stephen Koukoulas

9. Late payments by sector

Transportation recorded the highest increase in late payments increasing to 19.6% compared to last year. Mining still continues to be the worst industry for late payment times. The retail industry have demonstrated signs of concern amidst weak wage growth and consumer confidence. This is most likely to be related to a shift in shoppers increasingly seeking bargains online.

10. Late payments by company age

“In the Mining and Utilities sectors, there has been a noticeable increase in late payment times. These two sectors also have the longest late payment times. These trends reflect the general weakness in the economy. These less favourable conditions for household finances are also feeding into some concerns within the retail sector. It is also noteworthy that there is a solid correlation between late payment times, the age of the business and the number of business failures.” – Stephen Koukoulas

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What can you do about late payments?

3 COMMENTS

  1. So glad to see these figures, it is certainly indicating changes in the economy. I have recently started my business and am focusing on credit control to assist companies to avoid extreme late payments. I am currently studying Credit Management and have my Cert IV Bookkeeping, I studied credit control many years ago and qualified with Advanced CMEA certification. With new cloud accounting it can now be done nationwide though earning trust is probably the first thing to overcome in order for a company to access their data.

    • Fantastic – glad you found this blog useful Vanessa. There are certainly a lot of changes going on. Congratulations on the work you are doing in bookkeeping and management. Let us know what other kind of content you’d like to see on the site.

    • Late payments are cultural. Changing the “late payments culture” is the challenge. Businesses that can focus on this within their customer base see the results through lower bad debts, more cashflow for growth, less stress and costs.

      The challenge with this is being crystal clear and consistent on your payment terms. Then automate & schedule polite, persistent and personal reminders…… These can be emails, sms, letters but must include calling the customer. We have researched different follow up plans at http://www.ezycollect.com.au – but a call should always be made after 2-3 emails or SMSs

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