Invoicing times dropping for Australian businesses

When small companies enter into a commercial contract as part of growing their business, one of the biggest obstacles can be payment times. Having worked hard to get a contract in place, it can be incredibly frustrating when other companies drag their heels when it comes to fulfilling their side of the bargain.

While this can be among the biggest obstacles that companies face, the latest figures from Dun & Bradstreet (D&B) suggest that Australian firms are getting better at paying their invoices.

In fact, almost half of invoicing payments are being made promptly – 47 per cent were made within thirty days in the second quarter of this year. A further 40 per cent were made within two months of the invoice being sent to the company.

These numbers are well up on previous statistics from D&B. Earlier this year, only 42 per cent of companies were filing invoices promptly, while the number stood at only 38.5 per cent this time last year.

While the overall trend for companies is to make payments quickly, there is considerable difference between firms based on their size. Larger firms are among the slowest to pay their bills, with those that have more than 500 staff taking more than 55 days on average.

Smaller firms have recorded much better payment times, with those in the six-19 employee group achieving an average of fewer than 49 days to fulfill an invoice.

Stephen Koukoulas, the economic adviser to D&B, suggested that the drop in payment time was indicative of improving conditions for Australian firms.

“Low interest rates are helping with corporate cash flow, as we can see from the 87 per cent of firms that are paying their bills within 60 days,” Mr Koukoulas said.

“With the RBA likely to hold interest rates at record lows in the months ahead and the economy still growing, albeit at a moderate pace, trade payment times should remain low over the remainder of 2014.”

While companies are getting better at meeting their contractual obligations, it is still important to consult with a commercial lawyer so that it is clear what obligations both parties are agreeing to.