25 Jul 2012

Business-to-business payments improve

7:39 am on 25 July 2012

New Zealand companies are improving the time it takes to pay their bills- they're sending the cheque earlier - but they're lagging behind the standard 30-day terms.

Dun & Bradstreet Trade Payments Analysis, which examines firms' ability to pay their bills on time, shows average payment times dropped 2.6 days to 42.2 days during the June quarter.

General manager John Scott says it's the lowest level in nearly five years and average payment times have been cut back to levels not seen since the third quarter of 2007, before the 2008 global financial crisis.

Payment times were also down by nearly four days over the past year.

Mr Scott says improving payment times are a clear sign that businesses are benefiting from economic recovery.

Recent Treasury statistics indicated a rebound in economic growth following strong GDP gains in the March quarter and post-earthquake reconstruction, and growth is expected to continue in the second half of the year.

"Business-to-business payment data is one of the best indicators of cash flow and financial stability, as it reveals how a firm is meeting its existing financial obligations," Mr Scott says.

Payment times began rising in late 2007, peaking at 51 days late in 2008 at the height of the crisis, before largely trending downwards over the next few years.

The past 12 months have seen businesses pay their bills significantly faster, providing further evidence of an improved trading environment, Mr Scott says.

June quarter figures show that Australian companies are averaging payment times of 53.6 days - a deterioration of nearly a day since the 2012 March quarter.