Late payments no cause for concern, finance adviser says

These are the bills that run the risk of damaging the finances of the creditor companies and if this rises, it will pose some threat to overall economic conditions Dun & Bradstreet economic adviser Stephen Koukoulas

LATE payments edged higher in the June quarter, although in absolute terms, the level of late payments remains near historical lows.

Dun & Bradstreet economic adviser Stephen Koukoulas said it was too early to be concerned about the rise in late payments over the past six months.

However, any further increase would indicate a shift away from the recent pattern of falling payment time.

However, one trend remained the same. The largest companies, those with more than 500 employees, were the slowest to pay their accounts.

An interesting aspect of the payment terms of firms was 79.5% paid their bills promptly, he said.

A further 15% paid their bills within one to 30 days, reflecting the strong cash flow position of most businesses.

Only 2.7% of bills took more than 60 days to pay.

‘‘These are the bills that run the risk of damaging the finances of the creditor companies and if this rises, it will pose some threat to overall economic conditions.’’

The moderate lift in late payment times in the last few quar ters had been across firms of all sizes, Mr Koukoulas said.

Before the more general rise in late payments, larger companies started to extend their payment times. The trend had continued in recent quarters and smaller firms continued to have the lowest rate of late payments.

The regional breakdown showed Auckland businesses also had the latest average payment times, due to the fact many larger firms had headquarters in Auckland.

The lower late payments times were linked to other regions, including those skewed towards agriculture and related industries which historically had the lowest late payment times.

The late payments data reinforced the trends evident in the series where payment times declined as businesses got older, he said.

The difference was quite marked. Firms between 2 and 5 years old showed late payments of 7.4 days and firms of more than 50 years had late payments of 5.2 days.

That broadly corresponded with Dun & Bradstreet’s business failures analysis, which had the failure rate across all industries spike for entities between two and five years old before steadily declining in ensuing years, Mr Koukoulas said.