Payment delays increase amid credit squeeze

Transport workers wait close to 60 days to be paid as businesses suffer from credit squeeze

Transport workers are waiting close to 60 days to be paid amid warnings businesses are at risk of a credit squeeze.

Dunn & Bradstreet’s Quarterly Trade Payments Analysis shows businesses averaged 56.5 days to settle accounts during the December 2008 quarter, the highest level recorded since 2001.

The report shows the transport sector averaged 56.9 days, while the electric, gas and sanitary services sector was the worst at 63.5 days. Agriculture was the best performing sector, but still averaged 51.3 days.

Dunn & Bradstreet Chief Executive Christine Christian says the onset of the global financial crisis has affected payment times, and the increase in late payments is a troubling sign.

"One of the first impacts of the crisis was a tightening of credit. As a consequence we began to see business cashflow impacted as borrowing was no longer an easy option to cover shortfalls," Christian says.

"It could lead to an increase in bad debts or be the trigger that pushes business into negative financial territory."

Christian has warned executives to monitor customers’ viability to reduce the risk of cashflow issues.

According to the findings, big businesses with more than 500 employees were the slowest to pay, with the number of days increasing by 4.3 days on the December 2007 quarter.

Small businesses with six to 19 employees were the quickest to pay, with Dunn & Bradstreet saying it took 53.7 days to settle accounts. The figure has risen 3.4 days since last year.

Victoria was the slowest state to pay at 58.3 days, while Western Australia recorded the quickest time at 53.2 days.

However, Christian says the issue is not confined to Australia. While domestic businesses were the fifth worst payer in the Asia-Pacific region, more than 30 countries globally are under pressure.

The analysis says more 30 percent of 33 of the world’s countries bills are late.

Christian has cautioned Australian firms trading internationally, saying they should be aware of a slowdown in payments from customers to protect themselves from cashflow constraints.

"Payment terms are increasingly becoming an issue across the globe as businesses worldwide feel the impacts of the global credit crisis," Christian says.

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