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NEW evidence has emerged of the economic impact of this summer’s devastating bushfires, with the time taken by forestry companies to pay their bills more than doubling, according to the latest illion Australian Late Payments Report.

In an analysis of Australia’s 15 key industries, eight sectors paid their bills quicker than they had in the past, while seven others required their suppliers to wait longer.

This suggests Australia could have a hidden two-speed economy, with some sectors doing well while others are burdened by emerging cash-flow problems.

Of particular note was the time taken by forestry companies to pay their suppliers, which blew out by 114 per cent in December 2019, compared with the corresponding period in 2018.

Ironically, despite the blowout, the forestry industry remains the most reliable bill paying sector in the nation.

Overall, late payments across the nation improved by 7 per cent year-on-year from 11 days to 10 days, reflecting overall improved trading conditions and industry and government pressure to cut payment times.

illion CEO Simon Bligh said the report’s findings underscored the devastation caused by this summer’s bushfires, particularly on the east coast.

“Our report puts some hard numbers around just how bad the bushfires have been and quantifies the pain being experienced by affected businesses that are now struggling to pay their bills,” he said.

“It has been a season of outliers and extremes. Despite the declines from the forestry industry, the performance of other sectors such as retail has been extremely positive.

“Overall, Australian businesses have delivered the best result since we began this report in 2011, with the December 2019 quarter representing the first time Australian businesses have gone below 10 days late payment during the Christmas holiday season.”

Suppliers to Australia’s mining, retail trade, manufacturing and electrical industries had to wait longest of any industry to be paid, although some of those sectors such as retail trade and electrical had improved in the last 12 months.

The retail industry experienced a relatively positive Christmas quarter, with late payments declining by 15 per cent compared with the prior year.

illion Senior Economist Stephen Koukoulas said the construction industry was a key indicator for the broader economy.

“The construction sector has been hit by weak dwelling investment activity and is likely to remain weak until there is a material lift in investment activity,” Mr Koukoulas said.

 Table 1: Year-on-year late payment days and percentage change by industry

 

 

INDUSTRY

Dec '18

Dec '19

% Change

1

Mining

12.2

13.0

7%

2

Retail Trade

15.1

12.8

-15%

3

Manufacturing

11.4

11.7

3%

4

Electric, Gas & Sanitary Services

13.4

10.8

20%

5

Communications

9.8

10.8

10%

6

Wholesale Trade

10.2

10.7

4%

7

Unknown

10.8

10.0

-8%

8

Public Administration

10.3

9.4

9%

 

AVERAGE

10.7

9.9

-7%

9

Construction

9.4

9.9

5%

10

Finance, Insurance & Real Estate

9.9

8.9

-10%

11

Fishing

10.4

8.7

-17%

12

Services

9.4

8.6

-9%

13

Transportation

9.4

8.8

-7%

14

Agriculture

7.6

8.3

9%

15

Forestry

3.8

8.0

114%

 

ACT the most improved but Tasmania slips

 Comparing payment patterns across the country, Tasmanian businesses remain the most reliable payers, taking just eight days to pay their overdue bills, while firms in the Northern Territory are relative laggards, at 11 days.

 Canberrans showed the most improved payment times with a reduction of 14 per cent from 12 days to 10 days. Victoria and Queensland followed, with late payment times improving by 10 per cent and 9 per cent to 10 days.

 Mr Koukoulas said the ACT’s strong performance is in part because of policy changes by State and Federal governments that have resulted in streamlined payments processes between governments and their suppliers.

 For example, the Federal Government has introduced an e-invoicing policy, which means the Federal Government must pay small suppliers within 5 days or pay penalty interest[1].

 “Combined with further interest rate reductions and an increased use of electronic payments systems, government initiatives to streamline payment to suppliers are paying off,” Mr Koukoulas said.

 “This is particularly so in the ACT, where a large number of businesses are suppliers to the Federal Government.”

  Table 2: Year-on-year average late payment days by states/territory

 

State/Territory

Dec ‘18

Dec ‘19

% Change

Northern Territory

11.2

10.8

-3%

Western Australia

10.7

10.5

-2%

New South Wales

10.9

10.3

-6%

ACT

11.7

10.1

-14%

Victoria

11.0

9.9

-10%

NATIONAL AVERAGE

10.5

9.9

-6%

South Australia

10.7

9.8

-8%

Queensland

10.3

9.3

-9%

Tasmania

7.5

8.1

7%

 

Big businesses remain worse payers

 Stricter payment conditions have likely contributed to the reduction in late payments overall but big businesses remain the worst offenders – taking 14 days to pay their late bills.  In comparison, small businesses only take 11 days to settle their debts.

 Mr Bligh concluded: “Small businesses are rightly demanding prompt payments and are fed up of playing bank for bigger firms. The Federal Government may respond to their demands by possibly legislating and enforcing new payment rules.”

 Table 3: Average late payment days by business size

 

Business size

Late Days

Big to big

14.0

Big to small

13.5

Small to big

11.8

Small to small

10.8

 

ENDS

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About the report:

Late Payments analyses trade information from illion’s Commercial Bureau, the largest database of business-to-business payment information in Australia and New Zealand. Monthly trade transaction files are collated and advanced analytics used to provide a summary of how late entities pay for goods and services after payment is due. Late Payments provides a quarterly report with a breakdown according to sector, size, age and location of entities. Business-to-business payment information reveals how an organisation is paying its existing obligations. It is a highly predictive data set and a critical element in credit risk scores and business failures forecasting. The predictive nature of trade data combined with its monthly availability enables businesses to properly assess credit risk with real time information.

 

Simon Bligh

CEO

illion

T: 13 23 33