New Zealand Trade Payments Decline

MEDIA RELEASE

New Zealand Trade Payments Decline

Business must watch out for increased credit risk

There has been a steady decline in trade payments over the course of the 2004/2005 financial year, signaling that credit risk for many businesses may become a critical issue in coming months. The February 2005 figures are from the latest Dun & Bradstreet (D&B) New Zealand Trade Payment Analysis (NZTPA), released today.

The figures show the average trade payment period grew to 44 days in February 2005. This is an increase from 39.2 days at the beginning of the financial year in July 2004 and means trade payments are now exceeding the standard payment period of 30 days by an average 14 days.

The slowest paying industry in February 2005 was Transportation and Communications followed by Public Administration. The fastest was the Finance, Insurance and Real Estate sector. D&B New Zealand General Manager, David Christiansen, believes the steady decline in payment terms over the financial year points to increased credit risks for New Zealand businesses.

“These latest figures should remind New Zealand businesses to keep a close eye on their debt management and cash fiow,” said Mr Christiansen.

“While the steady decline of the payment figures is of concern, perhaps more concerning is that we are now entering the end of financial year period, which last year saw a further deterioration in payment terms. If that trend were to be repeated then a number of businesses could face cash fiow problems. This is a clear sign that New Zealand businesses must focus strongly on receivables management leading into the end of the financial year."

The D&B figures follow the release last week of the Bank of New Zealand Confidence Survey which showed a weakening in expectations for growth of the economy. Mr Christiansen believes that when businesses delay payments as a way of better managing their own cash fiow, it can be a signal of concern about the economy.

“As businesses become concerned about their prospects moving forward, they tend to seek to bolster their own cash fiow position by delaying payments.

“Unfortunately as most businesses are both debtors and receivers it creates a vicious cycle.

All businesses must better manage their receivables process."

Industry / Feb 05 (Days)
Agriculture, Forestry & Fishing / 42.8
Mining / 44.7
Construction / 45.6
Manufacturing / 44.7
Transportation & Communications / 46.3
Wholesale Trade / 44.5
Retail Trade / 43.2
Finance, Insurance & Real Estate / 41.0
Services / 44.6
Public Administration / 45.9
Overall / 44.0

ENDS

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