New Zealand trade payments continue decline

MEDIA RELEASE

New Zealand trade payments continue decline

Cash flow crunch for business

Wednesday August 24th, 2005

There has been a further decline in business to business trade payments this year, signalling greater cash flow and credit risks for business.

The June figures, revealed today in the Dun & Bradstreet (D&B) New Zealand Trade Payment Analysis (NZTPA), show trade payments have blown out by an additional five days over the past year.

The figures reveal the average trade payment period is now 45 days. This is an increase from 2004 when payments were a consistent 40 days for most of the year, after improving from a high of 48 days in 2003. Trade payments are now exceeding the standard 30 day payment period by an average of 15 days.

The slowest paying industry in June 2005 was Transport & Communications on 48 days. The fastest was Retail on 40 days.

Australia has also experienced a further decline in payments with the average trade payment period now 56 days, over a week longer than at the beginning of the year.

D&B New Zealand General Manager, David Christiansen, said the increase in trade payment periods was consistent with other data showing that business confidence remained subdued in New Zealand.

Mr Christiansen said businesses were watching the economy closely before making any financial decisions, including when to pay their bills.

“There is high caution prevailing about the economy, with some business surveys indicating many businesses expected the economy to get worse over the coming year,” Mr Christiansen said.

“The Bank of New Zealand Business Confidence Survey last month showed a continued slump in business confidence and a decline in home building.

“The significant increase in trade payment times demonstrates that business is still watching its outgoings very carefully.

“D&B believes that small business is at the greatest risk from the payment period blow out, especially those that rely heavily on big business for the bulk of their revenue.

“This can be a much bigger problem for small business, particularly when their market strength makes them so reliant on larger companies and affects their capacity to demand quicker payment.

“If businesses don’t call in their debts faster, they will put too much pressure on their cash flow and may suffer as a result.”

New Zealand Trade Payment Survey 2005

Average as of June
Industry Payment Terms (days) / Trade Payment(days)
Agriculture, Forestry & Fishing 30.0 41.9
Construction 30.0 45.7
Finance, Insurance & Real Estate 30.0 40.9
Manufacturing 30.0 45.9
Mining 30.0 43.0
Retail 30.0 40.4
Service 30.0 44.2
Transport & Communications 30.0 48.4
Wholesale 30.0 44.7
Public Administration 30.0 44.5
All Industries 30 days 44.2 days

ENDS

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