New Zealand trade payments remain in decline

Dun & Bradstreet

Media release
Monday 12 December 2005

New Zealand trade payments remain in decline

Continuing cash flow woes for business

The dramatic increase in time it is taking businesses to pay their bills continues, putting pressure on small and medium-sized businesses as they head into the Christmas and New Year period.

The October figures, revealed today in the Dun & Bradstreet (D&B) New Zealand Trade Payment Analysis (NZTPA), show business-to-business trade payments exceed the standard 30 day payment period by an average of 13 days.

The October figures, analysing payments over the past two months, reveal the average trade payment period is now 44.7 days, several days longer than at the beginning of the year. Standard payment terms are 30 days.

The slowest paying industry in October 2005 was once again Transport and Communications on 49.7 days followed by Public Administration on 49.1 days. The fastest was Finance, Insurance and Real Estate Services on 40.2 days.

D&B New Zealand General Manager, David Christiansen, said the continued increase in trade payments was an ominous sign, particularly for small and medium-sized businesses.

Industry Oct 05 (Days)
Agriculture, Forestry & Fishing 45.4
Construction 46.3
Finance, Insurance & Real Estate 40.2
Manufacturing 46.1
Mining 44.4
Retail 42.9
Service 44.7
Transport & Communications 49.7
Wholesale 45.2
Public Administration 49.1
All Industries 44.7 days

“The Christmas and New Year period is the most difficult time for SMEs chasing outstanding debts and balancing their cash flows because of the long break many companies take,” Mr Christiansen said.

“There’s no doubt companies will have to become smarter as we continue to face uncertain economic times and the continuing decline in trade payments.

“The ANZ National Bank’s November business outlook has shown a dive in business confidence with levels hitting a 17-year low. Fears over rising interest rates and Government controls on lending have led to businesses adopting a cautious approach to the economy, which is reflected in our trade payments analysis.

“The figures indicate businesses are holding on to their cash for longer periods before paying their bills. However this approach to cash flow is a vicious cycle. It is a timely warning for business to assess their payment terms and broader business practices.”

Mr Christiansen said this approach was particularly important when 90 per cent of business failed because of poor cash flow and debt management practices.

“The cost of bad debt is more costly than most people think. Bad payers reduce the cash flow of a business, cash flow which could be used for growing the business.

“Credit risk is a constant process. Acquiring pertinent information is the key to assessing credit risk.

“None of us can be 100 per cent sure about the economy moving forward, but businesses can implement practices that limit their own level of risk.”

ENDS

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