Timely business bill paying rises

Last updated 12:23 18/12/2013

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More businesses are paying their bills on time as rising consumer confidence is improving corporate cash flows, a trade credit agency survey shows.

An analysis of company invoice payments by Dun & Bradstreet (D&B) during the three months to September shows that 61 per cent were made within 30 days, an increase from 59 per cent in the previous quarter and 60 per cent a year earlier.

The survey shows the average time taken for businesses to pay each other has fallen for a second consecutive quarter to 41 days.

Meanwhile the cash flow position of big companies has benefited from improving consumer sentiment.

As unemployment fell to 6.2 per cent in the third quarter and retail sales grew 0.3 per cent, the survey's index of consumer financial stress settled at -3.7 points, indicating New Zealanders were less stressed about their financial position than any other time in 2013.

Lance Crooks, D&B's New Zealand general manager, said there was a clear relationship between healthy cash flow and a strong business sector.

"With favourable economic conditions in New Zealand, businesses have had a greater capacity to meet their financial obligations on time and, in turn, invest back into their operations and the economy more generally," Crooks said.

"These September quarter findings on business-to-business payments are a positive pulse-check on the state of the economy, which was forecast by the Reserve Bank to have grown by 1.1 per cent across that same period.

"With interest rates unchanged this month, positive employment activity and the Christmas spending period underway, businesses look set to end the year in healthy financial position."

While one day slower than a year ago, the survey shows companies operating on the South Island paid their invoices in 40 days during the third quarter of 2013, faster than the 41 days taken by businesses on the North Island.

The survey shows that Christchurch businesses settled their accounts the fastest, in 40 days, while in Auckland business payments were made in an average of 42 days.

The agriculture sector continues to outperform all industries in payment times, according to D&B, averaging 36 days to pay its commercial invoices, compared with 39 days a year earlier. The fishing industry, at 38 days, is the second-fastest to pay its accounts, followed by mining and forestry sectors at 39 days.

Despite significant building activity this year, the construction industry is averaging 43 days to settle its accounts - the slowest time across industries according to the survey.

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