Content supplied by Dun & Bradstreet
Businesses in New Zealand are experiencing a cash flow boost from the country’s strong economic performance, with the average time taken for invoices to be paid falling to the fastest second quarter level on record.
With the economy growing at a higher-than-expected 0.7 per cent in the June quarter, businesses have demonstrated a greater capacity to manage their finances and pay their expenses on time.
According to Dun & Bradstreet’s Trade Payments Analysis, 66 per cent of commercial invoices were paid promptly (between 1–30 days) during Q2 2014, an increase from 59 per cent the year before.
The jump in on-time payments has taken the average time for invoices to be paid to 41.4 days, the fastest rate measured for a second quarter.
During the same period, Dun & Bradstreet also found that 30,435 businesses became a lower risk of making late payments in the year ahead, compared to the 19,613 which were deemed a higher risk.
Dennis Martin, Managing Director of Dun & Bradstreet in New Zealand, said that the latest business payment figures represented a continuation of the long-term improvement in business conditions since the global financial crisis.
“As evidenced by the latest GDP figures, New Zealand’s economy continues to perform strongly, with businesses benefitting from increased trade and a faster, more reliable cash flow,” Mr Martin said.
“This benefit is clear in the long-term trend for faster business-to-business payments, which has allowed businesses to get their hands on money sooner, pay their own bills sooner, invest back into their business with more confidence, and in turn, keep money flowing through the economy.
“Encouragingly, the business sector has shown an ability to maintain this rate of payments through 2014 while absorbing four interest rate increases and a high dollar; a resilience which may be called on should the current concerns about the Chinese economy be realised,” he added.
Despite slowing growth in China this year and weakening commodity prices, New Zealand’s substantial agriculture sector remained one of the fastest paying industries during the last quarter. D&B’s Trade Payments Analysis shows that the sector paid its invoices in an average of 36.4 days, two days faster than the year before and five days sooner than the all-industry average. At 34.9 days, businesses in the forestry sector were the fastest to settle their invoices during Q2 2014.
The country’s utilities sector continued to take the longest time to clear its accounts, with payments slowing over the past year from an average of 43.6 days to just under seven weeks (48.2 days).
Across industries, large companies employing more than 500 staff have been the slowest payers, averaging 52.5 days, a week slower than at the same time last year and 11 days later than the national average.
Meanwhile, the country’s smallest operators have maintained speedy payment times.
Businesses with between one-and-five staff took 40 days to pay their invoices, while those with between six-and-19 staff were slightly faster again, at an average of 39.6 days.
“With economic growth strong and the impact of the interest rate rises from the RBNZ yet to hit businesses’ finances, this latest analysis points to a resilience and strength in the economy.
“The sustained improvement in average payment times suggests that the economic performance will remain healthy for some time to come,” Mr Koukoulas added.