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Why businesses are paying their bills quicker

A reduction in payment times by New Zealand businesses may indicate the domestic economy is getting stronger.

Caleb Allison
Tue, 16 Oct 2012

New Zealand businesses are paying their bills, on average, more quickly than they have in the past decade.

The latest trade payments analysis by credit checking company Dun & Bradstreet shows the average time businesses took to pay their bills was 40.3 days in the September quarter.

That is well down from the peak of 50.8 days at the height of the global financial crisis, and about the same as levels seen in the June 2004 quarter.

In Australia, payment times were 52.5 days, nearly two weeks longer than for Kiwi businesses.

D&B New Zealand general manager John Scott says if businesses are paying their bills faster it suggests their cashflow position is strong.

"This trend has been evident over a number of quarters now and is having a flow-on effect on the broader economy. As businesses continue to experience more positive financial conditions, it has less of a strain on their cashflow cycles."

Mr Scott says trade credit makes up most of a firm's short-term finance and is one of the most important indicators of the health of the business and the wider economy.

"This is particularly true for small businesses as they often rely more on trade credit rather than bank credit." 

According to the survey, businesses with six to 19 employees paid their bills quickest at 39.4 days, down by nearly three days from the same quarter last year.

Firms with between 20 and 49 employees took about the same length of time, while businesses with more than 500 staff took 42.4 days, down nearly five days year-on-year.

Caleb Allison
Tue, 16 Oct 2012
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Why businesses are paying their bills quicker