Money news | Earnings & Financial industry

Australian businesses worst in the world at paying their bills on time study finds


CONGRATULATIONS, Australia. We are officially the most annoying country in the world to do business, according to this one statistic.

Australian companies are the slowest at paying outstanding invoices worse than Mexico, South Africa and the United Arab Emirates according to data from MarketInvoice.

MarketInvoice is a finance company from the UK which lends to businesses based on the value of their outstanding invoices, freeing up cashflow and allowing them to reinvest.

The company crunched five years worth of data 30,000 invoices from 1000 companies across 80 countries to compile its iLate Payment Report 2016/i. It says globally, 72.5 per cent of invoices are paid late.

The average amount of time it takes for an invoice to be paid in Australia is 26.4 days overdue. In Mexico, the second-worst offender, that figure is 18.6 days overdue. Compare that with Japan, where on average invoices are paid 6.5 days early.

Other countries where bills are typically paid before the due date include Belgium (4.1 days), the Netherlands (three days), Switzerland (0.8 days), Germany (0.5 days) and Ireland, where debtors on average squeeze in their payments just under two-and-a-half hours before deadline.

MarketInvoice says Japans zero-to-negative interest rates may be the reason for its unique record. With no reason to save, capital is actually better utilised by investing in material stock and physical goods, the report said.

Thus, big Japanese businesses actually have an incentive to pay promptly, with less reason to hoard cash.

Looking at late payments as a proportion of the total number of invoices, France was the worst offender, with 75.4 per cent of all invoices being paid late.

By sector, banks were the timeliest payers, usually settling their bills the day after the due date. Supermarkets and e-commerce retailers tend to pay more than a week late, while high-street retailers are the worst, taking two weeks to settle up.

Its not the first time Australias culture of late payments has been slammed. Credit reporting agency Dun & Bradstreet estimates that $19 billion annually is locked away from businesses beyond the widely accepted 30-day payment term.

The issue was the subject of a discussion paper from the Federal Governments Department of Innovation in 2013.

Late payment ... adds financial and administrative costs, reduces the potential for investment opportunities, damages business relationships and fuels business uncertainty, the paper noted.

This weakening effect on businesses, particularly small businesses, compromises their competitiveness and survival.

The paper notes Dun & Bradstreets estimate that 90 per cent of small business failures are caused by poor cash flow, and the inherent imbalance of bargaining power means many can be reluctant to pursue late payments for fear of jeopardising future work.

When invoices don't arrive on time, how often should you pester or let it go? Moneyologist Quentin Fottrell discusses. Photo: Getty

MarketInvoice found the payment records of blue-chip companies and small businesses were more similar than one would expect. However, SMEs tend to pay far more sporadically, often very late or very early, it said.

This would suggest an ad hoc attitude to payment, or a deliberate delay for the sake of cash flow. There is also the possibility that SMEs are merely passing on a payment problem from the top of the chain.

According to Dun & Bradstreet data from 2008 to 2013, Australian businesses took an average of 53.7 days to pay their bills, indicating an average late payment period of 23.7 days roughly in line with MarketInvoices figure.

Australian dollar tipped to fall if donald trump is elected president




THE Australian dollar could fall up to 10 per cent if US Republican candidate Donald Trump wins the US presidency in November, according to Commonwealth Bank’s currency strategists.

Mr Trumps main economic policies, including major income and company tax cuts, government spending and tariffs, are very inflationary, CBA currency strategists Richard Grace, Elias Haddad, Joseph Capurso and Wei Li say in a research note.

We believe US bond yields and the US equity market will lift on the company tax cut, and the US dollar will surge higher, they said.

A 10 per cent jump in the US dollar will be driven by investors chasing higher returns on their investments, which in turn could see the Aussie fall by 10 per cent to around 68.71 cents.

However, if the Democrats control the Congress, the impact on currencies would be less, the CBAs currency strategists said.

The first US presidential debate between Mr Trump and Democratic candidate Hillary Clinton is set to take place on Monday night in the US, around 11am on Tuesday.

Recent polls suggest Ms Clinton is still the favourite to win the presidency, but her lead over Mr Trump is shrinking, according to CBA, which cites FiveThirtyEight.com.

If elected, Mr Trump has vowed to sharply cut income taxes to lift household and business spending, and to reduce business tax to 15 per cent from its current scaled variable rate of between 15 to 35 per cent.

The US economy would grow at a more rapid rate given household consumption accounts for 70 per cent of US GDP (gross domestic product), CBAs currency strategists said.

Mr Trump also proposes to boost infrastructure spending and to remove regulations that inhibit job growth.

The controversial businessman also plans to lift a raft of environmental restrictions that inhibit energy investment, to label China as a currency manipulator, renegotiate the North American Free Trade Agreement (NAFTA) and apply tariffs and duties to countries that cheat.

Americans will head to the polls on November 8 to elect the next president and members of the US House of Representatives and the Senate. The election results will be out a day later.

At 7am on Tuesday, the Australian dollar was trading at 76.35 US cents, up from 76.18 cents on Monday.

One major fund manager has warned of significant downside risk for the Aussie dollar.