Cash flow pressures intensify for businesses in Dun and Bradstreet survey

Despite an apparent recovery in confidence, New Zealand businesses delayed their payments to other businesses by a further 2 days in the March quarter, increasing the average to around 46.6 days, credit information firm Dun and Bradstreet has reported. State owned businesses continue to be slower payers than privately owned businesses, while large firms pay slower than smaller ones. South Island firms also pay faster than North Island ones. Wellington firms have the slowest payment records of all the major cities, the survey showed. "A further deterioration of the size recorded in the March quarter could put payment days back near the levels experienced during the height of the global crisis," Dun and Bradstreet said. "Business confidence has begun to improve which bodes well for domestic demand in 2010. However, liquidity and access to cash are absolutely critical in an upturn. Consequently, the decline in payment terms is cause for concern,” said Dun and Bradstreet General Manager John Scott. "If payment terms continue to deteriorate in the months ahead firms may find themselves battling the cash flow pressures that impacted business growth and stability during the height of the credit crisis," Scott said. Here is the full news release below:

New Zealand firms face the prospect of renewed cash flow pressures in the months ahead, according to the latest business-to-business trade payment figures released today by credit reporting agency Dun & Bradstreet. The findings -- which examine the millions of current accounts receivable records contained on the Dun & Bradstreet database -- reveal that a deterioration (2.0 days) in the March 2010 quarter has taken payment terms to 46.6 days and largely reversed the gains made over the previous three quarters. A further deterioration of the size recorded in the March quarter could put payment days back near the levels experienced during the height of the global crisis. According to John Scott, General Manager of Dun & Bradstreet New Zealand, access to cash is absolutely critical to New Zealand's economic recovery. "Business confidence has begun to improve which bodes well for domestic demand in 2010. However, liquidity and access to cash are absolutely critical in an upturn. Consequently, the decline in payment terms is cause for concern,” said Mr Scott. "If payment terms continue to deteriorate in the months ahead firms may find themselves battling the cash flow pressures that impacted business growth and stability during the height of the credit crisis." Industry The mining sector was the quickest to pay in the March quarter 2010 despite adding one day to the time taken to settle accounts (compared to the previous quarter). The agriculture sector was a close second, averaging 41.8 days to settle its trade accounts – this group added 1.5 days to its payment terms. Conversely, the electric, gas and sanitary services sector was the slowest paying group (some 14 days slower than the mining sector). This group averaged 54.7 days to settle accounts, following an increase in terms of close to three days (quarter-on-quarter). The fishing sector was the only group whose payment terms did not deteriorate compared to the previous quarter, while the finance sector experienced the most significant increase in payment terms (rising by 3.4 days). Public | private Public companies are consistently slower to settle their accounts than their private counterparts however; the gap between the two groups has narrowed. Private companies added 2.1 days to their payment terms to average 46.6 days to settle accounts during the March quarter. Meanwhile, public firms took 2.3 days off the time taken to pay their bills, taking terms to 47.0 days. Location Firms based on the North Island have traditionally been slower to pay their bills than South Island firms. This trend continued in the March quarter 2010, with firms averaging 47.1 and 43.6 days respectively to settle their accounts. The terms of both groups deteriorated compared to the previous quarter with north island firms payment terms up 2.1 days and the terms of south island firms rising by 1.6 days. Wellington based firms recorded their third consecutive quarter as the slowest paying group, averaging 49.8 days to settle accounts. Auckland and Christchurch followed at 48.0 and 44.8 days respectively. Wellington based firms increased their terms more than the other major cities (rising by 3.1 days compared to the December quarter) and were the only group to experience a deterioration in terms compared to the March quarter 2009.