Australian companies are the slowest in paying overdue bills; the average time for local businesses to pay outstanding invoices is 26.4 days after they are overdue, according to research by MarketInvoice. Based on a new survey by one of the world’s largest credit insurers Atradius, it seems that Australian ICT companies are the worst offenders when it comes to late business-to-business (B2B) payments.
Late payments are a blight on the business sector. In a discussion paper on this topic released by the Federal Government in 2013, it was noted that late payments add “financial and administrative costs, reduces the potential for investment opportunities, damages business relationships and fuels business uncertainty”. Yet, many companies are either careless about paying bills on time or are deliberately withholding funds to preserve their own cash flow.
Atradius conducted a survey on 200 businesses for its Payment Practice Barometer Australia 2016 report to breakdown payment habits of local companies across different verticals. The study found that ICT companies take the longest to pay overdue invoices. On average, companies in this sector pay their invoices up to 30 days after the overdue date.
As a result, the ICT industry has generated the largest proportion of overdue B2B invoices, according to the study. Around 55 per cent of the total value of invoices issued by suppliers in Australia to B2B customers in the ICT industry were paid late.
Atradius managing director Mark Hoppe commented that the Australian ICT sector is currently experiencing financial difficulties and elaborated on the results of the findings.
According to Hoppe, there’s a good explanation as to why ICT companies often pay their invoices late:
“Traditionally in ICT, shorter terms are offered but there’s almost an understanding they will be paid at a later date. For example, in some industries where terms of payment are 60 days, these invoices more likely to be paid on time. Whereas in an industry such as ICT, where terms are shorter, they are often paid after the due date but this still prior to the 60 days of other industries.”
Even though there may be some unspoken understanding within the industry that bills would be paid late, Hoppe concedes that it’s not healthy for the ICT sector to have so many outstanding invoices.
“Many businesses in the ICT industry rely on paying late as a form of cash flow management. This is of course not ideal,” he said. “… All businesses need to protect their cash flow. If payment behaviours stay the same or get worse, it will become more difficult for businesses to maintain a strong enough cash flow to keep their operations sustainable.”
You can find more details on the Payment Practice Barometer Australia 2016 report here.