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

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

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 Late Payment Report 2016. 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.

Japanese businesses are the best at paying their bills.

MarketInvoice says Japan’s 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.

It’s not the first time Australia’s 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.

Where is Bruce Billson when you need him?

The issue was the subject of a discussion paper from the Federal Government’s 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 & Bradstreet’s 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.

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 MarketInvoice’s figure.

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