Payment times of bills and invoices improve

Payment times of bills and invoices have improved across most Australian industries.

The improvement in the payment times of industries arguably hit the hardest by the pandemic pointed to a strong economic recovery, but CreditorWatch CEO Patrick Coghlan said this was threatened by continued Covid lockdowns and border closures.

Payment times of bills and invoices have improved across most Australian industries in December as the economy continues to improve, according to CreditorWatch - but the credit reporting agency says rolling border closures and new COVID-19 lockdowns may threaten Australia’s economic recovery.

According to the CreditorWatch Business Risk Review for December, 15 out of 19 industry groups said the time it takes to pay their bills has decreased, although results vary widely from sector to sector.

The transport, postal and warehousing industry saw average payment times fall the most in December, down 53 per cent as the COVID-19 inspired international delayed began to be resolved.

The agriculture, forestry and fishing industry saw the largest monthly increase in payment times, up 38 per cent as labour shortages begin to bite on the industry.

However, the industry is one of two to record a decrease in payment times over an entire year, down 50 per cent, alongside the accommodation and food services industry which saw payment times fall by 41 per cent compared to December 2019.

The sectors with the largest annual increase in payment times were those that arguably had to navigate the highest number of additional COVID-19 regulations established through the year: health care and social assistance, up 285 per cent, and administrative and support services, up 177 per cent.

Elsewhere, the retail industry saw payment times fall by 31 per cent over December, real estate industry payment times fell by 27 per cent and accommodation and food services payment times fell by 8 per cent.

The improvement in the payment times of industries arguably hit the hardest by the pandemic pointed to a strong economic recovery, but CreditorWatch CEO Patrick Coghlan said this was threatened by continued Covid lockdowns and border closures.

“The reduction in payment times reflects better economic conditions at the end of 2020,” he said.

“However, lockdowns and border closures at the end of the year due to Covid have the potential to stymie this,

“But there’s a lot of potential for a quick recovery, similar to that experienced in the middle of 2020 when the original lockdowns were removed.

“Sectors such as accommodation and food services could demonstrate a strong comeback when existing restrictions and border closures are put to bed.”

Despite an improvement in payment times, the review also reports that the number of external administrations rose by 23.4 per cent over December even when the temporary relaxation of rules regarding trading while insolvent remained in effect up to December 31.

The number of defaults dropped by eight per cent in December, following much steeper declines 67 per cent in November and 68 per cent in October.

Annually, the number of external administrations fell by 32.4 per cent and the number of defaults fell by 45 per cent.

CreditorWatch Chief Economist Harley Dale said that although it is likely the number of businesses in administration or defaulting on their loans will grow now the insolvency trading rules are no longer in place, the nation is not headed off a “steep cliff of business failures.”

“What’s key is for businesses to work with experienced advisers and start to negotiate with creditors now,” Mr Dale said.

“That’s going to be the best way to continue trading even through difficult economic periods. Insolvency is not inevitable.”