18
Why are average invoice payment times improving in Australia?
While average invoice payment times are improving in Australia, cash flow can still cause headaches for business leaders.
Invoice payment times are improving across Australia.
Regardless of whether your enterprise has just started or is a multinational, ensuring money continues to filter in is a vital part of the corporate equation. There is no doubt that without this income, businesses can't enter new markets, hire new staff or settle their own debtors.
This notion certainly highlights the importance of accounting and finance professionals who monitor payment schedules and debtor histories to ensure cashflow is as strong as possible.
End-of-year invoice payments improving
While accounting and finance personnel are responsible for cash flow within their own enterprises, it is important to look at payment times more broadly to understand overall business sentiment.
According to the latest Trade Payments Analysis published by Dun & Bradstreet in late January, average invoice payment times dropped in Q4 2015 to 44.1 days. This represents a small decrease from the 45.1 days recorded during Q3 2015.
Dun & Bradstreet Economic Advisor Stephen Koukoulas explained this movement in more detail.
"The further fall in the payments times for the business sector shows that firms are not only cashed up, but confident about their financial position. The record low interest rates set by the RBA are freeing up cash flow and lowering borrowing costs and underpinning a strong performance for corporate Australia," he said.
Interestingly, the analysis found that 68 per cent of enterprises ensure payments are made within a prompt period (30 days). In general, this is the expected timeframe for most payments.
Consequences of poor cashflow clear
Of course, if business leaders can't reverse poor client payment times, there is always the danger of running into further financial trouble. This fact is reinforced by statistics released by Australian Securities & Investments Commission.
In its Insolvency statistics: External administrators' reports (July 2014 to June 2015), it was reported that inadequate cash flow or high cash use was the top reason why businesses failed - highlighted in 44 per cent of reports. This issue was higher than both poor strategic management (42 per cent) and trading losses (34 per cent).
Managing cash flow remains one of the top business challenges.
According to Bibby Financial Services, managing cash flow remains one of the top business challenges in the coming years. With this in mind, enterprise leaders will need to recruit accounting and finance professionals who have the skills and experience to drive performance levels. This is where the team at Ethos BeathChapman can assist.
With years of knowledge in this sector, we have access to countless people who can support your business objectives moving forward. Ethos BeathChapman is an executive recruitment specialist focussed on the mid-senior candidate market across Asia, Australia and EMEA.
By Andrew McPherson