Firms paying bills faster

Things seem to be looking up - the amount of time it takes businesses to pay their bills is back to levels not seen since before the start of the global financial crisis.

That's according to Dun and Bradstreet's trade payments analysis for the quarter ended June.

Its key findings include that New Zealand businesses are doing better than Australia for the June quarter by 11.4 days. Australia had an average payment period of 53.6 days for its bills while New Zealand had 42.2 days.

Payment terms began rising in the fourth quarter of 2007, to a peak of 50.8 days in the first quarter of 2008. The number then began to trend down over subsequent years.

So who is paying its bills first?

Communications had the biggest improvement in the quarter, a drop of 8.7 days in the time they took to pay their bills, followed by utility firms - such as power companies - dropping four days.

Agriculture and forestry firms remained the fastest payers at 37.4 days and 37.3 days respectively.

If you have your own business or are a sole trader, you will probably be very conscious of your payment terms. If you aren't getting money in, you won't be able to meet your obligations.

If you offer credit to your customers, allowing them to pay a couple of weeks after you give them your bill, do you have terms of trade and a signed personal guarantee on file? You'll need this if you are going to enforce a payment.

Make sure everyone involved in your business is clear on the levels of credit you will allow. Sometimes a client's account can get out of control unexpectedly and you may be left waiting a long time to be paid.

Perhaps even consider a discount for prompt payment. This is the carrot approach to getting the cash in sooner. Better still, talk to clients about prepay options.

The ability to pay bills more quickly indicates better cash flow and financial stability, this is a sign of economic recovery. Let's hope the trend continues.