Unpaid bills spike

Dun & Bradstreet (D&B) have just released their quarterly Trade Payments Analysis, which examines the ability of firms to pay their bills, and pay them on time:

…during the December quarter last year, the number of bills left unpaid for 90 days or more grew 20 per cent compared with 12 months ago.

While overall payment terms fell to 52.3 days during the December quarter, a fall of 0.7 days, terms remain elevated by 0.5 days compared with the previous year.

This represents an average trade payment term almost a month beyond the standard 30 day payment period. According to Dun & Bradstreet CEO, Christine Christian, given the importance of trade credit, overdue accounts can have a serious run-on effect for the economy as a whole.

“Business to business lending through the extension of trade credit amounts to billions of dollars a year and the rate at which these micro-loans are being paid back is a leading indicator of cash-flow performance and financial stability,” Ms Christian said…

Australian businesses also recorded a year-on-year 42 per cent spike in the number of bills 61-90 days late, with a rise of 10 per cent during the December quarter alone. This was in contrast with both the June and September quarters last year where severely delinquent payments actually fell as much as 18 per cent.

The jump in severely delinquent (90+ days) bills was particularly evident among the Finance, Insurance & Real Estate sector, where the number of accounts in this category grew by over 50 per cent during the fourth quarter. Likewise, Service sector businesses recorded a jump of 28 per cent in the number of severely delinquent payments over the same period.

D&B’s media release is attached below.

Severely Delinquent Bills at 12-Month High – Dun & Bradstreet-1

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Unconventional Economist
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    • Where that would show up is in the current levels of factoring, but I don’t know where to get that data. I’m not even sure if the RBA even collect it.

      Banks are falling over themselves to avoid cashflow lending at the moment, and the CBA has completely pulled out of factoring – something to do with substantial losses in Melbourne I believe.

      I’ve put in a call to one cashflow lender that I know well, so I’ll let you know some anecdotal info, but that is all I can source.

    • Jumping jack flash

      I really think that everyone’s just repeating a mindless meme when they proclaim “weneedtocutinterestratesnowandstimulatetheeconomy!”.

      They seem to have no idea that cutting is only a small part. People need to exploit that cut, and that depends on their willingness and ability to take on more debt, and then spend it.

      And as Peter also mentions, the willingness and ability of the banks to lend it at the new lower rate.

  1. Just doing some quick number crunching shows that the number of severely delinquent (90+ days) bills after Q4 2011 was 19.3% higher compared to a year earlier.

  2. These will start showing up on P&Ls soon as “losses”.

    That’s when medium and large businesses will start making more employment cuts.

    I expect retail unemployment in particular to increase in Q1 and Q2; with more broad-based UE to increase markedly in Q2 – ie. after EOFY, and associated decisions are made.

    My 2c

    • The information we are seeing is more people cutting the life expenses. there is a lot struggling at the moment, debtor days in various businesses (accounting) are blowing out (30 days out to 50days)

  3. I have for a while now thought that the ‘speed’ of money flowing around the economy to be the single most important (read vulnerability) variable.

    I conceptulise as: If ‘the’ dollar that gets spent 100 times per week we can all pay our bills. If that same dollar gets spent 50 times per week we can each pay half our bills or perhaps half the accounts will remain unpaid.

    I may be barking up the wrong tree here but thus far it reflects the real world.