Regardless of the size of your business, cash flow is a constant headache that needs to be addressed. Without a consistent stream of revenue, enterprises can’t commit to any form of business expansion, making it harder to remain competitive.
The bulk of cash flow comes from debtors, either individuals or other businesses purchasing your goods or services. As such, the faster that these parties pay what they owe, the more scope your business has to invest in future expansion.
Dun & Bradstreet’s latest Trade Payments Analysis found that invoice payment times have dramatically plummeted in recent months.
Record payment times recorded
According to the announcement, the average invoice was paid in 45.1 days during Q3 of 2015. This is more than four days faster than in Q2 and almost a week ahead of Q3 2014. Invoice payment times are often a good measure for the economy as a whole, so this result suggests Australia is moving out of its slump and towards positive expansion.
However, Dun & Bradstreet revealed that not all businesses are enjoying these short payment times. A total of 66 per cent of invoices were paid within a month, while 26 per cent reported settled bills between 31 and 60 days.
The real concern comes with the eight per cent of invoices completed after 61 days. In fact, many payments are made after the 121 day mark. Any business in this situation would be wise to consider contractor payroll services which can assist the entire payment process.
The Australian Bureau of Statistics reported last year that one in five local enterprises don’t innovate as much as they would like to because of a lack of funds. This highlights the importance of chasing invoices and receiving prompt payments.
Tasmania leads the way
All states and territories saw improvements to their invoice payment times with Tasmania once again taking the top spot. With an average of 41.3 days, the Apple Isle state holds a narrow lead over the Northern Territory (41.6 days), Queensland (42.7 days) and Western Australia (43.3 days).
According to Economics Advisor to Dun & Bradstreet Stephen Koukoulas all states should enjoy lower invoice payment times in the future.
“The spectacular decline in average invoice payment times since the middle of 2014 suggests firms are experiencing favourable cash flows,” he said.
“A combination of savings from record low interest rates, reasonable income growth and on-going economic expansion mean that firms are well placed to pay their bills more quickly than at any time in many years.”
Strong cashflow = strong business spending
One of the benefits of a positive cashflow is the opportunity for businesses to invest in their enterprise. Whether this comes in the form of technology, people or processes, it is the mark of a strong leader to see an opening and take it with two hands.
In fact, according to statistics from the Commonwealth Bank, this is exactly what is occurring at present. Based on its latest Business Sales Indicator, spending on services such as computer equipment and software rose 5.3 per cent in September. This is an outstanding result and is the largest spike since the start of 2008.
“The stellar rise in business spending shows that the Federal budget initiatives are proving to be sustainable over a longer period,” Chief Economist Craig James outlined.
“With growth across a number of retail-based sectors, businesses should be feeling optimistic leading into the holiday season.”
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