Dun & Bradstreet's latest Trade Payments Analysis- which examines the ability of firms to pay their bills, and pay them on time- reveals that this disparity in payment terms has been the largest of the past four years.
While payment terms for private companies were on par with the national average of 44.6 days, their publicly-listed counterparts averaged payment terms of 51 days, 2.2 days longer than the previous quarter and 5.8 days longer than the same quarter a year ago.
Payment Terms for Private Firms and Publicly-listed Firms
John Scott, General Manager of D&B New Zealand, believes that these figures represent a concerning shift in payment behaviour from listed companies, particularly since the standard payment period is only 30 days.
"This is indicative of an inherent mismanagement of cash flow that can be potentially hazardous to their financial health, given that firms on the stock exchange contribute significantly to the New Zealand economy," said Mr Scott.
While listed firms have historically taken longer than their private counterparts to pay their accounts, the latest spike brings payment terms for listed companies to their highest in ten quarters after steadily rising upwards for the past two years.
This correlates with D&B data, which indicates that large firms, those with 500 or more employees were the slowest payers at nearly 49 days. In contrast, firms with one to 20 employees took the least amount of time to pay their bills at 43 days during the December quarter.
According to Mr Scott, the impact of late payments is often less noticeable on a large firm's cash flow cycle than smaller firms but is just as, if not more important.
"Wherever possible, small businesses pay their bills as soon as they can because they have tighter cash flow cycles and if they are consistently delinquent, we see this reflected in an increased failure rates."
"Conversely, large businesses with more generous cash reserves are more able to stem any short-term cash flow problems and hence are less likely to fail. This is extremely worrying given the long-term implications of not paying on time," Mr Scott said.
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