Late B2B payments are a universal issue, with businesses around the globe feeling the cash flow pressure from delayed invoice payments. Yet not all jurisdictions address the pain point in the same way. This week’s B2B Data Digest looks at the latest initiatives in Australia, which include efforts to accelerate vendor payments. These initiatives are in stark contrast to large corporations in the U.S., which continue to practice longer supplier payments.
5 percent of all sales made on trade credit have been written off as uncollectable, according to a new survey released by Atradius. The report, which surveyed Australia businesses, concluded that B2B payment practices reveal “dramatic” trends. For Australian suppliers, for instance, the percentage of write-offs more than doubled the average of 2 percent of credit sales written off, which was the average before the pandemic. Late B2B payments also rose, with 54 percent of Australian B2B Firms reporting invoices are past-due — compared to 21 percent before the pandemic. The construction industry in Australia has been hit particularly hard, researchers found.
“As businesses look to grow during this time of economic uncertainty, it’s important they continue to employ strategic credit management measures such as credit insurance to … [minimize] the risk of payment defaults,” stated Mark Hoppe, managing director for Atradius Oceania. “This will help protect businesses from the increased risk of customer bankruptcy, help them manage the additional volume of late payments more efficiently and will also facilitate company growth by helping businesses explore new opportunities including extending more credit to existing customers and new customers, and finding new markets to explore.”
7-day payment terms have been implemented for small suppliers of BHP, a mining company that operates across Australia, Chile, the U.S., Canada, Mexico, and Trinidad and Tobago. The organization said the accelerated payment terms would begin July 1 of this year and will also apply to local and indigenous-owned suppliers. The 7-day payment terms follow BHP’s 2020 efforts to hasten payments to small suppliers in Australia only; previous payment terms had been at 30 days, reports in Mining Weekly said, adding that BHP spends an estimated $2.5 billion with small, local and indigenous suppliers every year.
20-day payment terms will be required for businesses working with Australia’s New South Wales government, Smart Company recently reported. Government officials’ new rules are part of efforts to support prompt payments to small suppliers, with the new requirements applying to large corporations with government contractors that work with subcontractors. Those firms will now have to pay those subcontractors within 20 days and will apply to firms with government contracts worth AUS$7.5 million (approximately $5.6 million) and up. “Cashflow can be a major issue for small businesses and the new policy will support the important role small businesses play in the NSW economy,” said NSW Small Business and Finance Minister Damien Tudehope in a statement.
58-day supplier payment timeframes were the average for large U.S. firms for the first quarter of fiscal year 2020, according to the Wall Street Journal (WSJ), citing data from Hackett Group. The research, which examined supplier payment practices for FY2020, concluded that some large corporations are taking longer to pay their vendors despite ongoing economic recovery. For the entire fiscal year, large firms took an average of 62 days to pay their suppliers. Among the larger firms extending invoice payment times is Macy’s, which, according to reports, noted in its earnings call last month that it benefited from longer supplier payment times. The publication also highlighted Mondelez International, which similarly saw a cash flow boost as a result of lengthening supplier payments.