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Summary conclusion
Despite the country’s strong economic performance a third of the invoices of the Australian respondents were paid late by their customers, with domestic customers being the worst culprits.
When it comes to foreign customers, Australians are far more diligent in managing credit risks compared to domestic customers with a larger percentage requesting advanced payments, using letter of credit and performing mandatory credit checks of foreign customers. These strategies seem to be working with foreign customers on average paying one day early of the agreed payment term, compared to two days late from domestic customers. A strong consistent credit management policy for both domestic and foreign buyers will reduce trade risks and contribute to a healthier balance sheet.
The primary determinants of credit terms for Australian businesses include the "company’s standard payment terms" and "industry standard payment terms" meaning there is limited flexibility for customers to negotiate the payment terms. Given Australia has one of the world’s shortest average domestic payment terms, perhaps greater consideration to individual buyer needs and incentives such as discounts for early payment will help reduce overdue payments and improve company cash flow.
Evaluation of Australian customers' payment behaviour found that almost half (46 per cent) delayed their payment beyond the term without prior agreement. While the trend is steady compared to last year, late payments are a key indicator that a customer may have cash flow issues and should be monitored closely.
Extent to which, in the last six months, your customers…
Basis: companies surveyed in Australia
Source: Payment practices barometer - Summer 2010
 Download full Payment Practices Barometer report on Australia
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Date: September 2010
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