Contrast of supplier payments in Australia and the United States
B2B payment delays are a universal problem, with businesses around the world feeling the cash pressure from late invoice payments. Yet not all jurisdictions treat the problem the same. This week’s B2B Data Digest examines the latest initiatives in Australia, which include efforts to speed up supplier payments. These initiatives are in stark contrast to large companies in the United States, which continue to practice longer supplier payments.
5% of all sales made on trade credit have been written off as uncollectible, according to a new survey released by Atradius. The report, which surveyed Australian businesses, concluded that B2B payment practices reveal “dramatic” trends. For Australian suppliers, for example, the percentage of write-offs has more than doubled the average of 2% of credit sales written off, which was the average before the pandemic. B2B payment delays have also increased, with 54% of Australian B2B companies reporting their invoices overdue, up from 21% before the pandemic. The construction industry in Australia has been particularly affected, researchers found.
âAs businesses seek to grow in these uncertain economic times, it is important that they continue to employ strategic credit management measures such as credit insurance to … [minimize] the risk of default, âsaid Mark Hoppe, CEO of Atradius Oceania. “This will help protect businesses from the increased risk of customer bankruptcy, help them more effectively manage the additional volume of late payments, and also facilitate business growth by helping businesses explore new opportunities, including by granting more credit to existing and new customers, and finding new markets to explore.
7-day payment terms have been put in place for small BHP suppliers, a mining company that operates in Australia, Chile, the United States, Canada, Mexico and Trinidad and Tobago. The organization said the expedited payment terms would begin July 1 of this year and would apply to local and native vendors as well. The 7-day payment terms follow BHP’s efforts in 2020 to expedite payments to small suppliers in Australia only; previous payment terms were 30 days, according to reports from Mining Weekly, adding that BHP spends around $ 2.5 billion annually with small local and indigenous suppliers.
20-day payment terms will be required for companies working with the Australian Government of New South Wales, recently reported Smart Company. The new rules for government officials are part of efforts to support prompt payments to small suppliers, with the new requirements applying to large companies with government contractors who work with subcontractors. These companies will now have to pay these subcontractors within 20 days and will apply to companies with government contracts worth A $ 7.5 million (approximately $ 5.6 million) and above. “Cash flow can be a major issue for small businesses and the new policy will support the important role small businesses play in the NSW economy,” the Minister for Small Business and Finance said of NSW, Damien Tudehope, in a statement.
Supplier payment terms of 58 days were the average for large U.S. companies for the first quarter of fiscal 2020, according to the Wall Street Journal (WSJ), citing data from Hackett Group. The research, which examined supplier payment practices for fiscal 2020, found that some large companies are taking longer to pay their suppliers despite the ongoing economic recovery. Over the full year, large companies took an average of 62 days to pay their suppliers. Among the biggest companies that are extending bill payment deadlines is Macy’s, which reports said in its earnings call last month that it benefits from longer payment terms for suppliers. The post also highlighted Mondelez International, which has also seen an increase in its cash flow due to longer supplier payments.