New Zealand invoice payment times have fallen to their lowest point in over a decade, with businesses taking 34.9 days on average to pay their invoices during Q3 2016.
According to Dun & Bradstreet’s Trade Payments Analysis, the latest payment figure marks a slight improvement on the previous quarter's 35.5-day average, and shows New Zealand companies pay their bills almost 10 days faster than their Australian counterparts. The result continues a recent trend of record-low payment times, which have remained below the 40-day mark since Q4 2014.
According to Stephen Koukoulas, Economics Advisor to Dun & Bradstreet: “Firms in New Zealand continue to pay their bills quickly, with the number of days for bill payments at historical lows. At an average of 34.9 days, trade payment times have been steady for the past year, at a level which remains 10 days or more quicker than average payment times during the global financial crisis.”
Koukoulas added: “New Zealand firms pay their invoices more quickly than Australian firms pay their invoices. It is not clear why this gap exists given that over the medium term, the economic performance and level of interest rates in both countries has been similar. One issue that may account for the difference is that agriculture, which has the quickest invoice payment times, is a larger part of the New Zealand economy than in Australia. This may skew the trade payment numbers lower in New Zealand.
“The trade payments data continue to indicate that firms are generally 'cashed-up', and with low interest rates continuing, there is little incentive to delay paying creditors,” Mr Koukoulas added.
On a year-on-year basis, the Q3 2016 Trade Payments Index result was 0.4 points lower compared with Q3 2015, when companies took 35.3 days on average to pay their invoices. The figure also remains significantly lower than the 10-year average of 44.2 days. Over this ten-year period, payment times peaked at 50.8 days during Q4 2008, but the figure has steadily fallen since then, dropping to the low-40s by 2012, before declining to the mid-30s by 2015.
How to get your invoices paid faster
Xero offers these five tips to improve your invoice payment times.
- Invoice promptly: The sooner you invoice, the sooner you’ll receive payment. It’s vital to get your invoicing process right from the start so that it is efficient and pain-free.
- Establish a relationship: Introducing yourself to the people in the accounts departments of the companies you are invoicing can often make a difference. At the same time, ask them to include your invoice number as a reference with every payment they make, to help you determine which invoice is being paid.
- Keep accurate records: Keep track of the time and materials expended on a client’s project and make sure you invoice for everything. If you record the work done as you go, it saves you trying to remember the details at a later date.
- Define your payment terms: Consider shortening your invoice payment period to encourage your customers to pay sooner, even to one or two weeks. If you make your best efforts to supply your products and services to your clients’ deadlines, there’s no reason why they shouldn’t try their best to pay you just as quickly.
- Make it easy to get paid: As a general rule, when you make it easier for your customers to pay, they’ll pay sooner. Some accounting software offers a ‘pay now’ button on digital invoices, which means you can send customers invoices online with the option of getting paid instantly. Also, automated invoice-chasing apps, like Chaser, integrate with your accounting software and do it for you.