Utility companies are the worst payers in the country: D&B   2 Oct 2014

Article - BusinessDesk

NZ utility companies are the worst payers in the country, D&B says

By Fiona Rotherham

Oct. 2 (BusinessDesk) - Consumers face penalties if they don’t pay their power, gas or water bills on time but it would appear the utilities providing those services play by a different set of rules.

The country’s utilities are the worst at paying their bills on time, according to the latest quarterly Dun & Bradstreet trade payments analysis.

Overall kiwi businesses are experiencing a cashflow boost from the country’s strong economic performance with the average time taken for commercial invoices to be paid falling to the fastest second quarter level on record at an average time of 41.4 days. Some 66 percent of commercial invoices were also paid within a month during the second quarter of this year, up from 59 percent the previous year.

But when you break it down by industry, there are marked differences between the fastest and the slowest payers. Utilities – most of whom enjoy steady and healthy cashflow - continued to take the longest time to clear their accounts with payments slowing over the past year from an average of 43.6 days to just under 48.2 days.

And despite slowing growth in China and weakening commodity prices, New Zealand’s large agricultural sector remained one of the fastest paying in the last quarter, with invoices cleared in an average of 36.4 days. That was two days faster than last year and five days sooner than the industry average. The quickest continued to be the forestry sector at 34.9 days to settle their bills.

Larger companies employing more than 500 staff were also found to be tardy, averaging 52.5 days or a week slower than at the same time last year and much longer than the fastest payers - small businesses employing five and under people which took an average of 39.6 days.

Dun & Bradstreet NZ managing director Dennis Martin said there was no good answer to why utilities took the longest to pay though the larger size of many of the companies involved in the sector may be a contributing factor.

BusinessDesk contacted a few of the country’s utility companies to see if any could explain the sector’s tardy payments but none confessed to being the culprit. One helpfully pointed a finger at competitors.

Electricity companies Contact Energy and Trustpower said they had systems in place to ensure invoices received were tracked and paid in accordance with their standard payment terms agreed with suppliers – typically payment on the 20th of the following month of receipt of an invoice.

Lines company Vector said a recent external audit showed it was well within the sector average of paying its vendors on time while Canterbury-based Orion said it was a proactive payer, paying signed-off invoices on the 20th of the following month unless urgency was required.

Electricity generator MightyRiverPower also confirmed it followed the standard industry terms of payment in line with Contact and Trustpower, although payment may be made earlier with some preferred suppliers.

But MRP was more honest than most that being a bigger company meant more buying power and therefore better payment terms. It pointed to the favourable payments terms dairy giant Fonterra Cooperative Group was able to negotiate. From a working capital perspective, companies prefer to pay later rather than sooner although from a supplier point of view the opposite is true. MRP said it was a commercial term like any other and no-one forced suppliers to agree.

Dun & Bradstreet said the utility sector including companies that provided gas, water, electricity and sanitary services and companies that support those services. Its trade payments analysis for the second quarter was based on more than 50,000 invoice payments reported to it by companies.

(BusinessDesk)

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