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Companies shortening their accounts payable period Print E-mail
Tuesday, 23 February 2010

By Matthew Quinn

The payment behavior at companies of all sizes and industries improved in January, according to Experian's monthly business benchmark report.

Last month, the national average number of days that businesses paid past their contracted amounts was 5.77, down 2 percent compared to six months earlier.

Additionally, the percentage of dollars delinquent remained stable over the six-month period and the percentage of dollars severely delinquent (91-plus days delinquent) is 5.3 percent, a 2 percent improvement from the previous period.

The national average commercial risk score for January was 57.14 out of a possible 100. Compared with six months ago, this score has improved slightly -- by 0.5 percent -- indicating some stability in expected payment behavior over the next 12 months, Experian said.

Businesses with more than 1,000 employees continue to show the highest rate of projected delinquency, with an average credit score of 33.03. However, that score has improved by 7.8 percent in the last six months. Still, the credit score for companies with 500-999 employees was 52.42, the second worst, illustrating how much more likely the biggest businesses were to be delinquent.

Big businesses, of course, have the clout to squeeze their customers to pay more quickly and also pay their vendors more slowly.

And while they have by far the largest percentage of dollars delinquent with 20 percent, big businesses are near the bottom in terms of percentage of dollars severely delinquent, indicating that they are managing their payments and not necessarily unable to make them.

The new Experian data shows that there is at least some easing of such policies, which suggests companies are a bit more comfortable with their cash positions and business outlook.

Overall, utilities companies have the best risk score average of all industries at 68.89, and the communication and finance industries have the lowest average at 50.27 and 50.60, respectively.

The report noted that for small businesses (0 to 99 employees), which have been under particular stress in the downturn, the percentage of dollars delinquent and the percentage of dollars 91-plus days delinquent are improving.

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