Construction companies are slower paying suppliers

Construction companies are slower paying suppliers
Big construction and engineering groups are delaying payments to suppliers, according to a survey by insolvency group McGrathNicol.

The annual capital working survey found that suppliers were now getting paid 10.5 days slower than they were a year ago, potentially creating a liquidity crunch for smaller contractors.

In its survey of 160 listed Australian companies across a broad range of sectors, McGrath Nicol found that most big companies were now taking longer to collect cash and pay suppliers.

MGrathNicol estimates the cash impact of the payment delay at $1.5 billion.

The delays have been attributed to tougher competition, the centralisation of procurement slowing down the processing of invoices and businesses now dealing with more small clients, making the collection of payments more time consuming.

McGrathNicol partner Jason Ireland says this could lead to problems further down the track.

“If you have got to resort to stretching creditors to conserve cash, you’re either going to place liquidity pressure on your suppliers or your suppliers will leave,” Mr Ireland told the Australian Financial Review.

 



An award winning author and journalist, commentator, lecturer, and speaker, Leon is a freelance business journalist who covers a range of areas including politics, strategy, globalization, leadership and all the big trends ahead. His main skill is summing up all the news that’s around. For the last 30 years, his main focus has been on management issues. He also produces two podcasts for RMIT University, Talking Business and Talking Technology. Leon has worked for Fairfax, News Limited, AAP and the Herald and Weekly Times.