Cash flows are healthier in Q3

AUSTRALIAN businesses are showing signs of healthier cash flows, new figures have indicated.

A trade payments analysis by credit experts Dun & Bradstreet shows that in the March quarter, 2012, businesses paid their bills more than three days faster than they had 12 months ago.

However, despite the year-on-year improvement and a fall from the 2009 peak of 57.4 days, payment days remained substantially above pre-GFC levels.

Dun & Bradstreet's director of risk management services, Damian Karmelich, said the figure remained well above the five-year low of 51.4 days which was recorded in the third quarter of 2007.

''Businesses, particularly SMEs which make up a substantial portion of Australian firms, rely heavily on trade credit as a form of ongoing funding,'' he said.

During the March quarter, sectors including services, construction and retail recorded significant improvements in payment days.

Dragging heels can hurt the smaller players, Mr Karmelich warned. ''Small firms suffer the most when suppliers' payments lag. This trend occurs because SMEs often operate on thin margins, and rely heavily on timely payment from vendors to stay afloat.'' Julieanne Strachan