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Company Debt Collection Soars

A “relaxed attitude” from kiwi firms to collecting debts is finally changing as pressure tightens on the bottom line according to Dun & Bradstreet.

The credit reporting and collections agency said today the number of debts referred for collection has more than doubled in the March quarter compared to the same period last year, and the average dollar value of each collection has also increased.

Debt collection referrals from Auckland firms increased by 160 percent in the first quarter, while Wellington firms saw a 139 percent increase and Christchurch firms referred 134 percent more collections than last year.

Overall, New Zealand businesses used debt collection with an increase of 127 per cent in the March quarter this year than in the same period last year.

Auckland firms were also the slowest to pay during the March quarter, averaging 51.3 days to settle accounts. Businesses based in Christchurch and Wellington averaged 48.5 days and 29.9 days to settle accounts, respectively.

The value of debts for collection also increased, with the average outstanding debt being chased in Auckland valued at $2300, a 32 percent increase from last year. Christchurch firms saw a 10 percent increase in debt values, with the average debt being $1975.

Wellington firms bucked the trend with debt values declining 46 percent from the March quarter last year to $1500 on average this year.

Dun and Bradstreet general manager John Scott said New Zealand firms have recognised that a relaxed attitude towards debt collections was no longer sufficient in the new business environment.

“When the economy was booming executives were able to take a relaxed approach to their receivables process without suffering significant detrimental impacts. However in the current environment where cash flow is of paramount importance, ineffective management of debtors will only result in your bill ending up on the bottom of the pile,” said Scott.

“As a consequence, cash flow and receivables management have come to the fore as executives have realised the critical role they play in ensuring the sustainability of business.”