Time it takes to pay invoices widening

Man with no money in his pockets

The results of the Credit and Debt Survey are in. Run by Dynamic Business in tandem with CreditorWatch, the survey found two thirds of businesses have seen a rise in the time it takes them to be paid over the last year.

The survey found some 67 percent of businesses said invoices are taking longer to be paid now than they were a year ago, and 42 percent said defaults increased during the same 12 month period.

Looking to the future, 40 percent of business respondents are anticipating bad debt will rise further over the next year. Despite this startling figure, 50 percent said they wouldn’t pursue legal action if the outstanding amount were less than $10,000, choosing instead to write it off.

According to CreditorWatch managing director Colin Porter, customers who enter administration will more than likely have exhibited indicators that the business was experiencing difficulties.

“Had they addressed these at the time, creditors could possibly have reduced their exposure earlier, lessening the blow. It’s important for all businesses large and small to allocate time and resources to these signs, no matter how small they appear to be,” Porter added.

The survey also found just 20 percent of respondents rely on a credit bureau, like CreditorWatch, to assist with credit management and the reduction of bad debt.

“CreditorWatch data showed a 22.5 percent increase in defaults last financial year in comparison to the previous financial year. The value of defaults is also growing, with an 18.5 percent increase in the average dollar amount of each default registered,” Porter said.

To combat this, Porter suggests businesses adapt a more proactive approach to credit management.

“Our members are still performing credit checks at the beginning of a new relationship however we have seen a significant increase in our members monitoring their customers for important changes such as payment defaults, court judgments and ASIC updates –  which include administrations/liquidations, winding up notifications, director changes and de-registrations,” he said.

“Businesses want to know immediately when something has occurred to one of their customers rather than react to slow payment cycles or a letter from an administrator,” he added.

  • http://www.smartbusinesscashflow.com Kirsten Clark

    A delay in receiving payments when you’re a small business is a real struggle and can really cause cash flow problems. It’s important for business owners to really understand the impact on a slow paying customer. It’s important to be proactive, especially with new customers and set an expectation from the beginning. Cash flow projections will show how the delay in payments affect the business. It’s an important tool to be used on an ongoing basis.