Commercial credit-reporting bureau, CreditorWatch, recently conducted an analysis of internal and aggregated data to highlight potential risk and trading insights for Australian creditors.
The analysis reviewed registered payment defaults and trade payment data sourced from over 40,000 active members across Australia. The data represents an accurate status of behavioural trends as it looks at entities of all sizes in addition to corporates that are generally considered "critical suppliers". CreditorWatch customers range from small businesses and non-critical suppliers through to ASX listed companies.
According to ASIC insolvency statistics, there were 9,848 Australian insolvencies for the 2015-2016 financial year. This however, does not include failures of sole traders, partnerships and trusts, a segment of the market that traditionally goes unreported on government statistics, and is not regulated in the same way as companies by ASIC.
Colin Porter, managing director at CreditorWatch said "as a credit reporting bureau that provides credit reports on both incorporated and unincorporated entities, we are able to identify changing behaviours by analysing statistics on all entities including companies, sole traders, partnerships and trusts."
Payment defaults have risen significantly by 90% and 63% in Q2 2016 and Q3 2016 from the previous year. These findings along with ASIC's annual result of 9,848 national insolvencies, otherwise suggests that unsuccessful entities have risen significantly, when the unaccounted segment of the market is taken into consideration.
The rise in payment defaults in the last two quarters is likely an early warning to expect court actions to increase in Q4 2016 and Q1 2017 as suppliers will register defaults before taking debtors to court.
The state breakdown of court actions conveys 2016 as having mostly levelled trading conditions, however it is evident that entities trading in WA are suffering due to the significant increase of court judgements every quarter from the previous year.
The results, coupled with the high volume of national payment defaults ultimately reflects a need for greater caution to be taken when trading and providing credit in Western Australia.
Small Business Sentiment
In addition to conducting an analysis to identify payment trends, Creditor Watch surveyed its members to identify small business sentiment for the coming year.
Survey Key Findings:
- Cash flow and the Australian economy are still leading concerns for Australian businesses with nearly two thirds of respondents citing these reasons ahead of profitability, government regulations and taxation.
- No significant growth is intended with almost half of respondents (48%) citing no plans to employ more staff in the next 3-6 months.
- Revenue growth appears to be levelled.
- Growing optimism amongst businesses as 42% expect to make more profit than the previous year.
- Taking on new customers is mostly perceived as an average risk amongst respondents (47%)
- Over half of respondents (54%) claim they feel confident of their trading decisions as a result of performing regular credit checks
Porter says “after reviewing the survey findings, more and more companies have identified how easy accessing a business’s credit file is and are relying on credit checks to identify risk and safeguard their credit decisions. It’s also a sign of successful education and that credit reporting is becoming increasingly accessible for all businesses.”
By Colin Porter, Managing Director of CreditorWatch
CreditorWatch is a commercial credit reporting bureau with over 40,000 clients, from sole traders through to ASX listed companies. CreditorWatch provides credit risk information on any entity in Australia and assists creditors by monitoring and sending alerts for risk indicators that may affect a debtor’s repayment ability.