Businesses encouraged to review customers as court actions rise

New research shows that nearly 1 in 2 Australian businesses are leaving themselves vulnerable to bad debt by not performing credit checks on their existing customers.

In a survey conducted by Australian credit bureau CreditorWatch, business owners, accountants and credit professionals from small to large-scale businesses were asked questions in relation to their credit management responsibilities.

Whilst 72% of all respondents claimed they always performed credit checks for new customers, almost half (45%) said they never performed routine checks for existing clientele.

The survey findings coincide with the release of CreditorWatch’s latest quarterly Small Business Risk Review. The analysis of aggregated and trade payment data, sourced from over 50,000 active bureau members, shows that an increasing number of businesses were taken to court over outstanding debt in the second quarter.

Quarterly court action and dollar amount

Table 1 – Court Actions and Dollar Amoun
Data sourced from courts around Australia. Slight variations may occur due to time lags in accessing total monthly figures.

Managing Director at CreditorWatch, Colin Porter says “Whether you are a sole trader or large enterprise credit manager, if you are responsible for managing credit on behalf of a business, you should be performing checks on all customers.

“Even a long-time customer with whom you have built a good relationship could be subject to court proceedings with other companies. When your customer is a bad debtor to someone else, this is a warning sign that you too are at risk,” adds porter.

Other Key Findings from the CreditorWatch Survey

  • The majority of sole trader and micro business respondents cited chasing payment as a frustrating and uncomfortable experience whereas SMEs said it was mostly time consuming. Unsurprisingly, those respondents answering on behalf of large corporates and enterprises claimed it was an easy practice.
  • 86% of respondents felt most comfortable trading with a company from a risk perspective over a sole trader, partnership or trust.

 

View the Small Business Risk Review Q2 2017 Report

 

Ravina Krishna, CreditorWatchTo learn more about CreditorWatch, please contact Ravina Krishna on 0405 054 019 or email ravina.krishna@creditorwatch.com.au
Senior Business Development Manager at CreditorWatch
0405 054 019  |  LinkedIn  |  ravina.krishna@creditorwatch.com.au

CreditorWatchAbout CreditorWatch

CreditorWatch is a commercial credit reporting bureau with over 40,000 customers, 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.

Find out more here or visit CreditorWatch.com.au

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