At the end of April 2017, CreditorWatch released their latest Small Business Risk Review for Q1:2017 with a very strong message …
Payment defaults an immediate warning for creditors
Key insights from CreditorWatch’s Small Business Risk Review have been released for the first quarter of 2017. The quarterly report is an analysis of aggregated and trade payment data sourced from over 50,000 customers to highlight risk for Australian businesses.
The average payment default (dollar value) registered with CreditorWatch had a small rise on the back of significant increases over the last five quarters. The peak increase of 206% (Q3 2016) combined with an increase in the number of defaults, has likely resulted in a sharp rise in NSW and VIC court actions within the last six months.
Graph 1 – Average Payment Default ($ Value)
The last two quarters have seen court actions rise in NSW and VIC with large value court cases possibly occurring in NSW, as evidenced by the gap between actions and dollar amount in Q4 2016 and Q1 2017 (see Table 1 – Court Actions and Dollar Amount).
These results are likely a flow on effect from the 206% increase of the average payment default in Q3 2016, as the majority of court actions take place in Australia’s larger states and have a higher chance of occurring within 6-12 months of a default being registered.
Table 1 – Court Actions and Dollar Amount
|Quarterly Year on Year (%)|
|Q3 2015||Q4 2015||Q1 2016||Q2 2016||Q3 2016||Q4 2016||Q1 2017|
|QLD Court Actions||-13%||-1%||-6%||-18%||-50%||-40%||-36%|
|QLD Dollar Amount||-23%||-14%||-26%||-19%||-57%||-44%||-74%|
|NSW Court Actions||-5%||1%||-4%||-19%||2%||3%||7%|
|NSW Dollar Amount||-1%||3%||-4%||-18%||-1%||12%||16%|
|SA Court Actions||66%||19%||-14%||-2%||-26%||-28%||64%|
|SA Judgment Amount||123%||20%||18%||108%||-57%||-29%||76%|
|VIC Court Actions||-27%||-24%||-9%||-4%||-11%||17%||21%|
|VIC Dollar Amount||-24%||-13%||-5%||4%||-2%||16%||24%|
|WA Court Actions||73%||98%||99%||42%||175%||113%||32%|
|WA Dollar Amount||71%||124%||226%||117%||205%||107%||-14%|
Data sourced from Australian courts. A slight variation may occur due to time lags in accessing total monthly figures
Managing Director at CreditorWatch, Colin Porter says “as reflected in the findings, struggling businesses are more likely to default on less critical suppliers and SMEs six months prior to them defaulting on a corporate or large business who is more equipped with the resources to take legal action against them.
“Anyone in the position of providing credit to an entity that has defaulted on payment with another supplier should be concerned and trade with caution.
“This doesn’t necessarily mean a business should cease trading but be encouraged to reassess their accounts on a regular basis and monitor all of their customers for important changes that increase the risk of bad debt,” adds Porter.
To learn more about CreditorWatch, please contact Ravina Krishna on 0405 054 019 or email email@example.com
Senior Business Development Manager at CreditorWatch
0405 054 019 | LinkedIn | firstname.lastname@example.org
In February this year Ravina Krishna shared an article about ATO changes that may jeopardise the credit ratings of businesses with unsettled tax debt.
CreditorWatch is a commercial credit reporting bureau with over 50,000 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.