Greetings, fellow business owners and entrepreneurs,
We bring to your attention the latest revelations from a comprehensive analysis, shedding light on the unsettling surge in overdue trade invoices and debt collection activities. These findings, recently unveiled by renowned credit bureau illion, hint at a potential downturn in business conditions throughout the remainder of 2023. This looming challenge affects various industries, with ‘retail,’ ‘food,’ and ‘construction’ facing particularly heightened risks.
At Barclay MIS, we understand the challenges that arise when businesses are confronted with mounting unpaid invoices. Our debt collection services stand ready to assist those affected in overcoming these obstacles and ensuring the stability of their operations.
- ‘Food services’ and ‘construction’ industries face a significant risk of failure, with rates of 14 percent and 11 percent respectively.
- ‘Retail services’ and ‘transport’ sectors carry a 10 percent risk of failure.
- Industries such as ‘financial & insurance services,’ ‘professional & technical services,’ and ‘wholesale trade & manufacturing’ exhibit a lower risk of business failure, with rates ranging from 3.5 to 4 percent.
Addressing the Struggle: How Debt Collection Services Can Help
For businesses grappling with overdue trade payments, the journey to financial stability might seem daunting. Our debt collection services specialize in assisting high-risk industries, such as ‘food,’ ‘retail,’ and ‘construction,’ in recovering unpaid invoices. By partnering with us, businesses can regain control over their finances and mitigate the potential risks that lie ahead.
Highlighting Payment Behavior Disparity
Visual representations of the data underscore the stark contrast in payment behavior between high-risk and low-risk industries. Invoices issued within the past three months in high-risk sectors are significantly more likely to remain unpaid for extended periods compared to their low-risk counterparts.
For instance:
-
- In the ‘construction’ industry, invoices are up to 60 percent more likely to remain unpaid than in ‘professional services.’
- In the ‘food services’ sector, invoices are even tripling the likelihood of non-payment compared to ‘financial services.’
- This glaring discrepancy reflects the financial vulnerability of the ‘food,’ ‘retail,’ and ‘construction’ sectors, potentially stemming from rising costs and decreased sales.
Insider Perspectives: Navigating the Present Landscape
Barrett Hasseldine, the Head of Modeling at illion, underscores the seriousness of the circumstance:
“When our attention zeroed in on high-risk enterprises, regardless of their specific industry, the investigation unearthed that a considerable 57 percent of all unsettled trade bills had exceeded the 60-day mark by March 2023. This figure is notably elevated compared to the delayed payment rate encompassing the entirety of Australian businesses, which stands at a mere approximately 6 percent.”
Listen: 3AW
The investigation discloses disconcerting trends for high-risk establishments in the ‘food services’ and ‘retail’ sectors. Over the preceding half-year, these sectors have borne witness to a notable degradation in the manner of trade payment, with slightly more than 62 percent and as much as 68 percent of trade invoices significantly surpassing their due dates, correspondingly.
Identifying Catalysts: Post-Holiday Downturn and Escalating Costs
The analysis points toward triggers that might account for these trends. Hasseldine proposes that these patterns could stem from a post-Christmas revenue dip and the mounting operational expenditures faced by retail establishments. Similar dynamics reverberate within the ‘construction’ sector, potentially interlinked with constrained cash flow due to the escalation of expenses tied to building supplies and contract labor.
Simultaneous Surge in Debt Collection Activity
A marked upswing in debt collection activity has emerged. The ‘construction’ industry has encountered a threefold surge in daily collections during the first quarter of 2023, contrasting sharply with the preceding nine months. Likewise, the ‘retail’ and ‘food services’ sectors have witnessed a robust 75 percent surge in collections activity. This trend stands in juxtaposition to the stable environment witnessed in the ‘Professional Services’ and ‘Financial Services’ sectors.
Enhancing Risk Management Through Trading Behavior Insights
In the midst of the economic upheavals that have defined 2023 for Australian enterprises, a consistent trend towards heightened failure risk has been discernible for more than a year. The progressive decline in trading behavior among vulnerable businesses has encountered a compounding effect from these recent economic jolts. The invaluable resources provided by Illion’s business and trade information have proven to be the key differentiator. These insights not only shed a spotlight on the underlying trading patterns but also offer a keen understanding of the recent shocks that have shaped the landscape. By analyzing these recent trading trends and engaging in collections activities with us, businesses have been armed with early visibility into potential risks, enabling them to proactively navigate shifting circumstances. Suppliers and creditors who harnessed this behavioural data promptly found themselves empowered to either sidestep newfound risks or strategically mitigate their existing risk exposures.
The economic shocks of 2023 have undeniably impacted Australian businesses. Vulnerable businesses have been grappling with a gradual decline in trading behavior, further amplified by recent shocks. At Barclay MIS, we remain committed to helping businesses navigate these challenges. Our debt collection services are designed to offer support and stability in these uncertain times.
For more insights, https://www.barclaymis.com.au/contact-us/ to discuss how we can collaborate towards a stronger financial future.
Stay resilient,
David Banks
CEO
Barclay MIS
