Businesses across Australia are feeling the pinch following a full year of the Covid-19 pandemic, according to the Payment Practices Barometer.
The report by credit insurance firm, Atradius, surveys both large and small businesses to check in on business to business payment behaviour.
Write-offs increasing
Over the past year, the survey found the number of invoices being written off by small business owners had more than doubled during the pandemic. Five per cent of all credit sales were written off as uncollectable, more than twice the 5 per cent average recorded prior to the coronavirus crisis.
The same story applies to late payments, 54 per cent of business invoices are overdue (compared to 21 per cent in the pre-pandemic year).
Credit creep leading to more defaults
In addition to the economic stressors, more than four in ten of the businesses polled (42 per cent) reported accepting credit requests far more frequently than they did before the COVID-19.
Unsurprisingly the cost of managing all this debt had also grown with three in five of the businesses surveyed reported a rise in administrative costs.
However, many businesses said that the key to navigating the difficult economic climate was agility.
Credit risks remain a challenge
Mark Hoppe, Managing Director for Atradius Oceania, said: “As the customer credit risk environment becomes more challenging with more businesses selling on credit, the insolvency environment is likely to increase. A write off rate of 5 per cent represents significant loss and businesses can put in place measures to protect themselves against the risk of such losses.
“As businesses look to grow during this time of economic uncertainty, it’s important they continue to employ strategic credit management measures such as credit insurance to minimise the risk of payment defaults.
“This will help protect businesses from the increased risk of customer bankruptcy, help them manage the additional volume of late payments more efficiently and will also facilitate company growth by helping businesses explore new opportunities including extending more credit to existing customers and new customers, and finding new markets to explore.”
