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Rise in debt claims adds to business woes

Supplier: Oxford Funding
22 September, 2011

Businesses must stay on top of late payments, says Oxford Funding Head of Debtor Finance.

The combination of a 40% rise in business-to-business bad debt claims and an increase in payment terms is another blow to Australia’s already dented business confidence, according to Rob Lamers, Head of Debtor Finance at Oxford Funding.

Statistics released by National Credit Insurance (Brokers) show that claims received in July 2011 were 40% higher than the average for the same period over 2004-2010.

The industries that suffered the most from bad debt, recording both the highest number and value of bad debt claims, were electrical with 21 claims in July 2011 worth more than $2.4 million and building/hardware with 20 claims worth almost $1.1 million.

"The statistics show that there are a growing number of organisations defaulting on their business-to-business payments. That will have a follow-on effect for other businesses if not nipped in the bud," said Lamers.

These figures join a recent report on the 2011 June quarter by credit bureau Dun & Bradstreet, which revealed that almost two-thirds of Australian businesses take more than the standard 30-day period to settle their accounts.

The report also found that the number of payments that were 90 days or more overdue jumped almost 20 percent compared with the June quarter 2010.

Lamers said this indicated that small businesses are finding things difficult at the moment.

"Economic troubles in the USA and Europe, soft consumer demand and a high Australian dollar has seen business confidence in Australia decline. With many businesses forced to wait over three months for much needed cash, there is even more pressure on businesses to stay cash flow positive."

Lamers said that a business which manages its cash flow closely and provides for bad debts in their forecasts is more likely to survive falling confidence.

"Talk to your business adviser or accountant about how you can improve your cash flow. Products such as debtor finance may help get your cash flow back on track."