CreditorWatch Business Insights

CreditorWatch Business Risk Index November ’22 results with Anneke Thompson

CreditorWatch Chief Economist Anneke Thompson takes us through the November 2022 results for the Business Risk Index.

The highlights for November include:

• B2B trade receivables are down 16% quarter-on-quarter.
• Credit enquiries are up 87% YoY and are up 61% since last month.
• External administrations increased 26% since last month and are up 24% year-on-year.
• Month on month B2B payment defaults continue to show a high degree of volatility decreasing by 25% from last month, whilst following a generally increasing trend.
• Court actions are down 6% year on year.
• Yarra Ranges in Victoria is the region with the lowest insolvency risk (across regions with more than 5,000 businesses), followed by Cottesloe-Claremont in Western Australia.
• The Western Sydney regions of Merrylands–Guildford and Canterbury are the regions at highest risk of default across Australia (for regions with more than 5,000 businesses).

CreditorWatch CEO Patrick Coghlan says businesses are right to take a cautious approach ahead of the Christmas/New Year period.

“Flat year-on-year trade growth in the month of November points to subdued trade activity in December, however, it appears that the RBA’s rate rises this year are beginning to bite and having the desired impact on inflation. There are still a lot of challenges out there for businesses but bringing inflation down would bode well for 2023.”

What makes a great place to work?

CreditorWatch was recently certified as a Great Place to Work and also made the AFR BOSS Best Places to Work list for 2022.

So how did we get there and, more importantly, how to we stay there?

CreditorWatch CEO Patrick Coghlan and General Manager of People and Culture, Fiona Crawford, share their insights into what makes a great place to work and the importance of authentic and transparent leadership, employee empowerment, inclusion and non-work related personal growth initiatives.

Dire Warnings for the Australian Construction Industry

Like the rest of the Australian economy, the construction industry was getting back on its feet after the worst of the pandemic. But the sector has now been hit by a perfect storm of supply chain disruptions, cost blowouts and staff shortages as inflation and interest rates rise.

Many of these forces, particularly cost increases, are beyond the control of construction companies. But construction also has major industry-specific challenges. Construction has the worst late payment record of any industry. About 12 per cent of construction businesses are more than 60 days in arrears on their payment to suppliers. Fixed-term contracts are also placing cost pressure on contractors.

The risk is that construction collapses cascade down, creating a chain reaction of failed businesses. That could have a serious impact on Australia’s economic recovery.

In this episode of Business Insights, Patrick Coghlan, CreditorWatch CEO; Anneke Thompson, CreditorWatch Chief Economist; James O'Donnell, CreditorWatch Data Analyst and Ginette Muller Director of GM Advisory discuss the findings from our 'Cracks in the Foundation' construction white paper and the outlook for the industry for the remainder of 2022.

Business Risk Index - April 2022 Insights

Economy at turning point as positive trends continue;

Grim outlook for flood-affected regions

In our latest episode, we present the January Business Risk Index results and analysis. CreditorWatch CEO Patrick Coghlan and Chief Economist Anneke Thompson discuss the key insights.

Key Business Risk Index insights for April:

• Trade receivables and credit enquiries continue to trend upwards, indicating the broader economy many have reached an inflection point.
• Average trade receivables for April were at their highest level since July last year.
• Credit enquiries decreased from March to April but are still up 30 per cent quarter-on-quarter.
• Multiple adverse impacts will likely temper this positive data over the coming months.
• The Business Risk Index national default rate remained flat at 5.8 per cent in April, however CreditorWatch forecasts a continued rise across 2022.
• There was stabilisation across industry default rates in April.
• Court actions decreased from March to April but are still up 12 per cent year-on-year.
• Victorian Grampians is the lowest insolvency risk region with greater than 1,000 businesses.
• Western Australian wheat belt is the new lowest insolvency risk region in the country overall.
• The Western Sydney regions of Bringelly - Green Valley and Merrylands – Guildford are the highest risk regions in the country.
• Insolvency rates in areas heavily affected by the recent floods are forecast to rise significantly over the next 12 months – 36 per cent in the Lismore area (Richmond Valley – Hinterland) and 14.5 per cent for Brisbane’s Rocklea – Acacia Ridge area.

Register to be the first to receive monthly insights from the Business Risk index at creditorwatch.biz/businessriskindex.

 

The 3 Ps of preparation for small businesses: Part 3 - Protections

Our latest episode of Business Insights is the third in a three-part series on how SMEs can best prepare themselves for uncertainty using the 3 Ps of preparation: processes, policies and procedures, and protection.

Our guest for the series is an expert in helping businesses with best-practice preparation: Natalie Ledlin, Solicitor Director at Ledlin Lawyers. 

In our third episode on protections, Natalie takes us through how to protect your business if something goes wrong with your customer, and how to take security over the assets that your customer has or that the directors might have.

Contact information: nledlin@ledlinlawyers.com.au

The 3 Ps of preparation for small businesses: Part 2 - Policies and Procedures

Our latest episode of Business Insights is the second in a three-part series on how SMEs can best prepare themselves for uncertainty using the 3 Ps of preparation: processes, policies and procedures, and protection.

Our guest for the series is an expert in helping businesses with best-practice preparation: Natalie Ledlin, Solicitor Director at Ledlin Lawyers. 

In our second episode on policies and procedures, Natalie takes us through setting up payment terms, credit policies and limits, and collection procedures, as well as prioritising payments and ensuring privacy of data.

Contact information: nledlin@ledlinlawyers.com.au

The 3 Ps of preparation for small businesses: Part 1 - Processes

In this challenging economic climate, it is more crucial than ever that businesses are well prepared for whatever impacts come their way.

Our latest episode of Business Insights is the first in a three-part series on how SMEs can best prepare themselves for uncertainty using the 3 Ps of preparation: processes, policies and procedures, and protection.

Our guest for the series is an expert in this area: Natalie Ledlin, Solicitor Director at Ledlin Lawyers. 

In our first episode on processes, Natalie takes us through the key legal considerations around customer onboarding, credit policies, prioritising payments and privacy of data.

Contact information: nledlin@ledlinlawyers.com.au

 

Business Risk Index - March 2022 Insights

In our latest episode, we present the January Business Risk Index results and analysis. CreditorWatch CEO Patrick Coghlan and index creator James O'Donnell from Open Analytics discuss the key insights.

Key Business Risk Index insights for March:

• Trade receivables and credit enquiries up, indicating the economy many have reached a turning point for trade activity.
• Multiple adverse impacts will likely temper this positive data over the coming months.
• The Business Risk Index national default rate was up marginally to 5.8 percent, from 5.7 per cent in February, however CreditorWatch forecasts a continued rise across 2022.
• Credit enquiries were at 219,428 for March – the highest monthly number since July 2021 and second highest since March last year.
• Court actions were at their highest point since March 2021 indicating that enforcements and collection activities are returning to normal levels.
• Trade payment defaults are at their equal highest point since October 2020, another leading indicator of rising insolvencies.
• The probability of default for the hospitality industry jumped from 6.7 per cent to 7.2 per cent from February to March. Arts and Recreation and Transport have also deteriorated.
• Trade payment default rates in the Lismore region have increased from February to March but remain well below the national average.
• The net result of the CreditorWatch Business Risk Index and our broader credit indicators is that the economic outlook is bumpy, with multiple negative impacts conspiring to drag on growth.

 

Register to be the first to receive monthly insights from the Business Risk index at creditorwatch.biz/businessriskindex.

How to improve the quality of your ledger with DebtorLogic

In this episode of Business Insights, we take you through how to improve the strength of your ledger, with CreditorWatch's Trade Consultant for DebtorLogic, Lucinda Judd. In these times of uncertainty for businesses, ensuring that your customers are reliable and able to pay on time is critically important for your cash flow.

CreditorWatch's DebtorLogic tool can help in two ways: by helping to identify those customers that are most likely to pay late or not at all and also allowing you to target those businesses in your industry that show the best payment behaviour.

To find our how DebtorLogic can help your business improve the quality of its ledger, get in touch with Lucinda at lucinda.judd@creditorwatch.com.au.

 

INTERVIEW TRANSCRIPT

Hello and welcome to the latest episode of Business Insights. I’m Michael Pollack, Head of content at CreditorWatch and I'm joined today by Lucinda Judd, Trade Consultant for DebtorLogic at CreditorWatch. Thank you for joining us, Lucinda.

 

Lucinda

Hi everyone.

 

Michael

Now, we are obviously here today to talk about all things DebtorLogic, but let’s just start with the lay of the land. We're seeing that a lot of businesses are currently in a very different state to what they were pre-COVID which has created quite an uncertain trading environment.

 

CreditorWatch’s Business Risk Index is showing that trade receivables continue to decline and court actions are picking up which is an indicator that the banks and the ATO are resuming their regular cycle of collections and CreditorWatch expects insolvencies to continue to increase across 2022.

 

As the RBA has also noted, the recovery is going to be long and protracted, so as Omicron or Deltacron as we're now talking about, and the devastating floods on the East Coast have shown, these externalities can be really swift and severe and can impact the entire economy.

 

So, I think it's fair to say the businesses that come out of this in the best shape will be those that act now to get a jump on their competitors. Would you go along with that Lucinda?

 

Lucinda

Oh, definitely I think being proactive is key at the moment due to all of the uncertainties that we are seeing in the market at the moment.

 

Michael

Sure. So, could you just tell us how businesses can best utilise data to strengthen their balance sheets and improve the quality of their ledgers?

 

Lucinda

Yeah, look I think you kind of hit the nail on the head there with the business conditions at the moment. [They’re] really really uncertain and I think we're in a time where creditors can probably no longer really rely solely on those traditional risk indicators to identify distressed business.

 

Trade payment data I think can really help by providing creditors a bit more visibility on payment behaviour across the market. You can see a customer's propensity to pay an outstanding amount and also any delinquency within your ledger as well, which is great that you've got that additional visibility there. Generally speaking, deteriorating payment behaviour is a lead indicator that an entity is experiencing financial difficulty so by being on top of these early warning signs of risk and trade activity. Our customer base can really take a more proactive approach to their debt management.

 

Michael

That's really the key isn't it - detecting those early warning signs. So how can CreditorWatch’s DebtorLogic tool help in this regard Lucinda?

 

Lucinda

DebtorLogic is my bread and butter. It provides a data driven analysis of your ATB or your aged trial balance to highlight your risky debtors, late paying behaviour and also put some accounts to prioritise for collections.

 

It's going to break down your information into some really easy to read graphs and charts so that your collections team can quickly establish risky debtors in conjunction with an outstanding balance as well. So, you can very quickly and easily segment your ledger into a risk category so you can see who's got a cancelled ABN, whose got court actions or payment defaults and just focus specifically on that.

 

We also offer really customisable reporting functionality within that field so that you can download reports from the system on your chosen filter. So, whether it be a risk category, which accounts are falling into a specific aging bucket state or industry, risk scores so you can take a really targeted approach and create some more prioritised call lists for your collections team based on that that data that we're seeing.

 

Michael

Sure, so DebtorLogic obviously not only allows you to identify delinquent payers or customers that are paying late for example, but it can be used proactively as a sales tool. Tell us a bit about how that works.

 

Lucinda

Yeah, definitely. So DebtorLogic is going to also profile your customers essentially based on high risk and low risk. So, if you see that a customer is falling into a low-risk score category of an A to a C, then your sales team could potentially choose to focus on that list of debtors for further credit extensions, some bonuses or incentives for continuing on with that low risk behaviour.

 

But also having the industry and state breakdowns allows them to target maybe an industry that's been doing quite well throughout this COVID period, through the floods, through everything that we're seeing in the market at the moment, you can target those strengths within your ledger whether it be for sales or marketing, for prospects, or even you know potential credit extensions as well.

 

Michael

Great. Now what are some of the other ways that DebtorLogic can help with credit management? How can it help improve collection rates for example?

 

Lucinda

Yeah, really great question. So, one of the real strengths within DebtorLogic is our customer insights graph so we actually combine small business and corporate trade data to help you understand really what sort of risk a customer represents to your business by looking at how they pay their bills across the market.

 

So that's what customer insights is focusing on is really comparing how you're paid against the market. So, this allows your collections team to target you know, maybe the accounts that are paying you 90 plus days where they're paying the rest of the market one to 30 days that is straight away seen as some low- hanging fruit and those accounts falling into that category can be identified as low-hanging fruit and the accounts to target for collections.

 

You know this is going to help to improve your collection rates within your portfolio but also your DSO as well. So really great visibility using the customer insights graph.

 

Michael

Great. Now CreditorWatch also offers a free ATB analysis to help businesses improve the quality of their ledgers. Could you just tell everyone what this involves?

 

Lucinda

Yeah, exactly so the free ATB analysis is a great way for our customers to see DebtorLogic in action and to get some rich data insights on their data specifically so rather than us just going through some dummy data, we actually book in a time, upload one of your ATB reports and go through all of those findings together.

 

So, we'll schedule in a 20-to-30-minute session and discuss all of those findings together and I would definitely recommend going through that exercise, especially now just to get a really good health check on your ledger at the very least.

 

Michael

Thanks, Lucinda, for that great overview of DebtorLogic. Now if you'd like to take up her offer of a free ATB analysis. You can get in touch with Lucinda at lucinda.judd@creditorcatch.com.au. You can also ask any questions you might have about DebtorLogic and that email address you'll find in the podcast description as well. Well thank you Lucinda.

 

Lucinda

No, it's lovely catching up Michael thanks a lot.

 

Michael

No problem at all. It was a pleasure. Thanks for listening everybody. Some really valuable information there I'm sure you'll agree on how to protect your business in this uncertain trading climate. All business insights will be back next Wednesday with more tips on how to protect and grow your business. So please join us then. Bye for now.

 

How to secure your assets on the Personal Property Securities Register (PPSR)

The Personal Property Securities Register (PPSR) is an essential facility for all businesses leasing or selling goods or services on credit. But it is also widely misunderstood by small business owners. In this episode of Business Insights, Paul Mead, PPSR Sales Specialist (NSW) and Jason Sutherlin, PPSR Sales Specialist (Victoria) discuss the essential elements to consider when registering assets on the PPSR.

Key points:

• The purpose of the PPSR
• Why searching on the PPSR is important for businesses
• Types of property not covered
• Key considerations for businesses when registering personal property on the register
• Why it is important to register within set time frames the different types of property

Read more on how to protect your assets using the PPSR here.