Business defaults hit their second highest rate in September for eight years, leading experts to warn SMEs to be on top of their accounts receivable as Christmas approaches and cashflow worsens.
According to figures released by National Credit Insurance (NCI Brokers), default claims during September 2011 rose 30 percent compared to the same period in previous years, behind only September 2009 which was during at the height of the GFC.
NCI figures showed that whilst the electrical, building and hardware and manufacturing industries received the largest number of claims, the advertising industry recorded the largest amount of debt, with over $1.1 million owed.
CreditorWatch managing director Colin Porter told Dynamic Business the default figures should serve as a warning to small businesses about keeping on top of accounts in the lead up to Christmas, “which is a traditionally quiet time in the cash flow cycle”.
“Invoices are easily ignored over the Christmas period. Can your business afford to wait until February to be paid? Try to get your payments in before the New Year…”
Porter said he’s seeing defaults from businesses in all industries, which means businesses need to be extra attentive in dealings with both current and prospective clients.
“Economic conditions are tough at the moment so businesses need to watch their expenditures over the next few months.”
“Make sure you are monitoring all of your clients for any adverse changes because even the most loyal and reliable customers can get themselves into cashflow trouble.”
He also emphasises the need to stay on top of changes to protect your business from follow-on effects: “remember the squeaky wheel gets the grease, so if you find payments are slipping, contact your clients, find out what the situation is and explain your situation as well. A phone call is more personal than an email, which is easy to ignore.”