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Time it takes to pay invoices widening

The results of the Credit and Debt Survey are in. Run by Dynamic Business in tandem with CreditorWatch, the survey found two thirds of businesses have seen a rise in the time it takes them to be paid over the last year.

The survey found some 67 percent of businesses said invoices are taking longer to be paid now than they were a year ago, and 42 percent said defaults increased during the same 12 month period.

Looking to the future, 40 percent of business respondents are anticipating bad debt will rise further over the next year. Despite this startling figure, 50 percent said they wouldn’t pursue legal action if the outstanding amount were less than $10,000, choosing instead to write it off.

According to CreditorWatch managing director Colin Porter, customers who enter administration will more than likely have exhibited indicators that the business was experiencing difficulties.

“Had they addressed these at the time, creditors could possibly have reduced their exposure earlier, lessening the blow. It’s important for all businesses large and small to allocate time and resources to these signs, no matter how small they appear to be,” Porter added.

The survey also found just 20 percent of respondents rely on a credit bureau, like CreditorWatch, to assist with credit management and the reduction of bad debt.

“CreditorWatch data showed a 22.5 percent increase in defaults last financial year in comparison to the previous financial year. The value of defaults is also growing, with an 18.5 percent increase in the average dollar amount of each default registered,” Porter said.

To combat this, Porter suggests businesses adapt a more proactive approach to credit management.

“Our members are still performing credit checks at the beginning of a new relationship however we have seen a significant increase in our members monitoring their customers for important changes such as payment defaults, court judgments and ASIC updates –  which include administrations/liquidations, winding up notifications, director changes and de-registrations,” he said.

“Businesses want to know immediately when something has occurred to one of their customers rather than react to slow payment cycles or a letter from an administrator,” he added.

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Lorna Brett

Lorna Brett

Lorna was Dynamic Business’ Social Web Editor in 2011/12. She’s a social media obsessed journalist, who has a passion for small business. Outside the 9 to 5, you’re likely to find her trawling the web for online bargains, perfecting her amateur photography skills or enjoying one too many cappucinos. You can follow her on <a href="https://twitter.com/#!/dynamicbusiness">Twitter @DynamicBusiness</a>

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