Close to 38,000 Australian businesses are considered to be ‘high risk’ candidates of distress this financial year, despite signs the Australian economy is on the mend, according to the latest data from Dun & Bradstreet (D&B).
The data reveals that the number of firms at risk has continued to rise over the past fifteen months, from around 34,000 in Q2 2008 to almost 38,000 in the June quarter of 2009. This increase leaves one in ten (10.2 percent) firms at risk of financial distress in the 12 months to the end of June 2010.
According to D&B CEO Christine Christian, this latest research provides a warning to Australian executives that the economic recovery won’t be all smooth sailing and that risk and cash flow management is critical to business success regardless of where we are in the business cycle.
“D&B’s research provides an important reminder that a continued vigilant focus on cash flow and credit risk is absolutely critical during a period of economic recovery,” she said.
Young firms face the greatest risk of financial stress or failure in the current financial year, with 17 percent (or more than 20,000 firms) of firms up to five years old categorised as high risk. Older, well established firms that have been operating for many years have a significantly lower risk of failure at just more than three percent. In terms of industry, the communication industry rated a high risk of experiencing stress this financial year at 13 percent.
People who read this, also liked:
8 warning signs of financial distress