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Credit a real problem for business in recovery

Credit a real problem for business in recovery: survey
A joint survey by Veda Advantage and Coface Australia has found that credit and trade payments can become a real problem for businesses during an economic downturn and the period of recovery.
The survey of Corporate Credit Risk Management in Australia*, revealed limited knowledge
knowledge amongst Australian business managers and owners when it comes to shielding themselves from customer and client financial difficulties and risk.
The survey of 524 businesses found that companies are extending more credit to Australian customers rather than export clients. More than half (57 percent) of the businesses surveyed have above 75 percent of their revenue on credit terms with customers, and outstanding payments and bad debts are reported as being on the increase. Despite this exposure, 28 percent of financial managers and business owners surveyed had no credit management tools in place. A further 32 percent of companies surveyed claimed debt collection the most important credit management tool.
Commenting on the results of the survey, Russell Evans, general manager of Veda Advantage said it is important for businesssses to implement proactive credit approval procedures to help minimise business risk.
“While we applaud Australian businesses for their positive attitudes and increasing business confidence, we recommend they proceed with caution and don’t let their guard down. It’s concerning that debt management is considered a main form of credit management tool,” he said.
“One of the most critical yet simple steps any business manager can take to minimise bad debts is to screen out risky customers and to research companies and directors before starting any business relationship,” he added.
Evans said businesses should continue to monitor credit procedures and the exposure to risk as the economy recovers.

A joint survey by Veda Advantage and Coface Australia has found that credit and trade payments can become a real problem for businesses during an economic downturn and the period of recovery.

The survey, Corporate Credit Risk Management in Australia, revealed limited knowledge knowledge amongst Australian business managers and owners when it comes to shielding themselves from customer and client financial difficulties and risk.

The survey of 524 businesses found that companies are extending more credit to Australian customers rather than export clients. More than half (57 percent) of the businesses surveyed have above 75 percent of their revenue on credit terms with customers, and outstanding payments and bad debts are reported as being on the increase. Despite this exposure, 28 percent of financial managers and business owners surveyed had no credit management tools in place. A further 32 percent of companies surveyed claimed debt collection the most important credit management tool.

Commenting on the results of the survey, Russell Evans, general manager of Veda Advantage said it is important for businesssses to implement proactive credit approval procedures to help minimise business risk.

“While we applaud Australian businesses for their positive attitudes and increasing business confidence, we recommend they proceed with caution and don’t let their guard down. It’s concerning that debt management is considered a main form of credit management tool,” he said.

“One of the most critical yet simple steps any business manager can take to minimise bad debts is to screen out risky customers and to research companies and directors before starting any business relationship,” he added.

Evans said businesses should continue to monitor credit procedures and the exposure to risk as the economy recovers.

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Jessica Stanic

Jessica Stanic

Jessica has a background in both marketing and journalism and is dedicated to making the website the leading online resource for small to medium businesses with ambitions to grow.

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