In new figures released by the National Credit Insurance Brokers (NCI) reveal bad debts in June 2010 were 44 percent higher than the 2004 – 2009 average over the same period.
The hardest-hit industries were building/hardware with $748,766 worth of debts defaulted on, followed by Electrical at $729,098, Paper/Print at $670,658 and Food/Provisions at $669,976.
Although a total of 94 bad debt claims were made in June 2010, on the positive side, 129 outstanding claims were settled in the same month. Oxford Funding chief executive Rob Lamers says the main factor behind the spikes in insolvencies is cash flow, which still accounts for 80-90 percent of collapses.
“Liquidity and access to cash are absolutely critical in an upturn as businesses seek to meet growing demand. However these figures indicate that some industries are still feeling the pains from the GFC and are defaulting on what they owe.
“Further, with continued difficulty by small businesses to access cash and with late debtor payments jumping 17 percent to more than 50 percent, the road to recovery is still fragile,” Lamers adds.
The wind-down in government stimulus packages and likely interest rates rises have also added to the renewed pressure for SMEs to service their debts.
Lamers said that smart companies should be implementing strategies to deal with bad debt contingencies and cash flow protection, and recommended that businesses that were yet to do so consult with their financial provider.
If your debtors aren’t paying on time, sign up to CreditorWatch to expose bad debtors and be alerted when the businesses you trade with fail to pay.
