PRINTERS WARNED TO WATCH CREDIT

Print businesses are being warned to keep a tight rein on extending credit, with the latest CreditorWatch Business Risk Index (BRI) saying insolvency risk for business is increasing significantly.

Printers with clients in the food and beverage services sector are most at risk of suffering payment defaults, and by a considerable margin, with 6.9 per cent of businesses in that sector predicted to fail to pay in the next 12 months. Transport, postal and warehousing is the next riskiest industry at 4.4 per cent.

According to the BRI, the regions with the highest insolvency risk continue to cluster around Western Sydney and South-East Queensland, with Merrylands-Guildford (NSW) recording a forecast default rate of 7.8 per cent for this time next year.

On the other side of the coin, Ballarat is now ranked as the region in Australia with the lowest likelihood of business failure, followed by Unley (SA), Norwood-Payneham-St Peters (SA), Yarra Ranges (VIC) and Cairns South (QLD).

This month’s index highlights that Australian businesses are feeling sustained pressure and it is impacting their revenue. The average value of business invoices has fallen by almost a third, 28 per cent, in the past 12 months. This drop means Australian businesses are ordering less each month, leading to a fall in revenues throughout the supply chain.

This deterioration is reflected in other key business indicators including payment defaults, external administrations, credit enquiries and court actions – all of which continue to track upwards.

Industries most exposed to consumer discretionary spending will continue to experience the toughest conditions across the second half of the year.

B2B trade payment defaults continue to trend upward, with an 86 per cent year-on-year increase. External administrations have increased 10 per cent year-on-year, with most industries experiencing an increase in this measure.

Court actions are up 17 per cent year-on-year. CreditorWatch’s national default rate prediction for the next 12 months is for an increase from the current rate of 4.67 per cent to 5.76 per cent.

CreditorWatch CEO, Patrick Coghlan, says the size of the drop in the average value of invoices is a major concern for the Australian economy.

Coghlan said, “Over the past year, the decline in the value of invoices has been consistent and severe. This deterioration is reflected in our other key business indicators: payment defaults, external administrations, credit enquiries and court actions.

“It will be the industries most exposed to consumer discretionary spending such as hospitality and retail that will experience the toughest conditions across the second half of this year.”