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Business insolvencies hit new high, expert says monitoring is key to survival
Tue 1 May 2012 - 12:47 pmEconomy | News
Local small business insolvencies hit a record high in February, with the number of companies entering external administration reaching their highest level since 1999.
According to figures released by the Australian Securities and Investments Commission (ASIC), 1,123 businesses went into administration in February, up from 518 in January. This was the highest monthly figure recorded since ASIC began releasing statistics in 1999.
The closest figure to this new high was recorded in March 2009, when 1095 businesses were placed in administration.
According to CreditorWatch managing director Colin Porter, the figures demonstrate the need to perform upfront credit checks on new customers as well as the importance of monitoring all customers for adverse financial changes.
“In recent months ASIC has identified there has been a serious increase in the number of companies going into administration or being wound up. Often a company will go into administration and creditors may not be informed by the administrator for long periods of time, or not at all,” Porter said.
“The last thing a business wants to be doing is providing goods or services to a company that is having trouble paying its debts.”
The ASIC figures also showed a jump in the number of businesses being wound up via the courts – a total of 449 in February compared with 79 the month prior, representing 40 percent of the total businesses placed in administration.
Porter said the current economic climate means business owners need to ask themselves how well they know their customers.
“You may be doing business with a company that is deregistered or in administration. As a result we are urging businesses to monitor all their customers to avoid any shocks. Don’t just monitor the customers you might be a bit worried about,” he said.
Porter said CreditorWatch, which allows members to monitor their customer database for issues such as court judgments, commercial defaults and ASIC changes, has also noted a rise in commercial payment defaults and is receiving hundreds of court default judgments each week.
“Commercial defaults and court judgements are an important indicator in assessing a customers ability to pay their bills on time.”
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