CreditorWatch’s Small Business Risk Review for Quarter 3, 2018, shows an improvement in conditions for the majority of Australia in comparison to Quarter 3, 2017.
Court actions and dollar amounts have decreased from last year’s third quarter for all states except Victoria. Western Australia has seen its court actions and judgements decrease by about 50%. Likewise, South Australian judgement amounts have decreased by 50%. However, Victoria showed similar trends to last year in regard to court actions and judgements, showing an increase of around 10% and 20%.
Cancelled unincorporated entities have seen a massive decrease of 73% since last year. Average payment defaults have increased by only 2% since the corresponding quarter last year. Nationwide, new bankruptcies have decreased by 5%, while insolvencies decreased by 18%. Western Australia was the only state that increased in bankruptcies by 10%.
Clearly, confidence is growing and cash flow is improving in the small business community. So, what has been contributing? Xero’s Small Business Insights report for October 2018 showed that improved digital connectivity is driving business growth. The rise of automation, cloud-based apps and streamlined online platforms have enabled SMEs to work more efficiently, saving them time and money.
The Xero report shows that SMEs who have access to high-speed NBN have grown by one-third (2.6%). Despite the digital improvements, thirty percent of SMEs are still using traditional paper methods.
According to the Sensis Business Index June 2018, SME confidence has been at its highest level since 2009. Confidence by state has risen, except for Victoria, and confidence by sector has increased as well, even retail. However, despite this, small businesses are finding it more difficult to access finance.
The SBI report stated that most of the businesses who were showing confidence (62%) were those who have demonstrated the strengths of being an established business. The business who were not confident (13%) left it up to decreasing sales and less than satisfactory economic environment.
Despite the wave of assurance, the fact remains that SMEs will only thrive if they get paid on time. While we can see that there is an improvement in payment habits, growth and confidence, it is important to continue to remain vigilant and perform due diligence by performing credit checks, credit reports and monitoring.
The first quarter of the year is fast approaching and tends to be a difficult one due to the holiday period over Christmas and January, and payments are typically delayed further due to business closures and tightened financial constraints. Therefore, it could be suggested that SMEs who are performing well now, should review payment terms and ensure that there is a plan in place for those tougher months.
For more information about how CreditorWatch can assist with due diligence, visit www.creditorwatch.com.au
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