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Businesses urged to monitor customers as court actions increase

New research shows that nearly 1 in 2 Australian businesses are leaving themselves vulnerable to bad debt by not performing credit checks on their existing customers.

CreditorWatch conducted a survey asking questions relating to credit management responsibilities to business owners, accountants and credit professionals from small to enterprise sized businesses.

Whilst 72% of all respondents claimed they always reviewed a new customer’s repayment ability, almost half (45%) said they never reviewed the on-going payment behaviour for existing clientele.

The survey findings coincide with the Q2 2017 results from the Small Business Risk Review which shows an increasing number of businesses have been taken to court over outstanding debt.

CreditorWatch’s managing director Colin Porter says “Whether you are a sole trader or large enterprise credit manager, if you are responsible for managing credit behalf of a business, you should be performing checks on all customers.

“Even a long-time customer with whom you have built a good relationship could be subject to court proceedings with other companies. When your customer is a bad debtor to someone else, this is a warning sign that you too are at risk,” adds Porter.

Another finding revealed the majority of sole trader and micro business respondents cited chasing payment as frustrating and uncomfortable experience whereas SMEs said it was mostly time consuming. Unsurprisingly, those respondents answering on behalf of large corporates and enterprises claimed it was an easy practice.