Spanning a broad cross section of Australian businesses, from art galleries to theatres, gyms to sport and recreation clubs – the arts and recreation services industry is a fickle beast. While essential to the mental and physical wellbeing of many people, these businesses face a trading environment rife with late payments, high overheads and the insolvency of contractors and suppliers. Many were hit hard during COVID-related lockdowns and are now operating with depleted cash reserves and tighter margins. Protecting your cash flow with company credit checks is a fundamental layer of security worth incorporating within the context of these challenges.

Navigate ongoing risks with company credit checks

The CreditorWatch Business Risk Index July 2022 results highlighted the arts and recreation services industry as being among the top three industries with the highest probability of payment default over the next 12 months. The pandemic recovery has been slow, due to spasmodic restrictions, cost-of-living pressures and lingering nervousness. Crowds have been wary in their return to the intimacy of the local theatre, or out-of-practice with their previously regular gym routine.

Further, the overheads have continued to climb – from the rent required to maintain residency of a creative or exercise space, through to rising utility prices, to the cost of contractors. Despite fluctuations in customer numbers, cash flow must remain steady and secure enough to cover these costs as they appear, preventing you from default. Should any partner business – whether supplier, contractor or otherwise – stifle your cash flow through late/non-payment, or the inability to supply the contracted goods, it can threaten the entire business. This risk must be mitigated.

Clear indication of the credit risk, or likelihood of default, of any associated enterprise is the essential information you need to make more informed business decisions. In times of irregular revenues, conducting business without credit history checking every associated enterprise, even those you think you trust, may expose your operation to unnecessary risk. It can be a simple process when using the right tools.

Using CreditorWatch’s business credit checks to protect your business

CreditorWatch provides a suite of business credit check tools and resources to protect your cash flow from unreliable operators. There are different tiers of due diligence that may be relevant to you, according to the volume or value of the trading relationship.

The baseline layer of protection is the Business Credit Reporting platform. Intuitive and user-friendly, it provides the rapid ability to credit check any business, according to their ABN or ACN. There is a swathe of useful information in the report that follows. Foremost, RiskScore uses three categories of comprehensive data, including over 11 million trade lines of monthly transaction data, and exclusive trade payment data from Xero and MYOB. By way of sophisticated machine learning technology, it provides the most predictive credit risk score on the market. The numerical credit score generated, between 0-850, provides a clear indication of the likelihood of payment default or potential insolvency. In such a high-tension business environment, this information can make all the difference.

Beyond RiskScore, the credit reporting suite provides crucial additional information on a partner business, including the number of credit enquiries on them, registered payment defaults, ATO tax payment defaults, cross-directorship information, and ASIC notices. This information can inform and empower your decision-making like never before and is customisable according to your needs. Should a supplier to your gym business also be a director of another player within the industry, perhaps that changes the nature of your trading. Or maybe an adverse ASIC notice is revealed, raising the probability of malpractice or bad-faith trading. Uncovering this information may save your arts or recreation business an inordinate amount of time, money and stress.

It could be that a corporate buyer of your artworks has a history of late payments – raising the threat of payment default to you. As a feature of the credit report, payment predictor addresses this very risk – using intricate data sets to indicate both history and future likelihood of honouring any credit or payment obligations on time. There is no space within arts and recreation to allow for irregular or drawn-out payments, as the outgoings are too high. Knowing which businesses to trust with regular, quick payments can mean the difference between growth and insolvency.

To further increase risk-mitigation and AUSTRAC regulatory compliance, the credit reporting suite also integrates seamlessly with the award-winning InfoTrack search portal. This incorporates police checks, Know Your Customer (KYC), Anti Money Laundering (AML), Politically Exposed Persons (PEP) and sanctions lists. Mitigating against exposure to the illegal activity addressed by these frameworks is especially relevant for those with high-volume international trade, such as some galleries.

As the volume and value of trading increases, so does the required level of due diligence. While the credit reporting suite mitigates against a significant amount of risk, it is not a fully comprehensive analysis of the financials of a partner business. Should you be engaging in a long-term, high-value contract with a supplier – their insolvency may be enough to correspondingly sink your operation.

A more intimate understanding of their creditworthiness and operations is required. In such instances, a Financial Risk Assessment by CreditorWatch provides that complementary layer of risk mitigation. Through a deep dive into a business’s financials, accompanied by concise relevant analysis by a CA or CPA, it fills in the extra detail required to form a strong bond of corporate trust.

For so many arts or recreation businesses, pandemic recovery has indeed been slow, however the horizons look bright. So long as you can protect your cash flow, and deal with trusted partners, there is every cause for optimism. Speak to CreditorWatch today to discuss how company credit checks can help secure the future of your business.