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Small Business Risk Review Q4 2018: A concerning end to a mostly positive 2018

Small Business Risk Review Quarter 4 2018

The final quarter of 2018 for small businesses didn’t  present the best outcome

Court actions and judgments across Australia (except WA) have increased significantly in the 4th quarter of 2018 in comparison to the previous year.  In addition, the average payment default value and cancelled unincorporated entities have increased.

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New South Wales and South Australian court actions and judgements have seen their first significant increase in over a year. Victoria has seen the largest increase in court actions and judgements in comparison to previous quarters. Since the last quarter, court actions have jumped up to 67% from 10% and judgements to 79% from 20%. During Quarter 4, 2017, both court actions and judgements were down 34%.

The average payment default value has increased from the third quarter of 2018 by 30% – the largest increase in over a year.  Last year they were down by 70%. Cancelled unincorporated entities have risen by 31% from the previous year when they were down by 8%.

It’s not all doom and gloom. New bankruptcies across Australia have only decreased by 1% in comparison with last year. Victoria, Western Australia and Queensland saw the biggest decrease. Likewise, insolvencies have decreased by 11% in comparison to Quarter 3, 2018. They have decreased by 18% in comparison to Quarter 4, 2017.

The final quarter of 2018 could be an indicator of the financial stress being felt nationwide, the droughts and or even the apprehensive lead up to the holidays. As businesses generally improved in cash flow and adverse data in 2018, perhaps they were too comfortable. However, the monthly released NAB business survey indicated that business conditions have suffered their biggest monthly drop since the global financial crisis. Weakening conditions have become relatively broad-based with declines across all industries nationwide except mining over the past six months. The survey looks at trading, profitability and employment. Whatever the case, the results of the small business risk review indicated a concerning change from the more positive previous quarters.

The Xero Small Business Insights report reveals that only 54.60% of small Australian businesses were cash flow positive and it took 34.08 days on average to get paid in November 2018.  Keeping this in mind, the first quarter of the year is known for later payments and poor cash flow. Small businesses should be monitoring customers for adverse data, implementing a debt collection plan for the new year and staying on top of cash flow.

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More articles like this:  A Positive Third Quarter for Australian Small Businesses 

Australian small business bankruptcy cash flow court actions credit risk management CreditorWatch insolvency late payments NewsHub payment defaults small business small business risk review SMEs unincorporated entities
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