While many of the movement restrictions and space limitations have eased since COVID-19 first hit Australian shores, businesses in the hospitality sector are still experiencing the impacts of the pandemic. Pressures such as higher costs for inventory and staff shortages have contributed to the food and beverage sector witnessing a heightened risk of default. Thankfully, hospitality businesses can work together to overcome bad debt through reporting payment defaults.
A registered payment default is an event recorded on a company credit file that indicates that they were either late in the payment of debts, or are yet to pay. A default may stay on a credit report for up to five years, and will likely adversely affect the company’s credit score. Once the default has been paid, the entity can work to improve their credit file. In the meantime, it has the function of warning businesses that perform a credit default check on prospective entities that this business may be more likely to repeat this poor payment behaviour with you.
In fact, CreditorWatch data shows that 91 per cent of customers will not engage with a company that has a payment default registered against it. So, what are you waiting for? Let’s explore how you can empower your business to get paid faster, and protect others in your sector, through the power of registering payment defaults.
Protecting hospitality businesses through registering payment defaults
As much of corporate Australia moves forward from the peak of the COVID-19 pandemic, the ripple effects are still placing significant pressures on businesses in the hospitality sector. The closure of international borders turned off the tap of holiday workers that the sector relies on, especially in smaller towns and popular tourist areas, such as Byron Bay. As demand for replacement workers is at an all-time high, when labour is eventually sourced – it comes at a high cost to the business.
Access to quality produce, wine and other foodstuffs has also been limited due to extensive crop destruction from recent disasters, such as the NSW-QLD floods. Venues are being forced to reduce menus as a result, and pay more for the diminished stock available. Domestic and international supply chain delays are impacting deliveries, particularly for those that rely on a large inventory, such as hotels and motels. Further, SMEs may be less incentivised to increase prices, not only to support their local community in a time of rising inflation, but to stay competitive within an increasingly crowded market. Higher costs from supply delays may not be passed on to customers, and instead eat away at business revenue.
These factors are contributing factors to the food and beverage services sector consistently experiencing the highest risk of default of all Australian industries. The latest Business Risk Index data from CreditorWatch saw the sector reach 7.2 per cent average probability of default, almost double arts and recreation. the second highest-risk industry (4.68 per cent).
If your business operates in the food, beverage and hospitality sector, it has never been more important that you vigilantly monitor for bad debts, and report payment defaults. Through superior debtor management, and the registering of payment defaults, the industry may be able to work together to return to equilibrium.
How do I lodge a payment default? A quick guide for hospitality businesses
The unfortunate reality for the hospitality sector is that, despite your best efforts to ensure timely payments and collect outstanding debts, it is sometimes necessary to take more direct action. If you are struggling with unpaid invoices from clients, trading partners, or suppliers, and the operational hours wasted chasing debtors is becoming unmanageable, it’s time to consider notifying these debtors that if action is not taken, you will lodge a payment default.
You can easily lodge a payment default by utilising CreditorWatch’s bad debt register. Simply:
- Register to use CreditorWatch’s transformative debt management tools.
- These tools will seamlessly integrate with your Accounts Software, such as Xero or MYOB, and collate your outstanding invoices from debtors for you.
- Go to your client dashboard to view your overdue customer invoice list.
- Select individual outstanding invoices, or select all above defaults.
- Simply click the ‘Register Defaults’ button.
The process of registering payment defaults is as seamless and streamlined as clicking a few buttons. This credit management tool is available to all hospitality businesses, regardless of their size. The threat of this black mark may help in promoting slow, or non-paying customers to pay their outstanding debts to your business, as the entity will likely want to clear this black spot from their credit file.
Not only could it encourage faster payment, but additionally CreditorWatch will automatically generate a real-time default alert to other associated businesses within its extensive customer base. This means that by taking the additional step to ensure payment is made to your business, you’re also working to protect other businesses. And for those who aren’t currently in the 50,000+ strong CreditorWatch customer base, the next time that business performs a credit default check on a prospective client, the default will be revealed.
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