As the Australian economy continues to suffer the effects of the Omicron variant, business activity remains soft as consumers sit on cash while in self-imposed lockdown and many companies struggle with staff shortages and supply chain disruptions.
CreditorWatch’s latest Business Risk Index results revealed that trading activity in December was the weakest since the pandemic began, down a massive 45 per cent on the December 2020 figure.
These conditions are causing a protracted recovery which means businesses are needing to be more vigilant and aware of payment defaults among their customer base as their prevalence increases. According to the most recent Business Risk Index results, the industry struggling the most is the accommodation and food services industry which has a probability of default of 6.9 per cent.
Being aware of customer payment defaults and understanding how and why to issue them is crucial for businesses of all sizes.
Payment Defaults – what are they and how do you register them?
A payment default is a black mark on a credit report that indicates a business has not paid its bills. A default can stay on a credit report for up to five years, affecting the business’ credit scores and reputation. In fact, 91 per cent of customers will not engage with a company that has a default.
CreditorWatch offers its customers the ability to register payment defaults regardless of whether they are larger companies or small to medium enterprises (SMEs). Payment defaults can greatly assist in your business getting paid faster.
CreditorWatch provides you with the opportunity to register a default on its bad debt register which will often prompt a slow or non-paying customer to pay their outstanding debts out of concern about damaging its credit history and deterring other companies from doing business with it.
CreditorWatch will also generate an automatic alert to other businesses in the 50,000+ strong CreditorWatch customer base about the payment default.
Why you should register payment defaults
When registering your payment defaults with CreditorWatch, you are given the option of two categories. The payment default could be a registration from your collections, or registration from a credit assessment perspective, usually from new customers.
From a collections point of view, the data assists businesses in actively dealing with potential defaults among their customers base. By monitoring their customers and lodging defaults they are reducing their risk of trading with a potentially insolvent business. CreditorWatch data shows that 39 per cent of businesses who have defaults registered against them are insolvent within 18 months.
Another benefit of registering defaults through CreditorWatch is that you are provided with a suite of best-practice templates and tools such as payment reminder templates and letters of demand.
CreditorWatch’s monitoring and alerts tool notifies you when one of your customers has had a default registered against them. This gives you the opportunity to strategise your risk management plans and decide whether to continue to be linked to them or cut ties.
The benefit of registering your payment defaults with CreditorWatch from a credit assessments or a new customer’s perspective is that it gives the business the opportunity to be more informed about the payment behaviour of its customer base and make educated decisions about who to trade with.
CreditorWatch’s credit reporting provides a clearer picture of the credit risk exposure of your business. Every business can significantly benefit from a broader vision of its own customers and how they are trading. CreditorWatch’s suite of risk management tools are perhaps more valuable than ever as many businesses emerge from the Omicron environment in a very different state to what they were pre-pandemic. CreditorWatch expects external administrations to jump when the banks and the ATO, who have been somewhat lenient on winding up struggling businesses of late, resume their regular cycle of collections.
Get in touch
Should you require any further assistance in registering payment defaults, please contact our Customer Success Team at support@creditorwatch.com.au
