Trade receivables down and external administrations up in November

Trade receivables have stagnated, and B2B receivables have dropped 16 per cent this quarter, according to the latest Business Risk Index from CreditorWatch.

by | 21 Dec, 2022

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The November report also shows that credit inquiries are up 87 per cent year-on-year (YoY) and are up 61 per cent since last month, while external administrations increased 26 per cent since last month and are up 24 per cent YoY.

Month on month, B2B payment defaults continue to show a high degree of volatility, decreasing by 25 per cent from last month, whilst following a generally increasing trend, and court actions are down 6 per cent year-on-year.

Yarra Ranges in Victoria is the region with the lowest insolvency risk (across regions with more than 5,000 businesses), followed by Cottesloe–Claremont in Western Australia.

The Western Sydney regions of Merrylands–Guildford and Canterbury are the regions at highest risk of default across Australia (for regions with more than 5,000 businesses).

CreditorWatch chief executive Patrick Coghlan said businesses are right to take a cautious approach ahead of the Christmas/New Year period.

“Flat year-on-year trade growth in the month of November points to subdued trade activity in December; however, it appears that the RBA’s rate rises this year are beginning to bite and having the desired impact on inflation. There are still a lot of challenges out there for businesses, but bringing inflation down would bode well for 2023,” Mr Coghlan said.

Anneke Thompson, chief economist at CreditorWatch, said the report reveals that the volume of trade receivables has stagnated, which is quite an unusual dynamic for this time of year as volumes tend to increase prior to Christmas.

“However, this is broadly reflective of what is happening with retail trade, which declined month-on-month in October for the first time in a long while,” she said.

“The second key trend we’re seeing, and this is really something we have seen over the year, is an increase in business-to-business trade defaults. And while this data does jump around a bit month-on-month, the trend line shows a clear increase since February this year.

“So, what this means is that more companies are lodging a payment default against another company, which does suggest that cash flow is starting to become an issue for some businesses.

“And once again, our bottom-ranked locations for default rate probability are clustered around the Gold Coast and Western Sydney. The top locations and that is the locations where businesses are least likely to default, are more spread out across the country, but overall tend to be more regional or outer suburban areas, with the exception of Cottesloe-Claremont in WA and Adelaide City.”

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