Small businesses urged to credit check customers as court actions rise

New research shows that nearly one in two Australian businesses are leaving themselves vulnerable to bad debt by not performing a credit check on each of their existing customers.

In a survey conducted by Australian credit bureau CreditorWatch, business owners, accountants and credit professionals from small to large-scale businesses were asked questions in relation to their credit management responsibilities.

While 72 per cent of all respondents claimed they always performed a credit check for new customers, almost half (45 per cent) said they never performed routine checks for existing clientele.

The survey findings coincide with the release of CreditorWatch’s latest quarterly Small Business Risk Review. The analysis of aggregated and trade payment data, sourced from over 50,000 active bureau members, shows that an increasing number of businesses were taken to court over outstanding debt in the second quarter.

Managing Director at CreditorWatch, Colin Porter says, “Whether you are a sole trader or large enterprise credit manager, if you are responsible for managing credit on behalf of a business, you should be performing checks on all customers.

“Even a long-time customer with whom you have built a good relationship could be subject to court proceedings with other companies. When your customer is a bad debtor to someone else, this is a warning sign that you too are at risk,” adds Porter.

In other key findings from the survey:

  • The majority of sole trader and micro business respondents cited chasing payment as a frustrating and uncomfortable experience whereas SMEs said it was mostly time consuming. Unsurprisingly, those respondents answering on behalf of large corporates and enterprises claimed it was an easy practice.
  • 86 per cent of respondents felt most comfortable trading with a company from a risk perspective over a sole trader, partnership or trust.

Inside Small Busines

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