Financial and insurance services companies are among the worst offenders when it comes to paying business invoices, CreditorWatch’s latest Business Risk Index shows.
The BRI shows 8.7 per cent of invoices submitted to financial firms are paid 60 days or more in arrears.
Only the construction industry has a worse incidence of payment arrears, at 10.3 per cent.
B2B payment defaults are at a record high, and up 69 per cent year-on-year, as businesses struggle to pay their invoices, CreditorWatch said.
The Business Risk Index reveals that hospitality businesses (food and beverage services) are most vulnerable to current economic conditions by a significant margin over other industries, with a 7.45 per cent chance of failure over the next 12 months.
CreditorWatch has identified “a strong correlation between B2B payment defaults and business failure, with a business defaulting on a payment having a 20 per cent chance of failure in the following 12 months, with the probability increasing with successive defaults.
“A business with four or more defaults registered against it has a 66 per cent chance of failure over the next year.”
External administrations are up 48 per cent year-on-year with the rate now well above pre-COVID levels.
Court actions have surged since January and are now up 108 per cent year-on-year and above pre-COVID levels.
Anneke Thompson, chief economist at CreditorWatch, said very weak consumer spending is noticeably hurting customer facing businesses, particularly those that are classified as smaller businesses.
“While Australia is far from being in a technical recession, and Treasury is still forecasting positive, albeit weak, GDP growth over the three-year outlook, business conditions will feel recessionary to most businesses that rely on consumer spending, particularly those businesses located in ‘mortgage belt’ areas of our capital cities.”