Increase in use of credit led to rise in write offs and overdue invoices: Atradius

June 30, 2021

SYDNEY -- Businesses across Australia are feeling the pinch following a full year of the Covid-19 pandemic, according to a report by credit insurer, Atradius. A Payment Practices Barometer survey of both large and small businesses shows dramatic changes in B2B customer payment behaviour.

It says 5% of all credit sales were written off as uncollectable, more than doubling the 2% average recorded prior to the pandemic.

The same story applies to late payments; 54% of business invoices are overdue (compared to 21% in the pre-pandemic year).

In addition to the economic stressors, Atradius says, these significant increases can partly be explained by a large rise in the number of credit sales.

More than 4 in 10 of the businesses polled (42%) reported accepting credit requests far more frequently than they did before the pandemic.

On average it took the construction industry one week longer than last year to settle overdue invoices. And a significant percentage of businesses across all sectors pointed to liquidity as one of their greatest concern, alongside the health of the global economy.

As much as half of the Agri-Food industry believes the domestic economy will drive improvements in their sales and profits rather than export trade.

Perhaps unsurprisingly, Atradius says, 3 in 5 of the businesses surveyed reported an increase in debt management administrative costs. However, many businesses said the key to navigating the difficult economic climate was agility. 

Mark Hoppe, Managing Director for Atradius Oceania, said: "As the customer credit risk environment becomes more challenging with more businesses selling on credit, the insolvency environment is likely to increase.

"A write-off rate of 5% represents significant loss, and businesses can put in place measures to protect themselves against the risk of such losses." (ATI).