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130,000 businesses now at ‘higher risk’ of distress

Posted by Internet Guru
April 22, 2009

Nearly 130,000 Australian businesses are at higher risk of financial distress over the next 12 months, with a record number of risk profile downgrades, according to credit reporting agency Dun & Bradstreet.

This is the largest number of businesses that Dun & Bradstreet has ever downgraded in a six month period, the agency says.

In a further sign of cash flow pressures in the economy, 150,000 businesses are at higher risk of not paying their bills, due to delinquent behaviour, while trade payment analysis shows business-to-business payment terms are at their highest levels in seven years.

Dun & Bradstreet CEO Christine Christian says in a statement the large number of risk and payment downgrades are just the beginning, with more businesses likely to deteriorate.

”The scale of the downgrades are significant and demonstrate how quickly the deteriorating economy has impacted Australian businesses,”

she said.

Ms Christian blamed the deteriorating economy but said many businesses have been caught out not paying enough attention to risk management and cash flow.

”The findings suggest that the economic downturn is likely to be prolonged and difficult for many firms, with the spike in payment downgrades evidence that cash flow and liquidity issues will remain a key challenge in the months ahead.

”The fact that on average more firms have become a higher risk of paying their bills late than actually failing is a clear sign that cash flow will continue to tighten.”

New South Wales, Queensland and the North Territory businesses suffered the largest number of downgrades, while Victoria had the lowest.

Smallbusiness.smh.com

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