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CreditorWatch: February saw business conditions tighten further

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By Published On: March 15, 20230 Comments

The February 2023 CreditorWatch Business Risk Index shows that business conditions, particularly around payment times have tightened due to high inflation and interest rates, in combination with falling demand.

CreditorWatch CEO Patrick Coghlan says the February Business Risk Index results show that Australian businesses are under increasing stress.

“From inflation to interest rates, supply chain problems, labour shortages and falling consumer demand, Australian businesses are doing it tougher now than they have since the GFC back in 2009,” he says.

“The businesses that have proper credit risk management processes in place and are monitoring the health of their ledgers will weather this storm much better than those that don’t.”

CreditorWatch has revealed that business conditions continue to tighten with a bleak outlook for the following months. The February 2023 data shows that B2B trade receivables are down 10 percent YoY as challenges confront businesses on multiple fronts. B2B trade payment defaults have risen 30 percent, indicating that cash flow is becoming a problem for more businesses as trading conditions become more challenging.

Credit enquiries continue to surge – up 102 percent YoY – as businesses tighten credit policies due to cost pressures. The news of Silicon Valley Bank’s collapse in the US earlier this week will no doubt add to the anxieties of small business owners.

CreditorWatch Chief Economist, Anneke Thompson, says we are now entering a very difficult stage for businesses to operate in. “The economy is in the early stages of its downturn,” she says “Prices are still rising, although we appear to have the worst of the price rises behind us, interest rates are likely to need to increase further, and consumer demand is slowing, and will continue to slow.

“The immediate impact is being felt by smaller businesses that are reliant on discretionary spending, before the impact flows through to the rest of the economy, including those businesses not directly exposed to consumers.”

Anneke Thompson also highlighted the low levels of consumer confidence following the news of a further RBA rates increase in recent weeks.

“Two popular measures of consumer sentiment and business confidence were released today, with both pointing to bleaker measures of confidence in the outlook. Westpac Consumer confidence remain at near recessionary levels, while NABs Business Confidence survey fell below the long run average, and is at its lowest level since November 2022. However, Business Conditions remain high and remain above average. These survey results both suggest that businesses, particularly smaller businesses providing discretionary goods or services, will face slowing demand moving forward. Coming off a time of strong economic activity in the post-lockdown months of 2022, this is not altogether unexpected. However, as the slowing demand coincides with higher costs of goods and borrowing, it presents a particularly challenging set of circumstances for businesses.”

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About the Author: Rosalea Catterson

Rosalea is the Editor of Power Retail. With a keen interest in consumer behaviour and tech, she covers everything ecommerce and hosts the Power Retail Power Talks Podcast.

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