The latest Payment Practices Barometer 2024 report by trade credit insurance and debt collection service provider Atradius has revealed that 59 per cent of Australian organisations have turned to trade credit as an alternative to traditional bank loans, amidst the ongoing economic pressures faced by Australian businesses.
“Based on Atradius’s research, there has been a significant impact of rising interest rates on an organisation’s borrowing,” Joe Lewis, head of client services in Oceania at Atradius, said. “With a sharp decline in borrowing capacity, 59 per cent of companies have pivoted away from traditional bank loans to instead prioritise trade credit, which has risen by 35 per cent.
“It’s clear that businesses are under increasing pressure to fund their customers’ short-term cashflows through extended payment terms and higher credit limits,” Lewis added. “Understanding the shift towards more flexible payment practices and the strategic use of trade credit is essential for organisational leaders looking to manage their cashflow effectively and mitigate financial risks.”
The research also reveals steady rates of bad debts and unchanged payment delays, with bad debts remaining steady at seven per cent of all B2B invoices, and late payments affecting 45 per cent of all B2B sales made on credit cards. As a result, 64 per cent of companies reported an increase in requests for repayment plans from B2B customers, which the report interprets as indication of the rising concerns over liquidity and financial stability.
Furthermore, the report found a 35 per cent increase in trade credit offered to B2B customers and payment terms have been extended by nearly two weeks, now averaging 35 days from invoicing, particularly in the construction industry.
Amidst the ongoing financial challenges, the report also highlighted that 55 per cent of businesses do not foresee an increased risk of insolvency in the next 12 months.
“As organisations in Australia and around the globe continue to adapt to a rapidly changing economic environment, strategic credit management becomes even more important,” Lewis said. “Companies that are proactive in adapting their payment practices and credit management strategies will be better positioned to navigate the uncertainties of the market and capitalise on growth opportunities.”
Based on data from the company’s annual survey conducted in the first quarter of 2024, the Payment Practices Barometer sheds light on how businesses are adapting their payment practices in response to the evolving economic and trading environment, with the aim of creating an understanding of the dynamics of corporate payment behaviour and the emerging trends that could shape the future of B2B trade in Australia.
