Aussie manufacturing increases protection against buyer risk

PRESS RELEASE

Aussie manufacturing increases protection against buyer risk

Sydney, 26 October 2011 –Australia's $100bn manufacturing industry has increased its due diligence around trading credit for additional protection from supply chain insolvencies, a study into trade dynamics and credit supply has found.

The 2011 Atradius Payment Practises Barometer found that despite relative business confidence in Australia, manufacturing and wholesale/retail/distribution companies have raised their level of buyer risk monitoring over the last 12 months.

David Huey, Managing Director of Atradius in Australia and New Zealand, said the uncertainty in Europe and the United States combined with the increasing trend in Australian insolvencies has seen key industries increase their demand for good market intelligence and insurance protection.

"The results indicate some sections of Australian business are not blindly trading, but recognising the need for sound credit management via strong relationships, positive trading history and due diligence," says Mr. Huey. “With a ‘double-dip’ recession forecast, we are seeing this in particular sectors and amongst larger companies.”

Insolvency figures in Australia have been steadily rising over the last 12 months, according to recent ASIC figures. 1,049 companies entered external administration in August 2011, up 14 per cent from 921 in July, and 20 per cent higher than the 870 in August 2010, figures which Huey says indicated a lack of risk awareness in practice.

"Many Australian businesses, particularly small and medium sized companies, still have to become alert to the dangers that their trading partners’ liquidity levels can pose, particularly when payment practices start to become problematic. This is a big issue for Australia as 52 per cent of the businesses surveyed traded on credit, which is slightly higher than some of our Asian neighbours," he adds.

John Sutherland, Head of Risk for Atradius in Australia and Asia said the survey results indicated basic buyer diligence was more profound in Asian countries than on home turf.

"Asian countries were found to have significantly increased their use of monitoring buyer risks, using secured forms of payment, and checking a buyer’s creditworthiness, however Australia's appetite for such credit risk tools showed no rise in activity," explains Mr. Sutherland.

"This may explain why 62 per cent of Australian business cited ‘insufficient availability of funds’ as the reason behind export payment delays, but only some 48 per cent of Asian businesses experienced this.”

 Australian practice is more risk averse when it comes to international trading, with only 15 per cent of all respondents providing credit for international trading, and 64 per cent of businesses stating they would offer no credit at all for international trades."

David Huey says this could be an indication of Australia's concerns about risks associated with international trading, which could be limiting a business' natural growth potential.

"Certainly international trading comes with increased risks, especially in these turbulent times, but risks can be mitigated through careful assessment and planning, such as trade credit insurance," he adds.

Other findings:

1. Only 24 per cent of Australian companies offered early payment discounting facilities, compared to the 48 per cent Asia Pacific regional average.

2. 2.4 per cent and 3 per cent of Australian domestic and foreign receivables went uncollected by respondents, the lowest Asia Pacific level in the survey.

3. The Australian Day Sales Outstanding (DSO) trend during the first half of 2011 was relatively unchanged. The 77 per cent stability figure averaged 10 per cent higher than the wider Asia Pacific region.

4. Larger businesses were more likely to have started checking a buyer's creditworthiness, with 47 per cent of respondents reporting they use the practice.

5. Australia is leading the league in customer payment behaviour, averaging 25 days for payment of accounts, one day less than average payment terms.

The survey covered 194 Australian companies and more than 5,200 companies from 27 countries.

-       ENDS  -

Media Enquiries: Louise Nealon, Callidus PR
T: + 61 2 9283 4114/ 0403 569 177; E: louise@calliduspr.com

About the survey:

The 2011 Payment Practises Barometer, completed by Heliview Research, surveyed more than 5,200 companies from 27 countries worldwide (Australia, Austria, Belgium, Canada, China, Czech Republic, Denmark, France, Germany, Great Britain, Greece, Hong Kong, Hungary, Indonesia, Ireland, Italy, Japan, Mexico, the Netherlands, Poland, Singapore, Slovakia, Spain, Sweden, Switzerland, Taiwan and USA) about the extent they use trade credit in their B2B transactions and customer payment behaviour.

About Atradius: The Atradius Group provides trade credit insurance, surety and collections services worldwide, and has a presence through 160 offices in 42 countries. Atradius has access to credit information on 60 million companies worldwide and makes more than 20,000 trade credit limit decisions daily. Its products and services aim to reduce its customers’ exposure to buyers who fail to pay for the products and services they buy. With total income of more than EUR 1.5 billion, its products help protect companies throughout the world from payment risks associated with selling products and services on credit.