Debt problems growing: Dun & Bradstreet

Australian businesses have a rising debt problem with credit referrals rising strongly in 2007 says credit information agency Dun & Bradstreet. Businesses are sitting on a growing backlog of doubtful debts as the impact of leaner business conditions and the credit crunch hits.

The Dun & Bradstreet research showed that the number of debts referred to for collection rose by 12% in 2007. The average size of this bad debt grew from $1400 to $7800, a rise of 22% on a year earlier. The financial industry is the most affected sector by far, with the average size of their debt referrals hitting $26,000 for 2007, a 300% spike.

D&B chief executive Christine Christian believes that the situation will deteriorate as businesses scramble to cover themselves from leaner cash flows.

“The increase in the value of debts being referred suggests that some businesses are facing significant cash-flow difficulties, while the increase in low-value debts suggests that businesses have been forced to chase outstanding account earlier in the cycle in an attempt to keep their cash flow afloat,” Christian said.

The D&B risk data estimates 7500 businesses will face liquidation in the year to June, with an additional 4000 applying for bankruptcy in the same period.