Natalie Kapovic, Content Manager at CreditorWatch, discusses minimising credit risk.
It’s been a tumultuous 12 months for the retail and hospitality industries that encompass Australian liquor retailers, bars, restaurants and licensed venues.
Plenty of high profile and seemingly busy businesses have recently run into financial difficulty, including McWilliams Wine Group, George Calombaris’ MADE Establishment, Dinner by Heston and Criniti’s.
This worrying trend could be set to continue and serves as a warning for Australian liquor suppliers and manufacturers to do added due diligence.
What does the data tell us about the liquor industry?
CreditorWatch’s Small Business Risk Review for Q4 2019, which utilises data from public sources such as ASIC and Australian Courts as well as proprietary data from their 55,000+ customers, measures the credit performance of Australian SMEs and paints a worsening picture.
Payment defaults have increased in the retail (17%) and accommodation and food (25%) industries year-on-year, and this is often an early warning sign that a debtor is on the path to insolvency.
CreditorWatch’s data shows that 50% of companies that suffer a payment default go into administration within 18 months.
While court actions are marginally down year-on-year for both industries, there has been a 10% (retail) and 12.5% increase (accommodation and food services) from Q3 2019 to Q4 2019.
CreditorWatch’s data shows in January 2020, the retail and accommodation and food services industries were paying their customers 27 days and 41 days late respectively.
According to the 2019 IWSR Report, low and no-alcohol brands are also on rise as consumers seek out more health-conscious food and drink choices.
This all points to a need for the liquor industry to meet changing market demands and be on the lookout for adverse risk factors that will affect their competitiveness in the sector.
This is where tools provided by the likes of CreditorWatch give businesses of all sizes an advantage.
CreditorWatch identifies problem debtors that are paying the rest of the market late and alerts users to any adverse changes to their customers, like payment defaults and court actions being registered.
How liquor businesses can protect themselves
Becoming familiar with your customers and their history is crucial to safeguarding your business’ livelihood in 2020. It’s about equipping yourself with the information you need to make informed financial decisions and ensure you get paid.
Due diligence doesn’t have to be complicated or time-consuming. It includes:
>> Monitoring a customer’s credit report for red flags like low credit scores, payment defaults and court actions.
>> Watching out for debtors that pay you late and how they treat the rest of the market.
>> Checking if a director of a company has a history of running failed companies.
CreditorWatch, a digital credit reporting agency headquartered in Sydney, is an Associate Member of The Drinks Association. From sole traders through to ASX listed companies, more than 55,000 Australian businesses now use CreditorWatch to make affordable, informed credit decisions, avoid high-risk customers and ensure they get paid on time.
CreditorWatch customers can easily search for and monitor the credit history, court actions, payment defaults and insolvency notices associated with any business entity in Australia (including sole traders, trusts and partnerships) giving them an incredibly accurate picture of the risk posed to their business.
The company was founded in 2011 and has offices in Sydney, Melbourne and Brisbane.
Find out more at www.creditorwatch.com.au
CreditorWatch is an Associate Member of the Drinks Association.