Business owners should scrutinise their list of debtors if they want to avoid becoming another statistic in the state’s growing list of commercial insolvencies.

New figures show 411 insolvencies were recorded across Queensland in the September quarter, up from 379 in the previous three months. A new report has also revealed the state’s economic conditions are expected to worsen before they get better.

Putting pressure on long-term debtors could mean the difference between a company surviving or going to the wall when times get tough.

An insight into Queensland’s insolvencies and court action for the September quarter was revealed in the release of Creditor Watch’s Small Business Risk Review, which showed company court action had increased 25 per cent and payment defaults have also risen steeply

The Courier Mail newspaper recently quoted Creditor Watch CEO Patrick Coghlan as warning “things are going to get worse before they get better”.

I’m not surprised by the latest statistics and have been advising my clients to take a serious and realistic look at their debtor lists.

There is a very real danger, particularly in high risk industries such as retail, food service and building and construction, of an otherwise healthy operator becoming caught up in an insolvency domino effect, where they get swept along in the collapse of other operators simply because they didn’t focus on their debtors.

In a situation where one person is waiting on payment from another, who is in turn waiting on payment from a third person, if the person at top fails and does not honour their payment obligations it can have a cascading effect and everyone down the line gets caught up in it.

Business owners in all fields, not just those mentioned above, need to ensure they are getting paid promptly and placing adequate pressure on debtors who are long paying them to sure up their positions and minimise their risks

Nationally, construction was the riskiest industry identified in the 2018-19 financial year based on the number of court actions and insolvencies within the sector but very few industries have been immune.

The value of court actions being the dollar amount disputed in court, jumped 444 per cent in Queensland in the September quarter.

The best way business owners can reduce the amount of money owed to them is to initially chase up the debtors personally. If that doesn’t work, they should contact lawyers or collection agencies who can take up the fight.

Sometimes all it takes is a letter from a lawyer to achieve the desired result but if that does not get results, there are a wide variety of debt collection strategies that can be employed.

The key is to not ignore the situation because you don’t want to be the one left holding the baby.

Business owners worried about their own financial situation also need to be pro-active, rather than sticking their head in the sand.

They will know, or at least suspect, that financial trouble is brewing and if that is the case, the first step is to get professional help – from an accountant, a lawyer or potentially an insolvency professional.

It might not be too late to turn things around, but the longer you ignore the problem, the worse it can become.

If you are the director of a company that becomes insolvent, if you have done the right thing and sought professional help early, you are far less likely to incur personal liabilities that can be applied to directors who allow companies to trade insolvent or leave the company with particular types of debts outstanding.

Please contact us for advice and strategy on managing and collecting your debt and navigating difficult commercial situations.