In June ASIC reported that 1,709 construction companies entered administration between July 2022 and April 2023, up 33% on the previous period. More recently an Australian Financial Review news feature highlighted the challenges ahead, forecasting more than 1 in 10 businesses operating in the retail, hospitality and construction sectors are at risk of significant business stress over the next 12 months. This highlights that for most businesses there is an increasing headwind, and irrespective of sector, pressure on operating costs is going to require even greater focus.
Wages and labour costs are a challenge, but the reality is there’s a combination of factors impacting operational costs, allied with the broader economic outlook, and the uncertainty of customer demand. We all need more business and new business, but not at all costs. The risk and reward balance is fragile, and there’s a lot of evidence around indicating that there is a stretch on debtor days, overdue invoices, and managing extended terms.
Within our business we’re working hard to secure new business and to work proactively with existing customers on maintaining terms, and undeniably a big focus is on risk and debtor management. With new business, that really starts with the initial Credit Application, and capturing and checking all important applicant information including trustee name, ABN, ASIC registered office for service of legal documents, email addresses and mobile numbers, and ensuring our customers have a clear understanding of our Terms and Conditions of Trade. Plus we will always request the specific creation of a separate Deed of Guarantee and Indemnity as a stand-alone document and undertaking. The administration required can be onerous for new accounts, but we believe any fair and reasonable customer will understand the necessity for doing so, particularly in the current climate.