26 June 2007
Smaller amounts getting more Australians into financial difficulty
Media Release
Australian consumers are defaulting on increasingly smaller amounts of debt and at even earlier stages of their life, potentially ruining their chances to access affordable credit in the future and placing additional cash flow pressures on Australian business, according to the latest default trends data from Dun & Bradstreet (D&B).
D&B is Australia's leading collections, credit reporting and business intelligence company.
The D&B default trends data reveals that:
- almost half (47%) of all consumer debt referred to D&B is less than $400
- 50% of debtors are aged less than 32 years of age, a 25% increase on 2006
- Aussie males are more likely to default than women, with the exception being telecommunications debt
- Australian men are also less likely to ever repay these debts
- rural Australians are better at paying up following a default than those in metropolitan areas.
Christine Christian, Dun & Bradstreet CEO, says the new data from D&B points to both the increased pressure being placed on business cash flow and the risk young people in particular are placing on their ability to access affordable credit for home and car ownership.
"We already know from our quarterly trade payments data that normal payment terms have almost doubled to 56 days from the standard 30 day period, placing business cash flow under pressure" said Ms Christian.
"Now with the release of the D&B default data we can see that business has to go to the expense of chasing smaller and smaller amounts of outstanding monies. However they have no choice as the small amounts can add up to a considerable amount of money, particularly for small business."
"On the consumer side the concern is that Australians, and particularly young Australians, are running the risk of a black mark on their credit report for small amounts of money. However this small amount can have a very big impact on a persons' ability to access affordable credit for major purchases like cars and property."
State vs. State
New South Wales (NSW) consumers are incurring larger average value debts than any other state or territory - 27% larger than those of Victorian consumers. Suppliers can also expect to recover the least amount of their outstanding debt from NSW consumers, whilst individuals residing in the ACT are 36% more likely to pay their outstanding bills than the average Australian.
Men vs. Women
Overall, with the exception of the telecommunications industry, Australian men are incurring more debt per capita then Australian women.
Findings indicate that when it comes to entertainment related services, per capita; Australian males are 22% more likely to incur a debt, and for banking and finance related debt, per capita they are 3 times more likely to default. When it comes to paying phone bills however, women are getting themselves into more financial trouble than their male counterparts.
Country vs. City
The latest trending data from D&B indicates that consumers living in regional areas are incurring more debt per capita than those living in metropolitan areas, however the average debt amount incurred is 23% less than that of a metropolitan resident.
Findings also indicate however that once the debt has been incurred, country consumers are 23% more likely to pay their debt than metropolitan consumers.
There is however a number of things that business can do in order to prevent outstanding debts from crippling a company through reduced cash flow.
"The response can be as simple as ensuring that a business credit checks its customers and suppliers, to ensure that they have both the capacity to pay and a good history of paying, and that there are clear processes and policies in place for receivables management" said Ms Christian.
Ms Christian believes there are some simple rules that should be followed to help reduce the risk of payment defaults:
- Ensure that the credit history of all customers is checked before entering into a business relationship, no matter what the size of the business.
- Be confident that your customer has not only the capacity to pay but also the habit of paying on time.
- Establish clear credit terms with customers at the outset of the relationship.
- Initiate regular communication with customers to identify and resolve problems before credit terms expire and invoices become overdue.
- Don't be afraid to take action against persistently delinquent customers.
- Establish a good receivables management process to ensure that arising payment defaults can be dealt with as quickly and effectively as possible.
- Should the capacity or expertise to recoup outstanding payments not be available in-house, outsource the debt to a reputable collector.
For further information, or to arrange an interview please contact:
Damian Karmelich
D&B
Director - Marketing & Corporate Affairs
Tel: 02 8270 2902
About D&B
D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.
The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.
Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.
Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.
