SYDNEY – 20 October 2022 – National credit managers are exercising caution in preparation for an economic slowdown resulting from rising interest rates, increasing cost of living, international supply chain issues, and changes to government incentives, according to a survey conducted by global data, analytics and technology company Equifax.
Released today to coincide with the 2022 Australian Institute of Credit Management (AICM) Conference, the 11th annual Equifax National Credit Managers Survey 2022 assesses the evolving role of credit management in Australian businesses and the integral nature of a 360-customer view when managing credit risk.
As professionals who work with companies across multiple critical sectors, a representative sample of credit managers’ attitudes and behaviours can be a notable indicator of Australia’s economic outlook.
“The optimism we observed last year has taken a hit, with many credit professionals expressing concerns about how their customers will weather a perfect storm of higher interest rates, elevated inflation, and the gloomy and uncertain outlook of the global economy,” said Scott Mason, General Manager Commercial, Equifax.
“We anticipate that the shift from credit management to risk management will ramp up significantly as a result, and they will need as much insight into their customers as possible to make accurate decisions about risk.”
Navigating through the perfect storm of economic volatility
Over the next 6-12 months, Australian credit managers expect an increase in business insolvencies/delinquencies, interest rate increases, supply chain delays/stock availability, input costs and the global economy to be key concerns facing their business.
After economic concerns, finding and attracting new quality customers is the second leading issue credit management companies will navigate over the next six months.
Customers that were previously considered to be high quality may have experienced a recent change in risk profile. Data from ASIC shows an upward trend in business insolvencies in 2022, largely driven by creditor wind-ups and companies going into voluntary administration.
To help manage this, Australian credit managers identified three possible ways to prepare for an economic slowdown: monitoring high-risk customers more closely, reviewing risk within their portfolios, and increasing account reviews. The majority (65%) of Australian credit managers also plan to tighten collections this year, up from 53% in 2021.
Understanding customers for informed risk management
In the immediate term, managing risk against the backdrop of volatile economic conditions is expected to supersede Australian credit managers’ focus on enhancing credit management processes.
To help with this shift to risk management, credit managers should gain a clearer understanding of the people behind the businesses they’re working with.
This 360-view is particularly important for businesses in sectors hardest hit by market and supply chain disruption. According to Equifax data, sole traders in the construction industry, for example, are twice as likely to be in mortgage arrears compared to the average consumer.
Additionally, SMEs and sole traders operating in accommodation and food services, construction, and wholesale trade are also more likely to have personal loans 30+ days in arrears, compared to the national average.
“Overall, credit managers are aware that broader economic conditions will impact how they approach high-risk customers. We’ve seen that many smaller operators are experiencing financial pressures, and some may even be dipping into their personal finances to keep their business afloat.
“Understanding the pain points of the people behind the businesses in their portfolios will help credit managers minimise cash flow exposure and prevent regulatory scrutiny and financial and reputational damage for their customers,” concluded Scott Mason.
ENDS
ABOUT EQUIFAX INC.
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics, and technology company, we play an essential role in the global economy by helping financial institutions, companies, employers, and government agencies make critical decisions with greater confidence. Our unique blend of differentiated data, analytics, and cloud technology drives insights to power decisions to move people forward. Headquartered in Atlanta and supported by more than 14,000 employees worldwide, Equifax operates or has investments in 24 countries in North America, Central and South America, Europe, and the Asia Pacific region. For more information, visit www.equifax.com.au or follow the company’s news on LinkedIn.
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The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.
ABOUT THE CREDIT MANAGERS SURVEY
Every year from 2011 to 2022, Equifax has solicited the views of credit managers around Australia across various industry sectors, including manufacturing, finance and insurance, construction and trade. The questions asked are designed to assess changes in credit practices, sentiment and conditions over the previous 12 months, relative to previous periods. The Credit Managers Survey 2022 was conducted in August 2022 and surveyed 81 Australian Credit Managers.
