A Decade of Data. The 2021 Annual Credit Managers Survey.
Every year from 2011 to 2021, Equifax has solicited the views of credit managers around Australia to gain insight into credit risk management practices, sentiments and trends. A decade of data provides a unique perspective of the past, the present, and the future of credit management in Australia. Here, we look at where the industry is heading and how it has transformed, including the impact of COVID-19.
The Past: Insights from 10 Years of Survey Responses
From credit management to risk management
Over time, the risk-function of credit management has taken on increased importance. New technologies, faster and cheaper computing power, more data, and the changing economic landscape have elevated the priority of staying alert to risk.
- 39% said they now more closely monitor high-risk customers
- 21% said they've increased account reviews
- Only on in 10 (10%) said they've reduced credit terms
When asked what topics they wanted clarity on to improve their ability to maintain compliance:
- 33% said cybersecurity
- 31% said risk management requirements for system reviews
- 20% said managing digital transformation.
"We've invested in risk management over the last twelve to eighteen months, which was certainly useful to have. It helped us work quickly, make better decisions, and manage considerations around larger credit limits where there was a risk of customers without sales of their own to meet."
Survey respondent
KEY TAKEAWAY
Know the individual behind the entity. It's by joining the dots on a myriad of information about a company's trading history, its shareholders, and the commercial and consumer profiles of its directors that warning signs can appear.
Increased confidence in the PPSR
Businesses have learnt that registering on the Personal Property Securities Register (PPSR) provides the necessary leverage to ensure they get paid following the insolvency of a customer. Not registering leaves a company vulnerable as an unsecured creditor.
- 75% said they register on the PPSR
- 70% said the PPSR helps them collect outstanding debts when a customer goes bust
- 80% said they are confident all PPSR registrations are correct.
KEY TAKEAWAY
Run an annual audit on a sample of your PPSR registrations. All it takes is one simple mistake when registering on the PPSR to invalidate your security interests. We find errors in 84% of the PPSR registrations we audit.
Other Findings
Here's what else we have learnt from ten years of surveying Australia's credit managers:
Improvement in Days Sales Outstanding Performance (DSO) Activity
From 2013 to 2020, down by 10%
In 2021, the average DSO is 39 days – this has remained consistent for the last two years.
Consistent demand for credit reports and scores
Credit reports: used by between 85-90% of respondents each year
Credit scores: used by approx. 60% of respondents each year
One Score is our latest generation, highly predictive credit score. It has won two awards for innovation at the 2021 Australian Business Awards.
Stagnant growth in knowledge of the customer's payables process
49% respondents believe they rank at the top of the customer's priority payment list.
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The present: Impact of COVID-19
A people-first approach to credit and staff management
Credit Managers have limited the adverse impact of Covid on their customers by taking a people-first approach to credit and staff management.
23% said they introduced new technology to communicate with customers VS 3% who outsourced to external parties
90% said they use an onshore call centre VS 10% offshore.
When asked what their #1 priority was immediately after Covid lockdowns began:
29% said managing and supporting staff
20% said collections
20% said business continuity.
KEY TAKEAWAY
Use technological innovation to engage with users, improve workflows and elevate your customer service.
Impact on business
Impact of Covid has seen a tighter reign on financial management and a focus on optimising operational processes.
20% said they increased review limits
18% said they hired staff
16% said they delayed payments.
Impact on collections
24% of the respondents' customers were unable to pay
34% of the respondents' customers made part payments
14.6% of the respondent's customers took advantage of the government repayment deferrals
We asked the respondents what their customers' top concerns were when discussing future collections:
27% said making partial payments
20% said defaulting on payments.
KEY TAKEAWAY
There are signs that businesses have developed resilience in adapting to lockdowns. Many respondents reported negligible effect on revenue and other economic factors.
"We were harder on limit increases during the onset of COVID, and our attitude to risk was more stringent, but we relaxed this stance after a few months… we don't have a hardship response, but we listen to our customers when they come to us with their concerns about making payments."
Survey respondent
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The future: Where to from here?
Reviewing credit management processes
Credit managers have a largely positive outlook, but they prioritise future-proofing. They are taking proactive action to review their credit management processes now to protect against uncertainty and challenge.
Top 3 processes to review:
36% - automation
31% - collections
24% - communicating with customers
When asked if they were going to tighten collections:
53% said yes
42% said no
5% were unsure
Strategy for tightening collections:
36% - place customers on stop
20% - reduce credit limits
20% - shorten terms
18% - lodge defaults.
KEY TAKEAWAY:
Creditors can facilitate more effective collections with the right technology, synchronised workflows and a clear communication strategy.
Concerns for the future
Employee wellbeing and digital solutions are front of mind for credit managers navigating the months ahead.
The primary areas of concern for the next six months:
35% said getting employees safely back to the workplace
15% said increasing focus on digital/automation
16% said managing collections activity.
Respondents are optimistic their customers will navigate the next six months effectively:
60% are somewhat confident
24% are very confident
When asked about what changes in the industry are of most concern, respondents said:
-
Regulatory and compliance changes
-
Changes to PPSR registrations
-
Lower quality of credit applications
-
Adapting to automated solutions for collections activity.
Emerging areas of focus:
- Cash flow forecasting
- Improving the cash to conversion cycle.
"In the next twelve to eighteen months, my focus is less on collections activity and the customer experience, and more on tackling the uptick in sophisticated fraud & ID takeovers, legal and privacy concerns and addressing default enquiries."
Survey respondent
KEY TAKEAWAY:
Successful credit management for the future will require a step up in data management and analytic capabilities.
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About the Survey
Who we surveyed
The survey targeted credit managers within various Australian organisations across a broad range of industry sectors, including manufacturing, finance and insurance, construction and wholesale and trade industries. There was representation from all states and territories, with more respondents from NSW and the ACT, followed by Qld and Victoria.
Company size
Respondents to the survey represented organisations with customer bases spanning from less than 500 to 10,000 or greater. The majority of organisations had customer bases of 1,001-5,000.
Size of credit team
The number of full-time employees differed across the sample, suggesting the survey reflected the variety of issues affecting smaller, medium and larger organisations. The greatest number of respondents were from organisations with a staff of more than 750.
Credit management experience
On average, survey participants have over 20 years experience in the credit management industry.
Click here for more information
The Equifax Credit Managers Survey is an annual survey established in 2011 and allows us to share valuable insights back to the industry, helps you understand how your business is faring compared to others, understand what the true impact of the pandemic has been on the industry as a whole and also helps us look ahead to for future planning. Email us to find out more.
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