Australian businesses still to minimise debt exposure

cent/remuneration/chief-executive/

31 October 2008
| By By Corrina Jack |

Australian businesses are concerned about debt and liquidity issues, however almost 60 per cent have not done anything in the past six months to minimise their exposure to bad debt.

The Veda Advantage business sentiment research survey released today, found almost 40 per cent of companies surveyed claimed they are exposed to a large amount of debt that was unlikely to be repaid, with only 42 per cent of business people surveyed stating they had put steps in place to reduce the potential impact of bad debt.

Veda Advantage chief executive Rory Matthews cautioned that cost-reduction measures are just one aspect of risk mitigation in times of financial instability and highlighted the need for more companies to take immediate steps to protect themselves from business relationships with risky customers.

“Now more than ever before, there is a need for all businesses to ensure they have effective credit-checking and approval systems in place to eliminate bad debtors and do everything within their means to make sure they do not become another casualty of the credit crunch,” Matthews said.

“The same need applies to businesses of all sizes, ranging from sole traders and small businesses to billion dollar companies.

“It is encouraging [to see] 42 per cent of Australian businesses have taken steps in the past six months to reduce the impact of bad debt, but we would encourage all Australian businesses to introduce measures to minimise this risk.

“If all businesses understood how simple it is to put effective measures in place to help screen out these bad debtors, I’m sure we would see some different outcomes.

“Now is not a time to take business risks,” Matthews said.

The survey also revealed that while most businesses have taken cost-cutting measures, 61 per cent of the 200 business leaders surveyed said economic uncertainty has not yet inhibited their business from investing in new projects.

The economic downswing has not led to a reduction in allocated budget for research and innovation, although other significant costs have been reduced.

Businesses participating in the survey identified cost-reduction measures in the following order: reduced expansion plans 55 per cent, reduction in staff remuneration wages 41 per cent, reduction in hospitality or entertainment costs 46 per cent, company acquisitions placed on hold 39 per cent, and IT investments placed on hold 44 per cent.

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