Being prepared for a recession can help you get through one

As the global economy continues to weaken, and higher interest rates and prices impact markets, it’s clear Australia won’t be shielded from these events.

There are already indicators of a rough ride ahead:

  • The RBA has increased interest rates every month for nine months;
  • Inflationary impacts on food, fuel and energy prices continue to affect commercial and household budgets;
  • Insolvencies in Australia are increasing; Probuild, Clough and now Scotts Refrigerated Logistics are just a few.

If interest rates stay at current levels, or rise, we can expect Insolvencies to rise Australia-wide.

Scott's Refrigerated Logistics is an example of a company seriously affected by:

  • Increased fuel prices;
  • Covid overhang and issues clearing wharves and warehouses;
  • Flooding across many regional areas;
  • Tough counterparties insisting on fixed price contracts;
  • A shareholder who may not have a long-term understanding of the transport sector.

There are many other companies facing some or all of these issues - thirty to fifty companies are failing every day!

In challenging market conditions, it’s critical to manage Risk and avoid Bad Debts.

To best navigate an uncertain future, we recommend paying attention to:

  • Information - Know your client, and keep up to date on their trading and payment frequency
  • Credit procedures - Are yours current, clear and effective?
  • Security - Do you have, or can you obtain ROT on all deliveries? Then register at the PPS
  • Guarantees -can you obtain Directors Guarantees? Could you obtain a Bank Guarantee?
  • Security of Payment – in the Building sector this is a critical consideration.
  • Insurance - use a Trade Credit insurance policy to share the risk with an Insurer.

For more information on how to best prepare your business for the future, or to learn more about the level of coverage offered through your insurance program, please feel free to reach out to David Pulver or Charles Galayini through the below details;

For a printable version of this article, click here


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