Customer debt hurting Ballarat businesses

Tough economic conditions, a decline in local consumer spending and increase in consumer debts are leaving Ballarat businesses feeling the cold, forcing some to close to their doors.

Roger Mendelson, CEO of Prushka Fast Debt Recovery, said some Ballarat businesses aren’t adapting to the declining local conditions or putting in place sufficient plans to protect themselves when customers don't pay.

“Services businesses are feeling pinch and without sufficient cash flow coming in, they’re finding they don’t have enough cash each month to cover their own obligations in the coming month,” Mr Mendelson said.

“We’ve noticed that debts to child care, medical and veterinary practices in the region have risen, with some telling us that they’ve never had problems with people who can’t pay, until now that is.

"Unfortunately local businesses have sailed pretty close to the wind in recent times, leaving little cash in reserve for when tougher times inevitably arrive. What’s worse is they’re often letting debts blow out beyond six months before referring them for debt collection. This significantly increases the likeliness of it needing to be written off.”

This is concerning not only for the business itself but for the region at large.

“When one business has financial troubles and can't pay or goes into administration, it creates a domino effect forcing intertwined businesses into hardship which may result in administration or closure too,” he says.

“To keep your cash flow healthy, I urge you to resist the temptation to have your customers dictate payment terms, document the steps to be followed for issuing of bills and following up on payment.

“Furthermore, try not to allow debts to go beyond 60 days. By doing this, you will improve your cash flow and decrease your risk of incurring a bad debt.”