Wagga Wagga businesses unprepared for economic downturn

Wagga Wagga businesses are holding onto debts for too long, leaving themselves at risk of serious cash flow problems with childcare and vets the hardest hit by bad paying customers.

Prushka Fast Debt Recovery records show a noticeable increase in genuine hardship claims from customers of local childcare and veterinary clinics.

Roger Mendelson, CEO said debts in these industries were common as they were services that people required immediately, sometimes without notice, regardless of whether they can pay or not.

“There is the belief that they can get away with it,” he said. “It may also be an expense they feel they won’t need in the future therefore they do not require a clean record with the business.”

However businesses are not without fault. Due to healthy, local economic conditions, businesses are over-confident, leading them to take more financial risks.

“Wagga Wagga currently has a relatively strong economic position with low unemployment and very few major business closures recently,” Mr Mendelson said. “This period of stability is unlikely to continue though and when conditions change, many will be unprepared.

“We are seeing many let their unpaid debts pile up, optimistic about the possibility of recovery. What they may not understand is that the longer a debt is left uncollected, the more difficult it is to recover. Some businesses are holding onto their debt for up to 12 months.

“Debt is a necessary part of running a business, but holding onto unpaid accounts for any longer than 90 days makes it increasingly difficult for a collection agency to recover. In fact debts referred before 90 days are 25 per cent more likely to be returned.”

In order to protect themselves, Mr Mendelson’s advice for Wagga Wagga business owners is to ensure they are prepared for when economic conditions start declining and not to allow customers to dictate payment terms.

“Protect yourself by having clients sign trading terms outlining that, if they should fail to pay their debt, they will be liable to pay any collection costs associated with recovering this debt,” he said.

“Best practice is to have any new customers fill out a ‘new client form’ and include your trading terms in this document so when they sign it, they accept your terms. And if a debt is starting to look like it’ll go bad, refer it to a collection agency.

“Try not to allow debts to go beyond 60 days. By doing this, you will improve your cash flow and keep your business in the black.”