A new survey by My Business released on Monday (April 16) highlights the challenges Australian businesses face when a business partner or supplier collapses.
According to the survey of 184 professionals, the vast majority (87 percent) said they have experienced a negative consequence due to the failure or collapse of a business partner or vendor. That effect occurred in the form of a financial loss, the report noted.
Only about a tenth said they had never experienced a financial loss because a supplier or business partner collapsed.
“With this in mind,” the publication said, “business leaders of all size and industries are being urged to carefully assess the risk their clients, suppliers and other collaborators present in a bid to reduce these flow-on losses.”
The site pointed to separate analysis from collection agency Atradius, which identified 10 major signs that a company is about to collapse. Among them include a business holding too much debt, cash flow struggles due to overexpansion, a lack of transparency in business operations and irregular payments to suppliers and other business partners.
According to the latest data from the Australian Securities and Investments Commission, the number of insolvencies in the country saw a decline during the 2016–2017 fiscal year by nearly 18 percent.
But just as cash flow challenges at suppliers and other business partners can have a negative consequence on a company, healthy cash flow at these firms can also have a knock-on positive effect on a company too.
Research released by KPMG found supplier financing programs are relatively rare but are beneficial to the cash flow health of suppliers and their customers. Only about one-third of buyer organizations said they offered a financing program to their suppliers, and less than half told researchers they track supplier relationships within their procurement function.