Business sentiment: it’s tough, but we’re surviving

Business sentiment: it’s tough, but we’re surviving. Veda Advantage business sentiment research released today, reveals the business community is significantly concerned about debt and liquidity issues in the current financial climate, and most have taken cost-cutting measures. At the same time, 61% of the 200 business leaders surveyed said economic uncertainty has not yet inhibited their business from investing in some new projects.

The survey of Australian business owners and senior corporate management also found that the economic downswing has not led to a reduction in its allocated budget for research and innovation, although other significant costs had been reduced. Businesses participating in the survey identified cost-reduction measures in the following order: reduced expansion plans 55%, reduction in staff remuneration wages 41%, reduction in hospitality or entertainment costs, 46% company acquisitions placed on hold, 39%, and IT investments placed on hold, 44%. Almost 40% of companies surveyed claimed they are exposed to a large amount of debt that was unlikely to be repaid, with only 42% of business people surveyed stating they had put steps in place to reduce the potential impact of that bad debt.

Only 17% of business people surveyed had found it difficult to secure credit from a financial institution in the last 12 months . Additional Veda Advantage data released earlier this week saw Business Credit Demand drop in the July to September quarter when compared to the same period last year. Business credit enquiries fell 2.6% in July, 6.3% in August and a significant 9.5% fall in September.

Although most account types saw a decrease in the July to September quarter, 30 day accounts actually increased by 5.5% year on year, indicating that businesses are more willing to commit to short term credit. In comparison property mortgage enquiries experienced the largest fall, down by 41% year on year. Veda Advantage CEO 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.

The Veda Advantage survey shows that almost 50% of businesses had noticed a change in their customers’ or clients behaviour in the past six months – such as a person taking longer to repay their bills. “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 every thing within their means to make sure they do not become another casualty of the credit crunch. The same need applies to businesses of all sizes - ranging from sole traders and small businesses to billion dollar companies,” Mr Matthews said.

Detailed findings of the Business Sentiment Survey include: Bad debt • More than 40% of Australian businesses are exposed to a large amount of bad debt (55% are not exposed to bad debt, 5% were unsure.) More than 25% of owner/operators surveyed were exposed to less than $500 000 worth of bad debt. Risk mitigation • Almost 60% of Australian business had not done anything in the past six months to minimize their exposure to bad debt, however, 42% of businesses have done something in the past six months to reduce its impact to bad debt • Only 17% of businesses had found it difficult to secure credit from a financial institution in the last 12 months, leaving 83% not finding it difficult to secure further credit. • More than 10% of business men and women said they would borrow more that $100 000, but less that $500 000 dollars in the next 12 months.

Only 3% said they would borrow more than 1 million, but less than 5 million. • Almost 65% of businesses said they were not likely to apply for credit in the next 12 months . Customer impact • Almost 50% of Australian businesses have noticed a change in client or customer behaviour– such as a person taking longer to repay their bills - in the past six months.

Business Impact • More than one third of businesses have been affected by liquidity and cashflow issues in the past year. • Of those affected by liquidity or cash flow issues 58% have been affected by an inability to expand, 47% were unable to unable to pay their bills on time, 36% needed to apply for short term credit, and 12% could not afford to pay staff.* • More than 43% of respondents could not put a dollar figure on the amount of money lost due to the current financial uncertainty, while 40% said the value was less than $500 000. • 61% of Australian business men and women said the recent financial uncertainty had not inhibited their business from investing in new projects, and a further 67% said instability in financial markets had not lead to a reduction in its allocated budget for research and innovation.

No business located in Canberra had reduced their budget for innovation, while 75% of businesses in Tasmania had put their innovation projects on hold. Degree of concern • Nearly 77% of Australia’s business people are concerned about the fallout from the global financial crisis (13% extremely concerned, 20% very concerned), however 16% were unconcerned. • Every single business person surveyed over the age of 65 was concerned about the fallout of the financial crisis (50% very concerned).

“It is encouraging seeing that 42% 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. It is alarming to notice that almost 40% of Australian businesses are currently exposed to a large amount of bad debt. Also alarming is that 100% of people surveyed over the age of 65 were concerned about the current financial uncertainty.

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,” Mr Matthews said. Veda Advantage’s research was conducted by online research company pure profile, in accordance with both Australian and International guidelines for online fieldwork.

The research consisted of 202 business owners and senior executives. The survey respondents were from a broad cross section of the business community, and had to be an owner, operator, CEO, CFO, COO, General Manager, or Senior Level Executives. The size of businesses surveyed range from companies earning less than up to $500 000, to companies earning more than $10M.

- Ends- *Not all percentages add up to 100%, as business people surveyed cold opt for more than one answer applicable to their situation. For more information contact: Sally Robertson at Launch Group 02 9270 0289 or 0400 927 003. Yesica Ares at Launch Group 02 9270 0204 or 0413 791 988.

Veda Advantage www.vedaadvantage.com Veda Advantage has been at the forefront of the information business for many decades. Issues such as privacy, data security, fraud and business intelligence have been part of our commercial landscape since the inception of both our company and our industry. Veda Advantage holds the country’s largest database of credit files for more than 14.5 million credit-active Australians.

The vast majority of applications for credit in Australia are checked against the files held by Veda Advantage – protecting business from financial risk and ensuring consumers are only offered products that fit their risk profile. You can apply for a copy of your business or company credit file at www.mycreditfile.com.au DISCLAIMER Purpose of Veda Advantage media releases: Veda Advantage media releases are intended as a contemporary contribution to data and commentary in relation to consumer credit activity in the Australian economy. The information in this release is not intended to provide guidance or commentary as to Veda Advantage’s financial position nor does it constitute legal, accounting other professional financial advice.

The information may change and Veda Advantage does not guarantee their currency or accuracy. To the extent permitted by law, Veda Advantage specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.. Tue Oct 2008 09:10 (2 months, 1 week ago)