Positive sentiment amongst credit managers declines in 2016

Veda National Credit Managers Survey 2016 results released

Sydney, Australia: Thursday, 13 October 2016 – After five years of increasing optimism, positive sentiment amongst credit managers has taken a dip, with only 31 per cent of participants expecting future economic conditions to have a positive impact on businesses, down from 47 per cent in 2015.

Released today to coincide with the 2016 Australian Institute of Credit Management (AICM) Conference, the Veda National Credit Managers Survey 2016 assesses the status of credit management in Australian organisations.

The annual survey by Veda, Australia and New Zealand’s leading provider of consumer and commercial data and insights and a wholly-owned subsidiary of Equifax, reveals that credit managers are cautious about future economic conditions. The timing of this year’s survey coincided with the political uncertainty of a protracted election period and a recent spate of high-profile insolvencies, including Dick Smith and Arrium.

The majority of the 205 credit managers who participated in the 2016 survey were from the manufacturing, finance and insurance, construction, and wholesale trade industries.

Neil Shilbury, Veda’s General Manager, Commercial Risk, said that although the survey showed a decline in positive sentiment, overall economic conditions in Australia remain positive.

“Looking at macro- economic conditions, the business environment is more positive than the survey indicates. And although sentiment among credit managers is less positive than it was in 2015, it is still considerably better than in previous years,” Mr Shilbury said.

“Veda has actually seen growth in business credit demand in the past six months. This is a reflection of a number of factors in the Australian economy such as the unemployment rate, which has fallen below 6 per cent, and Reserve Bank cuts to the cash rate, which is at an all-time low of 1.5 per cent,” Mr Shilbury added.

In response to their more cautious outlook, credit managers have tightened their credit policies, with 26 per cent of participants reducing their credit limits (compared to 16 per cent in 2015) and 64 per cent of respondents increasing collection activity (compared to 70 per cent in 2015).

Over the next six months, 43 per cent of credit managers have indicated they plan on enforcing stricter lending credit criteria and the majority of respondents expect to further increase or tighten collections activity.

“The survey also revealed credit managers’ views on the future of the industry. More than half of respondents indicated that automation, better use of data and generally improving processes would be most effective in improving credit management in the future,” Mr Shilbury said.

The 2016 survey had a special focus on the prevalence of fraud and its management by respondents, due to the increasing sophistication of cyber threats.

“One of the most alarming findings in this year’s survey was that only one in five credit managers performed a fraud assessment in addition to a credit check and that 40 per cent of respondents were unable to determine whether overdue debt was due to fraud,” Mr Shilbury said.

Veda National Credit Managers Survey 2016 Key Findings

  • 38 per cent of credit managers indicated a negative impact from general economic conditions over the past six – 12 months, up from 30 per cent in 2015
  • Only 31 per cent of participants expect future economic conditions to have a positive impact on businesses, down from 47 per cent in 2015
  • In 2016, 23 per cent of participants reported an increase in the demand for credit over the past six months
  • The majority of respondents expect to further increase or tighten their collections activity in the future.
  • 81 per cent of credit managers indicated that they did not perform a fraud assessment in addition to credit checks
  • Of the remaining 19 per cent who did perform a fraud assessment, the most common form of check was to determine whether the representative was in fact a director of the company in question (53 per cent)
  • 14 per cent of respondents believed credit management would be sent offshore in the future

Read the full report here

For more information please contact: Philippa Hill philippa.hill@veda.com.au