The Australian economy, like many others, has suffered hugely throughout 2020 as a result of the coronavirus pandemic. The national debt grew in March, as many businesses were forced to close temporarily, in order to align with government restrictions, set to ease the spread of the virus. We were not the only country to see this happen, and we were also not the only country that saw an impact on the economy because of it.
As a result, Australia entered into a recession for the first time in nearly 30 years. Due to businesses experiencing such disruptions, many of them have also been experiencing cash flow issues among other financial troubles.
This, in turn, causes a flow-on effect, where purchases aren’t able to pay their suppliers, wholesalers can’t pay their importers, and it continues. The pandemic has directly caused this build-up of outstanding debts across many sectors, creating expectations of an impending surge of demand for debt recovery services across the country.
Another rise in bad debts is also expected to be seen once the government’s financial supports begin to reduce over the next six months or so. The economic impact caused by the recession is expected to hinder growth within some businesses for years, so the surge in debt could be retained for longer than predicted, and in turn, debt recovery services will experience an increase in demand.
For debt recovery agencies, this is a good time for their services; however, they also must ensure that they are undertaking these collections with the utmost sensitivity. It is a delicate time for businesses going through financial stress, and for the debtors.
Businesses will tend to leave referral to debt recovery services until they feel that they have exhausted all possible options, which often leaves them feeling frustrated and helpless. This can sometimes lead to tension between the debtor and creditors, creating a dispute where there wasn’t one, relating to the invoice.
The timing here is critical for everyone involved in the situation. It is essential because cash flow varies throughout the year for everyone, especially this year. There are times of the year where debtors are more likely to pay, while there are also times of the year where creditors are either struggling, and they need the debt to be recovered urgently, which can be draining for both sides.
To overcome the impacts of a recession, debt recovery services must help to improve the cash flow for the creditor. Successful debt recovery can be a critical injection of cash into the business during these times.
A business needs to approach and use a debt recovery service if you have money owed to you before it is too late, and your debtor becomes a victim of market conditions. You aren’t alone in needing to use these services. By the time that a debtor has not paid an invoice, ignored a reminder notice and are threatened with a final notice, the next step won’t be a surprise to them.
The focus during an economic recovery should be on building new business and filling the companies scheduling. Collecting on work that has passed does produce revenue, but it’s not building the business.