Rising Insolvencies: What AR Teams Need to Do Right Now to Protect Cash Flow

# Rising Insolvencies: What AR Teams Need to Do Right Now to Protect Cash Flow

The Insolvency Landscape Has Changed

Business insolvencies in Australia hit a 30-year high in 2024, and the trend has continued into 2025 and 2026. In the US, Chapter 11 filings have climbed steadily as the post-pandemic credit environment normalises and interest rate pressures bite into working capital. For B2B finance teams, this isn't an abstract economic statistic — it's a direct threat to your receivables book.

Every customer that becomes insolvent is a potential bad debt. And in many cases, the warning signs were there weeks or months before the formal appointment of an administrator — they just weren't being watched.

Why AR Teams Are the First Line of Defence

Your AR team interacts with customers more frequently than almost any other part of your business. They see payment behaviour change before your credit team reviews limits. They hear the excuses before the CFO gets the call. They know which accounts have gone quiet.

That makes AR the most important early warning system your business has — but only if you have the processes and data to act on what you're seeing.

The Warning Signs Your Team Should Be Watching

1. Payment Pattern Changes A customer who has paid on Day 30 for three years suddenly stretching to Day 45, then Day 60, is telling you something. Don't wait for them to miss a payment entirely. Flag the change and investigate.

2. Partial Payments Without Explanation Partial payments often indicate a business managing cash flow under pressure — paying enough to keep supply running while holding back what they can. Treat every unexplained partial payment as a credit risk signal.

3. Increased Dispute Activity A sudden spike in disputes from an account that rarely disputed before is sometimes a delay tactic. Customers under financial stress use disputes to buy time. Track dispute frequency by customer, not just by value.

4. Requests to Restructure Payment Terms Customers asking for extended terms, payment plans, or credit limit increases mid-relationship deserve scrutiny. A legitimate growth request looks different from a distressed cash flow request — ask the right questions.

5. Changes in Contact Behaviour When the person who always took your calls stops responding, or you start getting referred to someone new every time, something has changed internally. Instability in the accounts payable team is often a sign of broader business instability.

6. Industry-Level Signals Some industries are experiencing disproportionate insolvency rates right now — construction, hospitality, retail, and professional services are all elevated. If you have concentration in these sectors, your exposure deserves a specific review.

What to Do Right Now

Review Your Top 20 Accounts for Risk Signals Pull your aged trial balance and look at the top 20 accounts by outstanding value. For each one, ask: has payment behaviour changed in the last 90 days? Have disputes increased? Are there any of the warning signs above present? This review should happen monthly, not annually.

Tighten Credit Limits on Borderline Accounts If an account was approved at $50,000 twelve months ago and the business environment has deteriorated, that limit deserves a fresh look. Reducing a limit proactively is uncomfortable. Absorbing a $50,000 bad debt is worse.

Accelerate Collections on Aged Debt In an insolvency, unsecured creditors typically recover cents in the dollar — if anything. The single most effective thing you can do to protect cash flow is to reduce the amount of aged debt sitting in your book when an insolvency occurs. Prioritise collection of anything over 60 days, particularly in at-risk sectors.

Check Your PPSR Registrations (Australia) If you supply goods on credit in Australia and haven't registered your security interest on the Personal Property Securities Register, you are an unsecured creditor in the event of your customer's insolvency. PPSR registration is not complex — but it must be done before insolvency, not after.

Review Your Terms of Trade Do your terms of trade include a retention of title clause? Is it enforceable? When did you last have them reviewed by a commercial solicitor? Weak terms of trade are a liability in an insolvency scenario.

The Role of Automation in Credit Risk Management

Manual credit reviews don't scale. When you have hundreds or thousands of active accounts, the only way to maintain continuous visibility over payment behaviour, dispute activity, and credit exposure is through automation.

AR automation platforms like Kuhlekt provide real-time flagging of payment pattern changes, automated escalation when accounts breach defined risk thresholds, and portfolio-level reporting that gives management the visibility to act before a small problem becomes a large bad debt.

The businesses that will navigate the current insolvency environment best are not the ones with the most aggressive collections teams — they're the ones with the best data, acting on it earliest.

The Bottom Line

Rising insolvencies are not a reason to panic, but they are a reason to act. Review your exposure, tighten your processes, and make sure your AR team has the tools to see risk early and escalate fast. In credit management, timing is everything — and right now, the clock is running.