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Rising Tide of Insolvencies: A Brief Comparative Analysis of the US and Australia

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Rising Tide of Insolvencies: A Brief Comparative Analysis of the US and Australia

The threat of insolvency looms over companies and economies, as recent statistics indicate a concerning trend in both the United States and Australia. This blog provides a brief exploration of the latest figures, drawing parallels between the two nations and emphasising the critical role of effective accounts receivable (AR) and credit management control in mitigating the risks associated with insolvency.

In my first two blogs,  I shone a light on the susceptibility of every business to bad and doubtful debts and emphasised the responsibility of the AR department and management to implement effective processes and controls that minimise these risks. As the business landscape continues to evolve, adaptability, foresight, and sound decision-making are indispensable management tools, ensuring a strong cash flow with minimal impact on balance sheets due to insolvencies.

The US Insolvency Landscape (Source: US ABS)

Data from the US bankruptcy filings paints a sobering picture, reflecting a significant 21% increase from November 2022 to December 2023. The total number of bankruptcy filings reached 37,860, up from the previous total of 31,187. These numbers underscore the vulnerability of businesses to economic fluctuations, unforeseen challenges, and other factors that can lead to financial distress, subsequently impacting a company’s cash flow and financial stability.

The Australian Scenario (Source: ASIC)

Australia has faced its own challenges in the form of insolvencies. The first half of FY2024 saw a notable increase, with 4,293 insolvencies reported – an alarming 26% rise compared to the same period the previous year. This surge raises questions about the resilience of businesses in the face of economic uncertainties, emphasising the need for robust AR strategies to minimise balance sheet losses.

As insolvency numbers rise in both the US and Australia, credit managers and AR staff are reminded of the crucial role they play in safeguarding the financial stability of their businesses. The current insolvency landscape highlights the necessity for businesses to fortify their financial positions. Only through effective AR and credit management strategies will companies rise to meet the need. Remember, if you’re not getting exposed to bad debts, perhaps your client credit lending criteria is too tight and may be limiting sales opportunities.

As ongoing economic challenges persist, the adaptability of management and the foresight to implement sound decision-making become instrumental in maintaining a robust cash flow and shielding or minimising balance sheets from the adverse effects of insolvencies.


author avatar
Ian Hindle
I fell into credit management by accident as a 20 year old, and spent my career working for companies like TNT, Aus Post, Budget Car Rental, Seek, Brivis, Recall, and Iron Mountain. Whilst working in the industry as a credit manager and later as a consultant, I realised that there was a clear need for a high-quality, comprehensive product that could be used by businesses to streamline their credit management functions, but that none currently existed. And so, I made it my mission to create one. Whilst most businesses see results as being the end game, I believe that how you get there is also extremely important. With Kuhlekt, my goal is to take the hard work out of managing your business’s accounts receivable, cash management, credit control, and collection processes, making the journey to achieving real results as easy and seamless for you as possible.

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