The number of companies rated a high risk of financial distress or failure in 2009 is up 12% on the previous year and 26% on 2007 figures, according to new research released this month by Dun & Bradstreet.

Additional D&B data reveals a 40% increase in debt referrals in the past two months and a sharp increase in payment terms which takes debtor days to the highest level since 2001.

Almost 6,000 Australian firms failed during 2008, with smaller (5-19 employees) and younger (0-4 years) firms, those based in Western Australia and those in the mining industry experiencing the most significant increase in failures.

According to Christine Christian, D&B's CEO, the rise in business failures during 2008 and the significant increase in business risk and collections referrals provide a pertinent reminder to Australian executives that further challenges lie ahead.

"Proper cash flow management is undoubtedly the most important factor for businesses to avoid insolvency.

"Many companies have been relying on cheap funding from banks and they have taken their eye off the basic fundamentals of business - managing cash flow is the single biggest part of that.

"However, for businesses whose fundamentals are strong - effective risk assessment and cash flow management - the door is open to new opportunities. These businesses should be able to weather the slow down due to the strength of their cash position and pursue opportunities through acquisitions as prices come down and industries look to consolidate."