Australian firms are taking steps to improve their cash position. Photo: Shutterstock

Australian firms are taking steps to improve their cash position and ensure their sustainability against the challenging economic backdrop.

Figures released recently by Dun & Bradstreet reveal that the number of business-to-business debts referred for collection has increased by almost 20% year-on-year, and their dollar value is up by almost 50%.

According to Christine Christian, D&B's CEO, Australian firms have recognised that a relaxed attitude towards collections is no longer sufficient and that effective cash-flow management is a critical factor in ensuring the ongoing sustainability of business.

"A number of Australian firms are now acting on their arrears relatively quickly when previously they would have allowed them to accumulate for lengthy periods of time. These executives are seeking to address both current outstanding payments and longer term arrears, which is increasing the level of debt being referred for collection.

"With close to 80% of business failures said to be the result of poor cash-flow management, this is a smart move which could be the difference between a business continuing to operate profitably or falling into irreversible financial distress."
More than 10% of firms in each state are now classified as a higher risk of paying their trade accounts in a delinquent manner.

These findings indicate that the economic downturn is likely to be prolonged and difficult for many firms, with cash flow likely to tighten further in the months ahead.