Consistent Late Payments
If a customer who previously paid on time starts missing deadlines or requesting extensions, it could signal financial distress.
What to look for:
- Increasing delays in invoice payments
- Frequent requests for revised payment terms
- Partial payments instead of full settlement
- Late payments to other businesses. If they’re paying others late, chances are it won’t be long until you’re experiencing delays too.
Action Tip: Monitor payment patterns closely and tighten credit terms for customers showing irregularities. The Access Intell continuous monitoring software provides a risk of late payment score (rating) that predicts the likelihood of a company paying in a severely delinquent manner in the coming 12 months. Scores are driven by advanced statistical modelling techniques using a variety of data elements including aggregated live payment data from other suppliers.
Sudden Changes in Ordering Behaviour
A sharp drop in orders, or an unexpected surge, can indicate trouble. Reduced orders may mean declining demand, while large orders could be a desperate attempt to generate revenue before collapse.
What to look for:
- Significant fluctuations in order volume
- Unusual urgency in delivery requests
- Cancellation of long-standing contracts
Action Tip: Investigate changes and assess whether they align with broader market trends or signal financial instability.
Difficulty Reaching Decision-Makers
If communication becomes strained or key contacts are suddenly unavailable, it may point to internal issues.
What to look for:
- Delayed responses to emails or calls
- Frequent staff turnover
- Lack of clarity on payment commitments
Action Tip: Escalate concerns internally and consider reducing credit exposure until stability is confirmed.
Negative Credit Reports Or Adverse Alerts
External indicators often reveal what customers won’t tell you. Keep an eye on credit ratings, adverse alerts and industry news.
What to look for:
- Downgrades in credit ratings and risk scores
- Adverse alerts like loss of business license (e.g. liquor license, building license)
- Reports of redundancies or restructuring
- Media coverage of financial difficulties
Action Tip: Use our credit monitoring tools plus industry alerts to stay proactively informed about your customers’ financial health.
A Reportable ATO business tax debt default
The Australian Taxation Office (ATO) may disclose overdue business tax debt if a business meets certain criteria. Visibility of overdue tax debts helps businesses to make more informed decisions about who to trade with, whether to extend trade credit and whether to continue extending credit to existing customers.
What to look for:
- A disclosed ATO business tax debt default at the onboarding phase of new customers
- Proactive alerts to a debt for existing customers
Action Tip: The only way to access this information is through approved credit reporting bureaus (including Access Intell). Clients that use our online trade application and assessment and credit risk monitoring products have instant access to this vital information both within the platform and via email alerts.
Court Actions or Supplier Complaints
If you hear of suppliers taking legal action or customers facing court actions, insolvency could be imminent.
What to look for:
- Court filings or insolvency notices – in particular look for court actions rather than just judgements
- Rumours of unpaid supplier bills (being a member of an industry credit bureau can help here)
- Increased pressure from creditors
Action Tip: Act quickly by reviewing outstanding invoices and consider securing payments upfront. Check your PPSR registrations are accurate and up to date to ensure protection.
Why This Matters
Customer insolvency can lead to bad debt, strained cash flow, and even reputational damage. By identifying these signs early, you can adjust credit policies, secure payments, and protect your business from unnecessary risk.
Next Steps for Finance Teams
If you suspect a customer may be heading toward insolvency, don’t wait. Proactive action can save your business from significant losses.
Contact Access Intell today for expert advice on credit risk monitoring. We’ll help you implement strategies to safeguard your revenue and maintain financial stability.
Frequently Asked Questions (FAQs)
1. What is customer insolvency?
Customer insolvency occurs when a client or customer cannot meet their financial obligations (meaning they are unable to pay invoices or settle debts). This often leads to legal proceedings, liquidation or a small business restructure.
2. How can I reduce the risk of customer insolvency?
- Implement strict credit checks before onboarding new customers.
- Register your financial interest on the Personal Property Securities Register (PPSR) to ensure you’re a secured creditor.
- Use credit monitoring tools to track changes in financial health.
- Set clear payment terms and enforce them consistently.
- Diversify your customer base to avoid over-reliance on one client.
3. What should I do if a customer becomes insolvent?
- Stop extending further credit immediately.
- Review outstanding invoices and consider legal options for recovery.
- Gather PPSR registration details to submit your secured claim to the insolvency practitioner.
- Engage with lawyers for advice on debt collection.
- Update your risk management strategy to prevent future exposure.
4. Are there tools to help monitor customer insolvency risk?
Yes. Many businesses use real-time credit monitoring tools (like Access Intell), credit reports and industry alerts to track financial health and spot early warning signs.
5. Why is early detection so important?
Early detection allows you to take preventive measures such as tightening credit terms or securing upfront payments before losses occur. It also helps maintain cash flow and protect your business from bad debt.
