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B2B invoice payment defaults rose 47% in the 12 months to February as higher input costs and softer demand meant more businesses struggled to pay their trading partners.
According to CreditorWatch, trade payment defaults are not only a key measure of business stress but have a strong correlation with business insolvencies or voluntary closures in the following 12 months; the risk of insolvency rises from 0.7% to 7.9% when a business defaults on an invoice payment.
CreditorWatch chief executive Patrick Coghlan said it was a precarious time for businesses as many were already facing tough conditions – even without looming US tariffs. “The expected slowdown in economic growth from the widespread US tariff regime will, unfortunately but inevitably, result in higher insolvencies.”
Businesses are, therefore, urged to take steps now to manage these risks, such as reviewing credit policies, running portfolio health checks or monitoring customers more closely.
Meanwhile, insolvencies rose in February – after having dipped in both December and January – and continue to trend strongly upward.
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