Australian companies are reporting liquidity challenges as late payments and defaults grow in an unpredictable trading environment, trade credit insurance provider Atradius says.

The group’s annual survey found more than half of business-to-business invoices were overdue, largely driven by customer financial difficulties, especially in the construction industry.

The survey report highlights a shift towards more relaxed trade credit terms, to preserve revenue and customer relationships.

“Based on Atradius research, there’s a growing reliance on short-term liquidity solutions like invoice financing and bank borrowing,” head of client services for Oceania Joe Lewis says.

“However, these are not sustainable substitutes for long-term financial resilience.

“Flexible trade credit policies may help businesses remain competitive in the short term, though this approach comes at a cost.”

Two-thirds of Australian businesses relied on bank loans in the past year, making it the most common form of external financing, followed closely by trade credit at 60% and invoice financing at 59%.

Only 37% of invoices were paid on time, while 52% were overdue and 11% were written off as bad debts.

Customer cash flow issues were cited as the top reason for late payments, followed by delays in customer payment processes and internal invoicing inefficiencies.

Most businesses anticipate payment patterns and days outstanding to remain stable over the next 12 months despite rising payment risks, indicating low expectations of improvement in customer payment behaviour, Atradius says.

The report is available here.