Why More Businesses Are Closing Their Doors

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Written by Zara Mends

6 June 2023

New Zealand businesses are facing a challenging economic environment, with insolvency rates on the rise.

Data from BWA Insolvency shows a 10% increase in insolvencies in the three months to March 31 compared to the previous quarter, and a significant 28% increase year-on-year.

This rise in insolvencies is particularly concerning for industries like transport and delivery, which saw a staggering 136% increase in insolvencies compared to the previous quarter. Other sectors like business services are also feeling the strain, with a 58% increase in insolvencies.

What’s driving the increase?

Several factors are contributing to the rise in insolvencies. Cautious consumer spending due to high inflation means businesses are seeing a decrease in demand for their goods and services. This, coupled with rising interest rates and fixed operational costs, is squeezing profit margins and pushing companies towards insolvency.

How can businesses protect themselves?

While the short-term outlook may seem grim, there are steps businesses can take to mitigate risk. One crucial tool is trade credit insurance.

Trade credit insurance protects businesses from financial losses if a customer fails to pay for goods or services received on credit. This insurance can be a lifesaver for businesses, especially in a climate with increasing insolvency rates.

Benefits of Trade Credit Insurance:

Protects cash flow: Trade credit insurance ensures you get paid even if a customer defaults, safeguarding your cash flow and preventing financial strain.

Enables secure expansion: With the safety net of trade credit insurance, businesses can confidently offer credit terms to new customers and expand their reach without worrying about bad debts.

Improves financial stability: Trade credit insurance reduces the risk of bad debts impacting your bottom line, leading to greater financial stability and peace of mind.

Considering the current economic climate in New Zealand, trade credit insurance is a valuable tool for businesses of all sizes. By protecting themselves from customer insolvency, businesses can navigate these challenging times and ensure their long-term success.

Free offer

NCI will undertake a data wash of your customer base, provide a free spread of risk analysis, provide feedback on any ‘secret adverse’ information we hold on your customers which could leave you open to a bad debt.