Staggering 77% Unpaid Debt Collected From Earthmoving Companies

Slater Byrne Recovers 77% Unpaid Debt From One of Its Earthmoving Companies

Recovering debt from earthmoving companies was one of the exciting work Slater Byrne did in 2019. The earthmoving company engaged the services of Slater Byrne to collect debts, which, if left unrecovered, would substantially reduce its cash flow. Without the much needed cash, the client would be forced to stop operation of its business. Slater Byrne provided work collecting on a total of 20 accounts. They were for the period August 2014 to January 2019. The report showed a successful debt recovery rate of 77.60% of the $288,754 total value of debts.

Why Earthmoving Companies Have Difficulty Recovering Bad Debts

There are a variety of reasons why recovering debt from earthmoving companies is difficult. Notes from Parliament hearings on terms of payment and contract terms in the mining sector highlighted the following reasons why it is difficult for small and medium-sized business to recover money in the earthmoving industry:

1. Extended payment terms.

The industry-standard payment term is between 30 and 45 days. However, submissions to Parliament showed that several large mining companies have asked for and are actually extending their payment terms to 90 days or more following the 2007-2008 global financial crisis. The extended payment term has resulted in businesses using their profits to manage their cash flows.

2. Request to reduce profit margins.

During the financial crisis, mining companies have asked their contractors to significantly reduce profit margins. While beneficial to mining companies, this has adversely impacted small to medium businesses who cut the rate of their services or supplies to keep a customer, while still providing the same high-quality of services or equipment.

3. Insolvencies in the construction and mining companies.

Statistics from the Australian Securities and Investments Commission (ASIC) showed that from December 2017 to December 2018, there was a 32.7% change in the number of construction companies that entered external administration. Within the same period, there was a 61.9% change in the number of mining companies that entered external administration.

This means two things:

  1. the earthmoving company entered administration or
  2. the earthmoving company is facing financial difficulties because their contractors are under administration.

Moreover, a CreditWatch report revealed that the construction industry remained the worst industry for court actions and payment for defaults in the third quarter of 2019. Companies across all industries in New South Wales were the worst performing during the same reporting period.

How Did Slater Byrne Help to Recover These Debts

Earthmoving companies face a unique difficulty in recovering their debts because of the volatility of the industries that they are serving. Global Data in 2019 reported that Australia’s construction industry is facing a troubled period. The mining industry is the pillar of the country’s economy. Turmoil in the mining industry likewise adversely affects suppliers.

Several earthmoving companies have approached Slater Byrne over the years to help them recover Earthmoving debts. Their primary concern are delayed and partial payments. It is burden to smaller players in the earthmoving industry when contractors do not pay on time. More so when contractors do not pay the full amount. Hiring Slater Byrne have allowed these companies to focus on what they are good at.

Each unpaid debt arises from a different situation. It could be a different business relationship or a different set of terms and conditions. With Slater Byrne’s credit and dispute resolution expertise, we recovered an average of 77.60% from the total unpaid debts. This percentage represented $224,084 of the total book value of $288,754.

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