Australia is in a state of uncertainty. While small and medium businesses remain the backbone of our economy, the extent of the impact of coronavirus on our economy is not yet known, but whether it’s consumers limiting in-store foot traffic or suppliers struggling with international restrictions, the retail industry, in particular, is under significant pressure.

Within complex supply networks, just one payment default can have a knock-on effect, leading to failed businesses and lost livelihoods. In fact, according to CreditorWatch data, 50% of companies that incur a payment default go into administration within 18 months.

There are a few things retail businesses can be doing now, in order to safeguard their future:

1. Do your due diligence

Retail entrepreneurs will often have to finely balance stock levels so having a supplier go down can have a big impact on sales to customer.

For retail businesses, in particular, it’s important to know both your customer and supply chain intimately. There’s a fine balance between stock availability and customer demand, and having a key supplier go down can directly impact your ability to meet customer expectations. Court actions, payment defaults, poor credit scores and or insolvency notices are all red flags that are likely to immediately stand out on a simple credit report. In addition, poor accounting or administration practices can also be indicative of a company that is not on top of its financial positioning.

It’s important to use technology and early warning notifications to alert you to any adverse changes to a supplier or debtor and watch for businesses that are consistently or increasingly slow to pay invoices.

2. Pay attention to the little guys

When it comes down to it, a struggling debtor is more likely to default on a smaller supplier than a larger creditor that they rely on for day-to-day operations. While small businesses or subcontractors may be the first to be affected by cash-flow issues, the knock-on effect can be industry-wide.

Where possible, reduce the concentration of your reliance on key partners and customers to 20 per cent at most, to minimise any risk to your business in the long-term.

3. Chase your invoices

In crises, small businesses often fail to meet payment deadlines. Companies are increasingly looking to lengthen their payment terms, and at the same time are pushing debtors to pay faster. Businesses should be taking this time to review their due diligence processes, check their terms and cash flow, and invest in the necessary technology and advice.

For many small retailers and suppliers, trying to match stock levels with varying customer demand, 90-day payment terms can have real-life consequences. Overdue payment terms can be the difference between paid or unpaid school fees or daycare fees. So, don’t wait until an invoice is due to start chasing it up. In many cases, it’s the person with the loudest voice that gets the attention, so, more often than not, if you don’t ask for it, you won’t get paid.

As we enter a tumultuous period of business and uncertainty, businesses of all sizes should focus on arming themselves with as much information as possible. It’s crucial that they know their customers, understand their history and take steps to ensure they have the appropriate strategies in place to get paid on time and in full.

Patrick Coghlan is CEO of CreditorWatch