Business insolvencies around New Zealand have declined 20% during the past year, but with Australian company failures up 12%, businesses are being warned not to become complacent.
Around the South Island, insolvencies for the calendar year to date are down about 10% at 81, according to Insolvency Management Ltd, one of the south's largest independent insolvency practices.
Iain Nellies, of Insolvency Management in Dunedin, said compared with the same period last year, insolvencies for the calendar year around the South Island were down from 90 to 81.
"We largely attribute that to Christchurch, where the banks are assisting people to carry on trading," Mr Nellies said.
Credit checking agency Dun & Bradstreet (D&B) reported about 850 New Zealand insolvencies for the quarter to September last year, with about 670 for the same period this year.
"It is business as usual really ... people are managing to keep a tight rein on things as a lot [of insolvencies] have already been shaken out," Mr Nellies said.
D&B yesterday released its global insolvency index, ranking business failures in more than 30 key economies. New Zealand ranked as the second-best performing economy after Latvia in the quarter to September.
However Australia, despite being in the middle of another mining boom, booked a year-on-year increase of 12% insolvencies, which now sits on a par with indebted euro zone countries such as Italy, Spain and Hungary.
D&B general manager, John Scott, said Australian business failures surged in the quarter to June with nearly 1000 insolvencies in July alone.
"Given that Australia is our largest two-way trading partner and accounts for $17.7 billion in total trade, it is crucial that Kiwi businesses do not take our lowered insolvency figures for granted," he said in a statement yesterday.
New Zealand's falling insolvency rate in recent months can be partly attributed to strong commodity prices and a low-interest rate environment, Mr Scott said.
New Zealand inter-company trade payments data revealed that more than 50% of firms were delinquent in making payments to each other during the quarter to June quarter, Mr Scott said.
The average payment terms of 46 days were "significantly longer" than the standard 30-day period and were nearly two days longer than 12 months ago, he said.
"Furthermore, high household debt and the continuing cost of earthquake reparations could present a further risk of failure for many businesses," Mr Scott said.
New Zealand's recent sovereign credit rating downgrade, from AAA to AA+, by two international credit rating agencies was an early warning that insolvency risk could increase if firms were not careful with their cash flow management and trade payments, he said.
The D&B data found New Zealand sat almost 50 points lower than Australia, 25 points lower than the US and 18 points behind the UK, and was classified as having a "stable risk rating trend".
However, Mr Scott said New Zealand companies should not become complacent, particularly in light of the European debt crisis and increased insolvency rates in Australia.
"Low insolvencies do not mean no insolvencies - it is imperative that business owners implement good cash flow management strategies before it's too late," Mr Scott said.
Since the $1.75 billion collapse of southern finance company South Canterbury Finance in August last year, there have been some high-profile receiverships or liquidations around Otago.
They have included Jennian Homes Otago, the New Zealand Malt Whisky Company, Western Pacific Insurance, Steve Rout Contracting Ltd, Beeby Construction, Christie Garden Products, three companies of St Clair developer Stephen Chittock, Middlemarch Tourism Ltd, Cycle Surgery Dunedin 2008 and Watertight Heating and Plumbing, of Mosgiel.
Around Wanaka there were three companies of Wanaka developer Andre Prassinos, also separately Oakridge Land Holdings Ltd, Workeablearth Ltd and Wan A Cab Ltd.
