Business insolvencies in Australia are rising at an alarming pace, faster than most businesses are prepared to handle. In March 2025 alone, a record-breaking 1,448 companies filed for bankruptcies, followed by another 1,308 in May. These are not just numbers on paper; they signal a troubling trend that’s putting immense pressure on businesses that remain operational, especially those extending credit to clients.

For many businesses, the impact is most strongly felt in accounts receivable. As clients fold or delay payments, unpaid invoices are mounting, and cash flow is becoming tighter. What once seemed like routine credit risk is now a growing threat to operational and financial stability.

The Dangers of Rising Business Insolvencies to A/R Health

More Unpaid Invoices Are Turning Into Bad Debts

As the number of business insolvencies rises, the challenge of recovering outstanding invoices is intensifying—often reaching a point where collection is no longer feasible. When a client becomes insolvent, they typically lack sufficient assets or cash flow to settle their debts, especially unsecured creditors who have lower priority in repayment hierarchies. What would have been a standard receivable suddenly becomes a bad debt, slashing income and forcing write-offs.

For creditors, this means that unpaid invoices must be written off, directly reducing revenue and profit margins. These losses can be devastating for small businesses and mid-sized suppliers since many rely heavily on steady cash flows from recurring transactions with their customers. So, when those customers fail, it disrupts their own operating budgets and cash flow forecasts.

Furthermore, trying to collect these debts through extended collection operations or legal action depletes resources and adds to expenses. In this context, bad debts pose a serious and expanding risk to the long-term viability and financial health of Australian companies.

Payment Delays Are Becoming the New Normal

Even before formal insolvency proceedings begin, many financially strained businesses are increasingly delaying payments well beyond agreed terms. This widespread extension of payment cycles is driving up the average Days Sales Outstanding (DSO), restricting cash inflows for suppliers and creating significant liquidity challenges.

In Australia, over 50% of business-to-business invoices are past due, with many payments being overdue by 30 days or longer. This is especially true for industries including distribution, hospitality, and construction. As a result, businesses find it more difficult to fulfil their own financial commitments, such as paying employee salaries, supplier invoices, or tax payments.

More Customers Are Defaulting Without Warning

The uptick in business closures means a greater number of companies are defaulting on debts—sometimes with little to no warning. What were once isolated corporate incidents have now become a frequent and concerning pattern within the Australian business landscape.

A significant driver of these defaults is the growing number of businesses unable to manage mounting tax debts. Since the Australian Taxation Office (ATO) increased its enforcement and debt recovery efforts in 2025, outstanding ATO debts contributed to more than one-third (33.6%) of private company insolvencies in the previous year. This has led to a difficult situation in which companies that seem secure might quickly go bankrupt because of their obligations to the tax office.

Economic Conditions Are Amplifying Payment Risks

The broader economic environment, including Australia’s financial system, is making insolvency risk worse. As of July 2025, the Reserve Bank of Australia (RBA) has maintained the nation’s cash rate at 3.85%, following a series of cuts earlier in the year. This rate remains high by recent historical standards and continues to increase borrowing costs for businesses, making it more challenging for them to manage debt and cash flow. 

Alongside rising wages, tight labour markets, and stronger enforcement by the Australian Government and tax office, these factors are placing significant financial distress on businesses. For creditors, this means payment risk is growing, even among clients who seemed reliable just months ago.

Collection Efforts Are Taking Up More Resources

Rising insolvencies lead to more overdue accounts, and recovering those debts takes time, money, and people. Whether it is extra admin hours, legal costs, or strained internal teams, chasing overdue payments eats into profits and operational capacity.

To manage these challenges, many businesses are now partnering with commission-only debt collectors. They handle recovery efforts without upfront fees, helping minimise financial risk while improving recovery outcomes.

Strengthen A/R Management with Bluechip Collections

As insolvencies increase, so does the need for faster, more effective accounts receivable management. Relying solely on internal teams to chase overdue payments is only a short-term solution that can stretch resources and lead to missed opportunities for recovery. Instead, professionals like Brisbane debt collectors can help safeguard your A/R from the adverse effects of rising business insolvencies. 

Bluechip Collections, one of Australia’s leading debt collection companies, offers a commission-only model to help businesses recover outstanding debts without upfront costs. Our experts approach every case with professionalism and care, allowing you to manage overdue accounts with confidence and minimal disruption to your business.

 

Protect your accounts receivable and secure your cash flow by contacting us through our website or at 1300 462 114 today.