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Credit and Finance

Credit and Finance Need to Make Moves Against Fast-Rising Bankruptcy Levels

1 Min Read

Emagia Staff

As the curtain falls on the active season regional B2B credit and finance conferences winds down for the calendar year, professionals are turning their attention to a troublesome elephant in the room, one that underscores the importance for the best possible, often tech-based practices in credit applications and collections: corporate bankruptcies are indeed on the rise again.

As NACM Connect’s Great Lakes Conference closed the final in its trio of fall conferences in Ohio this week, experts from law practices like Lowenstein Sandler LLP and credit report giant Experian warned that corporate bankruptcy numbers are trending worse than any time since the pandemic began about 3 ½ years ago.

And the numbers are backed up by an increasing number of recent reports from sources including Forbes, the Wall Street Journal, and CNBC, which recently named Emagia one of the top fintech companies in the world. The latter noted this month that the surge in business failures is particularly pronounced among “Main Street,” locally owned firms as well as “zombie firms,” ones that have been largely unprofitable and surviving mainly by accruing more credit debt from firms that can’t detect their troubles.

NACM Connect Closing Keynote Speaker Brodie Oldham, from Experian, noted that early predictor metrics, such as consumer credit debt, are particularly worrisome. When consumers’ credit usage levels exceed 30%, a downstream impact is observed, affecting non-essential goods purchases, shipping, and various related industries.

“We’ve started crossing that threshold,” Oldham said. “We should have earlier, but people had money in their pockets for a long time because of things like the pandemic stimulus.”

This doesn’t take into account the potential challenges arising in commercial real estate and the surplus of office space, exemplified this week with the We Work bankruptcy filing.

Managing the mounting volatility necessitates addressing cash flow issues, especially as late payments rise and credit quality diminishes. It accentuates the urgency for credit and finance departments, especially the many that are not optimally staffed, to leverage automation and AI-based technologies. Doing so ensures they operate at peak efficiency, crucially important as we approach a potentially challenging 2024.
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