December and January are statistically the highest-risk months for trade credit in Australia. The concentration of factors — compressed business operating days, businesses managing cash flow before year-end close, customers deferring payment into the new year, and the January resumption of operations revealing how many businesses did not reopen — creates a pattern of credit risk that creditors need to anticipate and manage proactively.
The December dynamics
Several things happen in December that increase credit risk:
- Year-end cash management: some businesses deliberately delay paying suppliers before the December year-end to improve their own year-end cash position or to manage tax timing. This is more common in December (calendar year-end) than at any other time.
- Decision-maker unavailability: finance directors, controllers, and payment approvers go on leave, creating processing delays that delay payment on invoices that would otherwise be paid in the ordinary course.
- Holiday trading pressure: retail, hospitality, and event businesses are often at their most exposed in December — high fixed costs, high inventory, and a concentrated sales period that can either generate significant cash or reveal that the business is not viable.
- Accelerated spending by distressed businesses: businesses that know they are in financial difficulty sometimes continue to purchase goods and services in December, knowing that payment will be deferred until after the holiday period — when they may no longer be trading.
The January reveal
January reveals the damage. Businesses that were struggling before Christmas either reopen and attempt to manage creditors, or they do not reopen. A creditor with outstanding December invoices who discovers in January that the customer has permanently closed has a recovery challenge that the early-January contact window may not resolve.
Pre-Christmas protective steps
- Tighten credit limits for at-risk customers: identify customers in categories with elevated December risk (hospitality, retail, events) and consider reducing credit limits or requiring prepayment in November–December.
- Issue December invoices with clear payment terms: do not allow invoices issued in November or December to have payment terms that defer to January without intention.
- Collect before the break: push your AR cycle forward in the first two weeks of December — accounts that are already overdue should be actively chased before key staff depart on leave.
- Check ASIC for administration appointments: in the first week of January, check ASIC's insolvency notices and your credit bureau for any appointments made in December affecting your customers.
Post-Christmas action
The first week of January is the optimal time to contact debtors with overdue December accounts. Many debtors who have been avoiding contact through the holiday period are reachable and responsive in early January, before their own operational pressures rebuild. Early January referral of accounts that remain unresolved is significantly more effective than waiting until February.
Refer a debt to Merion at the start of January to take advantage of the new-year contact window.