The Australian Institute of Credit Management (AICM) has warned a flow of corporate insolvencies might be coming in the months ahead as government stimulus winds down.

Although JobKeeper formally ended the last month, it will only stop being paid in early May.

Additionally a temporary moratorium in Wind Up petitions has recently expired and according to Sydney-based debt restructuring firm Chapter Two the ATO has reportedly commended “soft” debt collection.

Chris Mushan, a director at Chapter Two, told Stockhead he expects to see businesses facing cash flow pressure in the months ahead, especially if they’ve been heavily reliant on JobKeeper.

“This will cause businesses significant cash flow issues if they have not been allowing for Tax Debt and Employment salaries in their budgeting,” he said.

“Many businesses that have been relying solely on JobKeeper will be the first businesses facing insolvency.”

 

Signs businesses are under pressure

The AICM has warned that insolvencies have been gradually creeping up since January after reaching a record low in the middle of the month.

CEO Nick Pilavidis thinks there are more to come.

“The fact that less than 50 businesses have sought refuge through the insolvency measures indicates many businesses are still hiding behind the artificially created business environment,” he said.

“Reports from credit providers suggest there are a significant number of legal enforcement proceedings that commenced in recent weeks so we expect to see this change dramatically throughout Q2.”

One company that has struggled recently is beauty clinic operator Wellness & Beauty Solutions (ASX:WNB) which entered voluntary administration the week after JobKeeper ended.

The administrators blamed a lack of inability to find funding and while it didn’t note JobKeeper as a factor, the company has told shareholders it has received payments under the scheme.

 

ASX stocks that might benefit from cash pressures and insolvencies

If corporate insolvencies do rise, one ASX company that might benefit is Credit Intelligence (ASX:CI1). It actually owns Chapter Two, having acquired the Sydney-based entity last year.

If businesses tried to soldier on then there are a handful of other stocks that may be able to help.

One is fintech Propell (ASX:PHL) which is listing this morning.

Propell is a cash-flow solution focused on SMEs offering forecasting tools, credit options and instant invoice payment solutions.

Another potential beneficiary is QuickFee (ASX:QFE) which acts as payment intermediary for services firms in the legal and accounting professions.

It offers an online portal that allows customers to pay when and how they want, reducing the lag times on late payments and smoothing out cashflows for the service providers.

Other firms include accounting firms Countplus (ASX:CUP), Prime Financial (ASX:PFG) and Kelly Partners Group (ASX:KPG) as well as financiers Earlypay (ASX: EPY), FSA Group (ASX:FSA) and Pioneer Credit (ASX:PNC).

At Stockhead, we tell it like it is. While Credit Intelligence is a Stockhead advertiser, it did not sponsor this article.

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