Increasing numbers of overdue invoices and debt collections are pointing to a worsening environment for trade credit insurers a quarterly index shows.

The NCI Trade Credit Risk Index increased to 902 points in the first quarter, from 851 in the December period, as the number of insurers reducing or cancelling company transaction cover rose.

The period was affected by bushfires at the start of the year while business and economic impacts from the coronavirus outbreak escalated sharply in March.

Trade credit broker NCI says the number of overdue payment debts rose 8%, while the number of companies escalating overdue invoice payments to third-party collection jumped 15% to the highest level since the beginning of the index in 2012.

The value of claims submitted to cover bad debts from suppliers actually fell 30% in the latest quarter to $30.1 million, but NCI says the trends on overdue invoices and on collection referrals signals a very challenging autumn as the full impact of the COVID-19 downturn filters through.

“The credit limit reductions for many Australian businesses will also likely impact on business’s ability or willingness to trade with customers further hampering the economy over the next quarter,” it says.

Building and construction was the top sector for trade credit claims received, followed by labour hire, finance and manufacturing.

NSW accounted for 30% of claims received, followed by Queensland with 24% and Victoria with 23%.

The index scores reflect data from more than 3500 companies on transaction insurance claims received from businesses, collection actions and overdue invoice payments. The higher the points, the riskier the trade credit environment.