Poor cash flow and inadequate strategic planning were the biggest killers of IT and telco companies in the past financial year.
ASIC has released its annual report of insolvency statistics for the 12 months to June 2014 (PDF), in which the 'Information media and telecommunications' sector was an ignoble standout for a few reasons.
Across all industries, IT and telco companies were in the top three sectors to fail due to poor strategic management of business, outstripped only by accommodation and food services; and electricity, gas, water and waste services.
Just as many IT and telco outfits – 98 companies – failed due to inadequate cash flow or high cash use.
Information media and telecommunications was also the second most likely sector to be guilty of the criminal act of insolvent trading; and the most likely to breach civil obligations in terms of care and diligence around directors’ and officers’ duties.
The corporate regulator counted 223 insolvencies across the IT and telco sector – or 2.4 percent of the nearly 9.500 corporate failures in the year. The sector couldn't touch the No.1 insolvency offender – construction – which counted 2,153 failures in the 12 months.
The Australian IT channel has been hit by a wave of insolvencies in recent months, including PC repair chain NCSS, systems integrator Remora, printing sub-distributor Tonnex, Melbourne reseller CPS Technology, Optus agent Mobilink, and the Laptop Factory Outlet in Sydney.
These six insolvencies represent potential bad debts of almost $17 million, including nearly $12 million to unsecured creditors.
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