The Morrison government’s safe harbour measures – those preventing businesses from falling into insolvency during the COVID recession – have helped to save thousands of small businesses and potentially millions of jobs over the past nine months. But with government support drawing to a close, small businesses need to ensure they are financially viable by December 31 to avoid directors being held personally liable for trading insolvent.
Is your business ready to go it alone?
Domenic Calabretta CEO, registered Liquidator, Administrator and Receiver at insolvency specialist Mackay Goodwin says its essential businesses examine their position now to prepare for when support cuts back. He suggests businesses that are struggling should seek help from a registered professional immediately.
“In these difficult times, it is imperative the insolvency profession, including liquidators, work with small businesses to try and restructure them in a way that will enable them to continue operating wherever possible,” Calabretta told Kochie’s Business Builders.
“We should have the ultimate goal of keeping as many companies afloat as possible, rather than immediate closure, which would further deteriorate the economy.
“We need to afford business owners empathy and dignity. As well as ensure creditors can secure more positive outcomes, by working collectively together with the common goal of maintaining integrity and confidence in our economy,” Calabretta said.
Watch for warning signs
So, what are the signs that your business could be in trouble? According to Mitchell Ball, director and restructuring expert from Mackay Goodwin, the top three signals are:
- unpaid superannuation or tax
- debt collectors chasing you
- outdated management accounts and business information.
“Shortness of cash flow can also be an issue here,” said Ball. “Businesses need cash to survive. You need to be able to pay your rent, your wages, your suppliers, otherwise you’re not in business.”
While Ball said there is not an exact checklist, other indicators a business could be in trouble include losing clients, or major contracts. And if staff are deserting your business like a sinking ship. In these instances, Ball says it could be time to seek help.
The road to recovery
Key to a small business’s financial recovery is identifying you need help and taking action. Ball suggests business owners at risk of insolvency should immediately seek professional advice. It’s possible to turn a business around from the brink, but sound advice and action are critical.
“In this very difficult situation, there’s four steps that you must take. One is to get advice. The second is to review your options, thirdly make a plan and then execute the plan.”
“I always say prevention is better than cure. So, if they see the warning signs, take action.
“When people are sick, they see a medical practitioner. They should also take the same approach [to their business] and see an insolvency practitioner and look at the options available.
“When a business is struggling, it is challenging to take that path alone. So, it is very paramount to obtain the right advice from a trusted advisor.”
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