Every day we read about the struggles and closures of many small and medium sized businesses (SMEs) in Australia. The current data at the end of FY24 listed 2,167 Court liquidations, a 99% increase on the previous year, while restructuring matters soared by 219%*. However, SMEs can often avoid insolvency by better understanding their financial position with the help of a trusted accounting partner.
Oxidate don’t liquidate
Inflationary pressure is having significant impact on consumer spending and the key industries being affected are construction, hospitality, and even breweries. ASIC’s annual insolvency data shows more than 11,000 companies entered external administration for the first time in 2023-24. And restructuring appointments grew by over 200% in 2023-24 compared to 2022-23 and now represent 12.9% of all external administrations**.
So, it’s never been more important for business owners to be educated and informed about the state of their business so they can make key decisions before it’s too late (i.e. before they have to liquidate). There are often many solutions that can help breath oxygen back into your business. Whether it’s a strategic shift, restructuring or right-sizing the business by reducing debt and operational costs, it’s about understanding your options in these uncertain times.
For example, if your business is in distress one solution may be The Small Business Restructure (SBR) regime that was introduced in early 2021 as a cost-effective method for distressed businesses to reorganise and negotiate business debt up to $1m. However, seeking the right advice before your business reaches the distressed stage, can not only help save your business, but it will also save a lot of time and unwanted stress. If your business is currently rowing in the wrong direction, adopting a strategy of “just row harder” won’t achieve the desired outcome.
A case in point
I recently caught up with a business owner on a social basis. He told me his entity structure was causing his hospitality business to operate in such a way that it was heading toward liquidation within the next 6 to 12 months. I suggested he talk with our accounting experts who then did a thorough assessment of his business. We were able to show him how to reduce his monthly expenses by 10-12% which enabled him to turn things around and continue to successfully operate through this challenging environment.
Does your business need a health check?
If you’re worried about how your business can weather the current inflationary headwinds, the team at Falanga & Co are here to help. We can review your business plan and current situation, or explore options on how you might be able to improve your overall financial position. For existing clients please get in touch with your Falanga & Co accountant today. For those who are not Falanga & Co clients, we invite you to click here to schedule a discovery call with a member of our team.
Josh Hallam
General Manager
*Insolvency Australia, Final F24 Corporate Insolvency Index.
**ASIC Annual Insolvency Data 25 July 2024.
Comments are closed.