There is no doubt that we business owners now confront more significant financial pressure and difficulties than we did during the global financial crisis of 2007 to 2011.
Market evidence suggests recent business sales (numbers of businesses) are down, as business buyers become even more selective.
There are also unscrupulous and uninformed brokers who may well intimate that it is possible to sell your business to escape the difficulties that you confront.
- Beware. It takes a long time to sell a business; Due diligence is more invasive than ever before… your problems will become evident swiftly.
- You may confront unanticipated issues. Creditors are sophisticated, it is likely someone will put your name into the reporting systems as soon as the sniff of a possible sale gets out.
- The possibility of a sale also incurs an increased risk that the firms who owe you money could default on you!
The incidence of corporate and personal insolvencies for the pre-Christmas period of 2023 was 30% higher than occurred pre-COVID… and full-year 2023 insolvencies were themselves at historic highs. We are warned that 2024/2025 will be worse again.
The ATO’s collectible debt has blown out to beyond $50 million. It now reports defaults to the CRA’s (Credit reporting Agencies).
The ATO (default banker for many business owners in distress) is being compelled to use its recent increased collection powers, these collective powers are no longer used as discretionary choices – the gloves are off and the Government wants the money.
Directors Penalty Notices are being issued in unprecedented numbers and they are being enforced. These are not a warning, nor a cautionary alert, but a first step in a harsh and distressing process.
The following are “must-do’s” for all small and medium businesses
who fear they may be entering a cash squeeze:
- Ensure all personal and company details held by ASIC are up-to-date and current.
- Don’t simply “wing-it” look carefully at the present and forecast cash flow. If you are concerned – seek out the correct professional and swiftly act on their advice.
- The simplified “Small Debt Restructuring” initiative that was first applied during Covid by the Federal Government is still in force. That valuable information is contained in a factsheet on the ATO website. You should read it.
It is important also to keep in touch with or learn to use your MYGOV account. Normal mail processes are used by the ATO – However the ATO’s primary outbound message source is now MYGOV and that notice does precede paper letters and notices by up to a week.
In a recession, you cannot afford to hide from financial issues. When on the cusp of insolvency or worse, the choices you can make to protect your business and your personal assets do become limited. If the Bank, the ATO, or other secured creditors do take the first step, you are deprived of all control and all the options that might once have existed. That will cost you dearly.
Do you want to know more? Kevin Lovewell is an Accountant and Registered Business Valuer – He works as a business intermediary acting as various seller or buyer agents and as the principal agent in complex M&A projects; he is an active business valuer in the Small to Medium (SME) Market regularly undertaking work in appraising SME businesses for their market value.
Kevin Lovewell
M: 0401 308 385
P: 1300 551 757
E: Click here to contact Kevin Lovewell
Member & Registered Business Valuer
Australian Institute of Business Brokers
Jessica Holbrook
P: 1300 551 757
E: Click here to contact Negotia Group
Business Analyst
