Are You Set Up for Business Survival?
With the provision of JobKeeper and other government subsidies soon to cease, it is more important than ever to consider what you can do to ensure your business survival through this transitional time, and into the future.
Business Survival and the Year that Was
Reflecting on 2020, it’s certainly been a year like no other. It brought about bushfires, floods, a once in 100-year pandemic, closed state and international borders, quarantine, a recession where the rate of business failure was increased by over 50% compared to the previous non-recession year and the biggest changes to insolvency law in almost 30 years! That’s a lot to process.
Let’s discuss what you can do to improve your chances of business survival and avoid insolvency in the year ahead.
What is Insolvency?
First off, let’s delve briefly into what exactly insolvency is. According to the Australian Securities and Investment Commission (ASIC), it is when a company or person cannot pay their debts when they are due. There are several options to consider if your business becomes insolvent, such as receivership, liquidation or voluntary administration.
But how can you avoid insolvency in the first place? The tips below outline how to ensure business survival in relation to insolvency.
Tip for Business Survival #1: Review Contracts and Agreements Routinely
To ensure business survival, you should consistently review current contracts and agreements, to ensure your rights and obligations align with those set by the government stimuli i.e. JobKeeper. For example, are you fulfilling employee rights under these schemes and are your contracts reflecting the changes imposed by the stimuli? This will assist you in remaining afloat whilst the government stimulus packages are operational. Once they end however, it may also help prevent you from becoming insolvent when the government stimulus packages draw to a close.
Tip for Business Survival #2: Consult a Professional
The second tip for business survival is to consult a professional for advice. Where necessary, you may need legal amendments made to contracts or agreements to align better with the government stimulus measures and to better protect you from insolvency. How will you know when it’s the right time to consult a professional? If any one of the warning signs outlined below in tip #3 are apparent, you should raise your concern with a professional advisor.
Tip for Business Survival #3: Pay Attention to Warning Signs
Being attentive to warning signs of insolvency is the next tip. A tight cash flow is a big sign, but can also include pressure from creditors, being unable to pay employees and spending time preventing escalation of issues as opposed to the daily workings of the business. These warning signs are vital to keep the boat of your business afloat. These signs are like leaks, which, if attended to properly, can be patched up and fixed but if left for too long can result in even bigger problems down the track.
Tip for Business Survival #4: Source Funds
Our fourth and final tip to avoid insolvency and ensure business survival is to source funds. If you feel like you are struggling and if you have the capacity to gain financial advice, seek access to capital from trusted capital partners. Seek the help of friends and family and their financial assistance, if this is available.
What to do next
While these tips can be of great assistance to a business in need, they are merely a starting point to help you identify common issues you may face if your business is in trouble. If you feel your business is struggling, it is always vital to seek professional assistance, sooner rather than later. At The Quinn Group can help in providing the total solution. As an experienced team of legal practitioners, accountants, financial planners and mergers and acquisitions specialists we are well equipped to help you navigate the many challenges of business survival.
If you would like help with respect to insolvency and business survival, please contact one of our experienced business specialists by submitting an online enquiry form, calling us on 1300 QUINNS or +61 2 9223 9166 to arrange a teleconference or appointment.