Business Health Check
As COVID-19 collapses the economy, business owners wonder if anything can save them from financial ruin. With Australia confirming its first recession in over 29 years this has deteriorated the impact to Australian businesses. The stimulus packages offered by the Government are scheduled to end in September (though these may be extended in some sectors).
As detailed in our earlier BLOG ‘Flatten the Curve of Insolvencies‘ – the time frame for compliance with creditors statutory demands and bankruptcy Notices were extended from 21 days to 6 months. Those extensions are also due to end in September 2020. This will further impact businesses.
If you are a person or director or employee of a company facing some of these issues – Undertaking a Business “Health Check” will minimise the risk of you and/or your business becoming an insolvency statistic.
Check List
There are some common reasons why businesses will become insolvent. Whilst the broader economy will impact on your personal and company’s situation there are some internal factors which can be reviewed to take control of your situation. These include:
- Inadequate bookkeeping (or even no bookkeeping)
Smaller businesses sometimes have owners and managers that might have great ideas for a business but are not great at keeping records of their company finances. This isn’t just a problem come tax time, but it can also mean that the business can’t keep track of revenue and expenses, leading to the business spending more than the owner realised, or failing to notice a downturn in sales until it was too late.
- Excessive spending
A business may increase spending through investing in more staff or try and expand with new products or services. When times are good, there is plenty of spare money to make these investments, but if times tighten up, the additional expenditure can quickly eat into profitability and absorb the cash resources. These are fixed expenses which are required to be paid each month regardless of revenue.
- Too great of an appetite for risk
This often takes the form of the organisation being too willing to take on debt, particularly in the growth stages, before it is fully aware of its revenue ceilings.
There is a myriad of factors which may contribute to the profitability of a company. The same can be said when the company’s revenue and therefore profitability diminishes. We have experts that can assist you in providing specific commercially focused advice if you company is struggling to pay its debts as and when they become due and payable. We can provide you legal advice to assist you as an individual and the company generally. Our duty is to you and we are governed and bound by a code of ethics.
If you need advice, please contact us today.