While business confidence has improved over recent months and the Australian economy seems to have stabilised, these factors have not been enough to save the fortunes of many local enterprises, according to statistics released by Dun & Bradstreet.
Based on the figures, more than 13,000 businesses closed their doors during the three months to September. This marks a 17.7 per cent increase on the 11,565 that failed in Q3 2014. In fact, compared to the 9,304 businesses that closed during Q2 this year, it is clear that many enterprises have experienced money problems since the start of the new financial year.
Dun & Bradstreet report that these figures encompass businesses from a range of financial situations with the statistics including external administrations, liquidations and those that involuntarily deregistered.
Where was the worst business failure rate?
It is important to note that enterprises in every state and territory in Australia face different problems to overcome. Whether this is related to their industry or government regulations, specific regions certainly have it tougher than others at present.
The state with the highest percentage of business failures in Q3 was South Australia. There were 528 closures during this period which is a 47.9 per cent rise compared to Q3 2014. Additionally, this was 61.5 per cent higher than Q2 2015, highlighting the tough economic times in this state.
Western Australia closely followed, with a business failure rate 41 per cent higher than 12 months ago. In fact, when comparing statistics quarter-to-quarter, this percentage increased to a massive 66.9 per cent.
However, it wasn't just these two states that recorded negative numbers. Queensland (31.3 per cent), ACT (28.5 per cent) Victoria (26.6 per cent), NSW (25.8 per cent), Northern Territory (20.3 per cent) and Tasmania (17.3 per cent) all saw the number of businesses close their doors rise compared to Q3 2014.
Corporate insolvencies rise in Australia
Running a small business always comes with issues, but according to a recent report published by the Australian Securities and Investments Commission (ASIC), these enterprises are over -represented in corporate insolvencies.
In its Insolvency statistics: External administrators' reports (July 2014 to June 2015), the ASIC found that close to 80 per cent of all insolvencies occurred in businesses that had fewer than 20 employees.
A total of 28 per cent of these insolvencies came from the business and personal services industry (28 per cent), followed by construction (21 per cent) and accommodation and food services (10 per cent).
Given that 97 per cent of Australian businesses are categorised as "small" by the Australian Bureau of Statistics, these figures are a concern and a sign that leaders need to access support and assistance as soon as issues appear.
The ASIC explained that close to nine in 10 (85 per cent) of SME insolvencies related to assets of $100,000 or less. This suggests that just because your business has limited assets, financial issues can still emerge.
Why are small businesses failing?
The report also highlights the top three nominated causes of failure. For any business leader who is facing money problems, understanding what is occurring in the wider market could help salvage the situation.
Across 3,647 insolvencies, the blame fell on inadequate cash flow or high cash use. This reason was followed by poor strategic management of the business (3,518) and trading losses (2,836).
Does your business need assistance?
With the number of businesses failing and the number of insolvency appointments growing in Australia, now is the time for leaders to take charge of their situation and seek assistance.
The team at Corporate Lifeline are experienced in business financial matters and can help ensure your enterprise has the knowledge and tools to grow. For more information on how we can assist, contact us today.
