For many businesses, these unprecedented times mean we should be taking a long, hard look at future trading prospects.
COVID-19 Pandemic relief packages are ending…
There have been many relief measures made available since the Coronavirus pandemic first hit Australia, in early 2020.
The federal government, via the treasury and the ATO, plus many banks and financial institutions have offered deferred payments, interest-only payments and payment arrangements to enable businesses to continue trading or to restart as soon as possible. These arrangements have mostly expired or you may need to renegotiate agreements.
State Governments offered a variety of one-off payments and other relief measures.
The Jobkeeper allowance was in place to help companies retain key employees.
The ‘trading while insolvent’ laws were relaxed, with conditions.
It may be critical for the future success, or failure, of your business to get professional financial advice as soon as possible. You will need assistance to negotiate ongoing payment plans with your debtors. You need to make certain you are aware of all relief measures that applied to you, or your business, to be sure you don’t miss out.
Which situation describes your business?
It is probable your business is in one of the following situations regarding finances and ability to trade:
1. Looking Good
The business seems to be profitable and competitive and expects to continue.
– Company directors are confident the business is solvent. Monitor as usual
2. Battling on
The business has been severely impacted during the pandemic and the subsequent lockdowns. Directors believe the company should be able to continue trading.
– Seek financial advice. A company restructure or small operational changes may make the business stronger. Make sure you have taken advantage of all available relief measures.
– It will be important to keep up repayments for any payment plans agreed to cover debts during the pandemic. Your financial advisor will ensure any repayments agreed are sufficiently conservative, to prevent cash flow difficulties.
– Be aware of the warning signs of insolvency, below.
3. No improvement
Financial difficulties from before the pandemic remain
– Act now. Seek immediate financial advice.
– A financial expert will review company finances and advise whether the company needs to be wound up. They will assist in dealing with creditors.
4. Over and Out
These companies have been severely impacted by COVID19. The owners have had enough and don’t want to continue running the business.
– Act now. You may need advice on any legal implications of trading while insolvent.
– A financial advisor will help you with the best way to end the company.
– You will want to ensure the best outcome for employees and debtors
– A professional, experienced financial expert will help you achieve the best financial outcome for directors.
It is going to be common for companies to have unpaid debt repayments with landlords, suppliers, banks and the Australian Tax Office (ATO).
Most businesses will have unpaid debts. Your Creditors will be expecting you to attempt to arrange a repayment plan. Be aware they may be struggling financially too and it might be a difficult discussion.
Your financial advisor should help you to negotiate, especially with debts to banks or tax or superannuation debts with the ATO.
Insolvency – the warning signs of financial difficulties
Now, and during ‘normal’ trading times, it’s important you are able to identify and respond, to signs your company has financial difficulties. Often, the situation can be turned around with expert help. Seek professional financial advice if you notice any financial red flags:
Cash flow difficulties
– reduced revenue, reduction in sales/demand for services
Unable to pay creditors
– The business is unable to settle debts
Demand letters from creditors
– creditors are hassling you regarding long-term debts
– You don’t see how the situation can improve
Missed payments to the ATO
– superannuation and PAYG debts outstanding
Additional loans are not available
– The company is refused further credit
While there are many other businesses in a similar situation at the moment, you should not be complacent.
Seek help now! Continuing to trade while insolvent can result in criminal charges for company directors.
Beware of poor/dangerous advice
It is important you seek advice from a reliable and professional adviser, such as a suitably qualified, and accredited, financial adviser, accountant or registered liquidator. They will consider whether the company is eligible for temporary restructuring relief and help you understand your legal obligations and personal liability.
Especially in these troubled times, be wary of unsolicited approaches from people who offer to help restructure your company. They may suggest they are able to enable the business to continue without having to pay any of the company’s debts.
If the advice you get sounds too good to be true, you should get a second opinion from another adviser.
Give your company the best chance to survive – Contact Corporate Lifeline
Corporate Lifeline is the leading provider of financial assistance and guidance to Australian companies. Our team have helped over 300 businesses turn their fortunes around, saving them from going into debt or even insolvency.
We can help you make a claim for any outstanding support or assist you with drawing up debt repayment agreements, giving your business the best opportunity to continue successfully.