Could your business be headed for insolvency?

Could your business be headed for insolvency?

Being able to identify the key early warning signs of a business in trouble is quite simply, the difference between being able to save a business from insolvency and not. 

By Jim Vass 

Early warning signs

If you missed the recent ATB Partners webinar with insolvency expert Graeme Beattie, then you missed some important information about how to tell the difference between a business that’s ‘stressed’ and one that’s on the brink of insolvency. 

In a nutshell, a lot of it has to do with momentum…. The longer the problem exists, the worse it gets. But if you spot the signs early, then you’re better positioned to take control and plan ahead.  At a high level, these warning signs are: 

  • Cash flow blocks
  • Stressed relationships with key suppliers
  • ATO drama
  • Cogs in business operations spinning at different speeds
  • Leaders “checking out” or becoming overwhelmed
  • Bad vibes … if it’s a family business

The thing is, timing is critical to being able to implement the right strategies for turning the situation around. And the great news is that there are numerous strategies you can implement, once you’ve pinpointed the problem. More often than not, businesses can be saved when issues are identified and addressed, before they become entrenched. 

The impact of Covid-19

The topic of insolvency is a bit like death and taxes – it has negative stigma and no one wants to talk about it. BUT, if you bury your head in the sand and everything gets worse, then you run the risk of running out of time and running out of options. And it’s an important topic right now, because there are some critical considerations for business owners in the context of current Covid-19 disruption, and inevitable post pandemic recession –  which the experts say, has already begun. 

To put it plainly, these external circumstances can not be changed. And – they’re not necessarily foreseeable either. Nothing about this year has been ordinary or predictable, but we’ve got to work with what we’ve got, as the saying goes. Sow’s ear, silk purse. You know what I mean. 

The other very serious consideration is that December is just around the corner and this traditionally presents a “cash flow crisis” for small businesses.  Have you considered the potential  impact this year? Have you had enough trading to put some funds aside? A recent survey by insurance company Allianz suggests that almost half of small businesses could run out of cash reserves by the end of the year. That’s a whopping number, and it paints a pretty bleak picture.  

In times like this, when there is a great deal of uncertainty, the most successful business survival strategy is to look within. Review your business from top to bottom and inside out. Understand what the numbers mean. Make honest and astute assessments and then do what it takes to make sure it’s financially stable for what lies ahead.  

Every business is different. Some are booming right now. Others are suffering, but have been buoyed by JobKeeper, and other assistance like business grants, or leniency from banks. 

While these initiatives by the Federal Government and the landlords and lenders have been vital for economic stimulus, inevitably, they will end.

What happens then? 

Get a grip

If you feel like you don’t have control over your business, then it’s time to take control: to get a handle on your current financial position, and also your future projections.

If things are looking shaky, there’s no shame in seeking the right kind of professional business advice. After all, these are unprecedented circumstances and some of the most solid and stable businesses are needing to re-think their operations post Covid-19 for a variety of reasons. 

No matter what shape your business is in right now, there are ways out of the quagmire.

You are not alone, and we are here to help

At ATB partners we offer taxation and accounting advice, along with virtual CFO services, as well as business planning and mentoring and financial planning advice. We have more than 60 years combined experience helping small business. We understand the unique issues you face, and the challenges that lie ahead.

Feel free to contact us at any time.


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