To be quite honest it is not a surprise.
Whenever interest rates or inflation go up it puts pressure on any business. If they are both high, it multiplies the pressure.
Then add to the fact that during Covid the government made sure that the most inefficient business remained in existence. Even those that should have been put out of their misery 2 years ago potted along with large ATO debts.
This was not sustainable and there is now a whopping great big hole in the bank accounts of the ATO. And as I predicted in this blog a year ago the ATO has started to tighten the screws. But it’s not just ATO. The banks are moving in too.
My insolvency friends are holding seminars and breakfast meetings knowing that there is work coming their way. And in a way they are saying different things. Some say that yes, insolvencies will increase but it won’t be a flood. It will be along the lines similar to pre pandemic levels. Others, like Insolvency Australia say they will surge – but then again, they would say that – its good for their members.
But it is not just business insolvencies. Personal insolvencies are also on the rise. This is because many borrowed maximum amounts at low rates of interest and many of these rates are moving from fixed to variable rates with a significant increase in repayments overnight. People trying to refinance are finding out that banks are refusing to refinance the original loans which means people are stuck with their lender on high interest rates.
Some business industries are at particular risk. Construction historically has always been risky but increases in material and wages costs is having an effect. The same is true for cafes and restaurants.
But if you are feeling under the pump, what should you do?
1. Come up with a Plan.
Speaking to your advisor should be your first move.
They will have the ability to assess very quickly where you stand. If you need to speak to an insolvency practitioner, they will tell you. If you need to speak to the ATO or your bank they will tell you.
If something it not working in the business they should be able to point you in the right direction.
If they can’t it’s time to move to someone who can.
2. Beef up on Financial Management
When times are tough, we don’t want to face reality – and that often means we take our eye off financial reporting. No- one wants to be told they made a loss, or the business is in dire trouble.
But here’s the thing. Once you face the reality you start making positive changes.
In 2015 we took over a client who had fantastic financial records, but no one was looking at them. They had let the business drift without direction and the business became loss making and debts with the ATO became significant.
But once reality was faced, plans were put in place and executed and today the business is extremely healthy. Was it easy? No chance. Was it worth it? You tell me.
3. Doing Nothing is Not an Option
I have seen many that do this only to regret it later. Do nothing and you will find yourself down a rabbit hole never to see the light. So our advice is do not ignore financial problems but face them
Maximising income and cashflow as well as financial survival are steps 4, 5 & 6 of our 9 steps to work less, earn more and build more wealth. If you would like more information please call 07 3161 9548 or email firstname.lastname@example.org>