Australian Small Business Ombudsman Bruce Billson has urged the Federal Government to reactivate temporary insolvency protections after a sharp increase in businesses entering administration in the last week of June.
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| “Small businesses aren’t like a light that can be switched on and off": ASBFEO Bruce Billson |
Billson says the re-introduction of measures such as the extension to existing safe harbour provisions would provide temporary additional protections for small and family businesses that may be trading insolvent due to lockdown trading restrictions.
“Small businesses aren’t like a light that can be switched on and off. With full respect for the need for public health orders, lockdowns do have a significant and immediate impact on small and family businesses and a cumulative effect when those businesses have endured multiple lockdowns. Many have far less cash in reserve, having eaten into savings to get through previous lockdowns.
“CreditorWatch has released data revealing a 75% increase in businesses entering administration in the last week of June, and that trend is widely expected to continue with payment times stretching out,” says Billson.
“Bringing back temporary protections that were in place last year, would be a sensible and appropriate policy measure, particularly for those small and family businesses impacted by recurring and protracted lockdowns in Melbourne and Sydney.
“Insolvency protections introduced temporarily last year worked to reduce the threat of creditors taking action against a small business impacted by trading restrictions and offered temporary relief for directors from any personal liability for trading while insolvent.
“Crucially its measures like this that give otherwise viable small businesses more time to recover or turnaround, preventing a wave of unnecessary insolvencies. By giving a small company breathing space to restructure, you also help mitigate the risk of small business creditors getting swept up in the domino effect of insolvencies.”
Billson encourages small businesses experiencing financial hardship to sit down with their accredited financial adviser for a viability assessment.
“We know the sooner a small business owner experiencing financial stress reaches out to an accredited professional such as their bookkeeper or accountant, the better the outcome,” he says. “Without the right professional advice, cash flow issues, compounded by falling revenue can prove devastating for the business owner, staff and their families.
“Now is the time to get expert, tailored advice on the state of your business so you can make an informed decision about the future.”
