Time to take stock

With tens of thousands of small businesses at risk due to the economic impact of COVID-19, now is the time to focus on finance, get professional advice and plan ahead.

The second wave of lockdowns in Victoria will have a lasting impact on the economy, but sadly many small businesses will pay the ultimate price.

Modelling by Deloitte Access Economics suggests about 240,000 small businesses nationwide are at risk of failure.

Adding to that grim picture are the latest CreditWatch figures, showing payment times are 224 per cent longer than July last year, which means liquidity is drying up.

And while the number of businesses entering administration over the past few months has been at historic lows, that has been largely attributed to the temporary government measures brought in to protect businesses from actions taken by creditors during this crisis.

“Small businesses should be making it a priority to sit down with their trusted, accredited financial adviser to develop a tailored plan.”

It’s in the best interests of small businesses to focus on their financial position now and to plan ahead for what happens when the current support measures such as JobKeeper stop and bills start coming in again.

If they haven’t already, small businesses should be making it a priority to sit down with their trusted, accredited financial adviser to develop a tailored plan for their business.

Small businesses with cashflow issues, compounded by falling revenue, may be putting off getting the professional advice they need because it costs money they don’t have. The snowball effect of this could be devastating, both for the business owner and family as well as the staff.

As part of our recently released Insolvency Practices Inquiry, we recommended the establishment of a small business viability voucher program, where small business owners facing financial stress would be able to obtain a voucher valued up to $5000 to access advice from an accredited professional  on how and whether to turn around their business.

Under the program, a business owner (or their accountant or bookkeeper) would apply for the voucher with services provided by a relevant accredited professional.

This would provide small businesses with access to expertise in judging if the business is viable, to help make an informed decision about whether turnaround is possible or exit is the right decision.

Getting this tailored plan is critical to the survival of many small businesses.

Equally, access to finance continues to be an issue for small business.

Too many small businesses are being knocked back for unsecured loans under the government’s SME guaranteed loan scheme. These loans are 50 per cent underwritten by the government so should be easier to access for SMEs. Unfortunately, the major banks are imposing unrealistic serviceability requirements on small business borrowers.

The program needs to be fit-for-purpose for SMEs.

Ultimately, in order for small businesses to get to the other side of this crisis, they need access to funding.

Kate Carnell AO, Australian Small Business and Family Enterprise Ombudsman

This story first appeared in issue 30 of the Inside Small Business quarterly magazine

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