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A perfect storm of economic challenges confronts small business and it’s only a matter of time before insolvencies lift, says specialist.
‘Dark days loom’ for SMEs near the brink
01 August 2022
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7 minute read
There are dark days ahead for small businesses with a range of economic challenges confronting every sector but food, hospitality and construction especially vulnerable, said the insolvency specialist at CPA Australia.
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Concerns over rising fuel, materials and labour prices combined with a post-pandemic hangover would send many to the brink, said the manager of SMEs, insolvency and public practice at CPA Australia, Kristen Beadle.
Speaking on the Accountants Daily podcast, Ms Beadle said her profession was starting to voice its anxiety.
“There’s a lot of stress and our members and former colleagues are telling me that inquiries are up – and this isn’t just in food and beverage or even construction – this is across the board. There’s a lot of concern around long term viability,” she said.
“Some of this may have been as a result of being assisted through COVID, when those businesses probably were on the brink of needing some sort of formal work out. So there was just that postponing of the inevitable.
“The ATO is beginning to engage in its debt collection processes again, saying engage with us so we can get you on repayment plans.
“If that’s not something that they can do, then there’s that exiting out of the business cycle through more than likely an insolvency event.
“The can was kicked down the road. And I think now we’ve reached that point where something needs to happen.”
She said data had yet to reveal the full extent of the problem but figures would lift in the second half of this year.
“I think insolvency numbers will increase because businesses just won’t be able to sustain where they’re at, particularly now if the ATO is knocking on their door to repay debt. And don’t get me wrong, the ATO’s outstanding debt is significant,” Ms Beadle said.
“I think, ultimately, there will more than likely be a contraction in GDP… does that mean a recession? Probably in a technical sense, we may see one in the next sort of 12 months.”
And the summer break in five months loomed as crunch time.
“Traditionally around Christmas time is when people take leave and businesses are cash flow poor. They don’t have the sales over Christmas, but they still have to pay annual leave,” Ms Beadle said.
“So that’s always been quite a very busy time in insolvency – you’ll usually see a large company go into administration mid-December – we will see a lot of that.”
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