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The Ombudsman has issued a guide to help Australian small businesses navigate the challenges of paying or collecting a debt.
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ASBFEO launches SME guide to help tackle debt
19 November 2024
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The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has revealed a new guide for small businesses has been developed to help them overcome the challenges of paying or collecting debt.
Ombudsman Bruce Billson said he had experienced a 50 per cent increase in calls from small businesses worried a supplier was insolvent or that their own business was insolvent.
“Outstanding debts can be overwhelming for a small business, whether you are owed money by a customer or you owe money to a supplier,” Billson said.
“Businesses usually want to keep doing business with each other but struggle to find a workable pathway to resolve debt disputes. This is where we can help.”
The Better Help Guide - Small Business Debt outlined how the office of the Ombudsman could help small businesses deal with debts.
According to the Ombudsman, the guide was created because often the amount of debt was not in dispute, but rather the means and timing of when it was to be paid.
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Billson said the ASBFEO did not specifically provide legal advice or debt collection services, however, it could provide information and resources to help SMEs make informed decisions about how to recover or pay a debt.
Debt could be particularly stressful and consuming for small and family business owners, Billson said.
“Their identities are interwoven into their business and the stakes are so much higher than just a job. Many have invested a lifetime and put their life’s savings and family home on the line to build up their business.”
“Nearly half of outstanding small business loans are secured by residential property.”
An ASBFEO survey revealed cash reserves for 60 per cent of small businesses were low or at zero, meaning they would have no buffer if things were to go wrong.
Billson said the first step for businesses that owed money was to pay any part possible and offer to enter a payment plan for the remainder owed.
Similarly, businesses that owed money would need to find a workable resolution and understand realistic options to pay.
“It demonstrates your good faith and can be a starting point for discussion, this proactive approach may reduce the risk of legal action and unnecessary interest charges,” Billson said.
“When a business does not pay their bills it can cascade through the supply chain, causing economic harm to others.”
“A good business pays its taxes, proper employee entitlements and its small business suppliers in a timely way.”
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