The accommodation and food services sector experienced a 21% increase in corporate insolvency appointments over the past year while the retail trade industry saw a 19% increase. Based on discussions and enquiries from business owners, there could be more pressure to come in the retail, construction and trading industries.
There was a drop in revenue for cafes, restaurants and retail in Sydney because of an oversaturated market. The main cause of personal insolvency is related to business economic conditions affecting industry, including credit restrictions, price cuts and competition, price drops, and rising costs. There was also a lack of business ability including failure to assess business potential and underquoting.
NSW, Victoria and Queensland had the greatest number of corporate insolvency activity in the same top five industries: construction, accommodation and food services, retail trade, transport, postal and warehousing.
To avoid insolvency, you would need to change the way that you conduct your business and the way that you deal with your own debtors. Look for signs that indicate a cash flow problem. Should you experience difficulties, seek help from your accountant as early as possible to avoid the irreversible effects of your business being forced into liquidation.
You should be able to see the bigger picture through efficient administrative systems, that can easily highlight missed debtor payments or fines for failure to lodge returns as well as tracking your creditors. Talk to your accountant to understand the financial facts and figures of your business, how much is owed to the business and the estimates for cash flow over the forthcoming months. If you have reliable data, you can take positive action and even control credit.
Your accountant can scrutinise your business cash flow needs and identify solutions to prevent insolvency. This can be done by selling some underused assets or factoring out debtor invoices. Control your debtor payments with a breakdown of each debtor’s account. Should you have an issue with a lack of, or too much stock on hand, or perhaps you are having problems in obtaining new credit because of late payments, these issues and more can be addressed with the help of your accountant.
As you look for different ways to grow and improve your business, seeking professional advice from a business consultant could prove to be an important and helpful decision.
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