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When debt strikes your business
Running a business takes passion, dedication, hard work, intelligence and a little bit of luck. So when your business takes a turn, it can be devastating.
In Australia’s challenging economic climate, even the most successful business can fall prey to volatile market conditions and cash flow pressures.
In these situations, it’s vital to identify, assess and respond to the signs of company turmoil to give your business the best chance of survival.
Business owners can unexpectedly come under financial duress because of circumstances out of their control. There could be changes in the economy, a customer might not pay an account, you could lose a vital contract or your debts could simply become unmanageable.
If your company is experiencing financial pressures, you should assess its solvency situation. If it looks as though your business is headed towards insolvency you need to take immediate action.
There are a number of strategic plans you can put in place to minimise the impact on all stakeholders. These include:
- Voluntary Administration
- Company Liquidation
When considering strategic action, it is important to be realistic about your financial situation. Ask for expert advise from your accountant or give us a call.
When your business hits hard times it is possible to turn things around and get back on track before your solvency becomes an issue. If you feel your solvency status might be slipping it is imperative to determine the chances of the business’s survival, identify appropriate strategies, and develop a preliminary action plan.
To do this, you should review each area of your business to uncover any major financial issues.
From your findings in the review you can then develop and implement a turnaround plan. Some common steps in a turnaround plan include:
- Assessing your labour requirement and making changes where needed.
- Refocus on the organisation’s core business by closing under performing business units.
- Restructuring management
- Eliminating unprofitable lines of business
- Identifying and potentially selling surplus assets
- Eliminating unnecessary capital expenditure
- Improving the accounts receivable collection process
- Focusing on the business’ cashflow
- Communicating with financiers and creditors
Acting quickly and seeking appropriate advice from your advisors is key in any turnaround. For help with a trunaround strategy or to talk about all your options, call us on 1800 00 3328. Our expert team of advisors will be able to help.
Has your business hit a bump in the road? If you are going through a rough patch or have short-term cash flow restrictions, you may consider Voluntary Administration for your business.
Voluntary Administration allows you to continue trading while undertaking a formal restructure that includes a compromise with your creditors. Unsecured creditors can’t enforce any of their claims against the company during the Voluntary Administration period which lasts for 20 days.
At the end of the Voluntary Administration period, creditors vote for one of three options:
- End the Voluntary Administration and return the company to the Directors’ control
- Approve a Deed of Company Arrangement for the company to pay all or part of its debts and then be free of those debts
- Wind up the company and appoint a liquidator (Company Liquidation)
Voluntary Administration is a formal insolvency appointment that gives companies the best chance to survive. It is designed to resolve a company’s future quickly.
One of the outcomes may involve a Deed of Company Arrangement (DOCA). A DOCA is a formal agreement between the company and its creditors to satisfy company debts.
A company goes into liquidation when its Directors and shareholders decide to wind it up because it can’t pay its debts.
Company Liquidation helps the directors to comply with their statutory duties by wiping the debts and deregistering the company.
When a company goes into liquidation the shareholders/creditors appoint a Liquidator to:
- secure and sell all the assets belonging to the company and distributing the proceeds to creditors.
- investigate and report the company’s affairs to its creditors.
- prepare a report for ASIC looking into the company’s failure.
- once the liquidation is complete the liquidator will apply to deregister the company.
If your business is experiencing financial problems, you require specialist, expert advice from an experienced company. That is why we work alongside ReVIVE Financial to provide business debt solutions to people in need.
ReVIVE Financial specialises in providing expert service and advice to companies in financial difficulty. Its down-to-earth, practical approach means every case is treated with consideration and expertise.
- mining services
- tourism and hospitality
The team at ReVIVE understand the urgency of these matters, and pride themselves on being able to adapt quickly to provide the most relevant and up-to-date advice to companies in financial distress.
Free Call: 1800 00 3328