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The Australian economy is affected by several soft factors that can push a business toward bankruptcy. Interruptions in global trade due to COVID-19 and record-high unemployment rates are all driving forces.

Small businesses were hit especially hard during the first two quarters of the fiscal year, and the hurting does not seem to be ending anytime soon. Even with government schemes in place to assist, no industry sector is spared, and no company is immune to financial distress.

Follow the Signs

There are warning signs of impending financial collapse if immediate steps are not taken to set things back on track. Business owners who pay attention to these cautionary indicators often can right the ship before it is too far off-course to be saved.

1. You are losing clients/customers

It is perfectly normal to cycle through clients from one year to another, depending on the nature of your product or service. An ongoing decline in sales without the potential for replacement of lost revenue is a sign it may be time to hire a financial advisor to strategise.

2. You are losing your best talent

Employee turnover eats into any business’s budget. Searching for suitable replacements, onboarding, and training new hires can be time-consuming and costly. It takes the average Australian company 39.2 days to fill vacant roles. One-off staff departures are normal and not a sign of trouble. But when your best and brightest start dashing toward the exit at once, it is time to address the underlying issues.

3. You have a cash flow shortage

Cash flow shortages are somewhat normal, especially for small businesses. Clients that are slow to pay and tightened lending criteria contribute to this issue. If this is an ongoing problem, it is time to take action to prevent it from winding down your business for good.

4. Your expenses are escalating

Spending money faster than you earn it is never a wise financial strategy, yet it is an issue with which many businesses struggle. If your business is operating in the red more than the black, it is time to get brutal about trimming expenses. Working with a financial advisor who specialises in business insolvency can help.

Trading While Insolvent

Unlike the other warning signs, trading while insolvent is a final cry for help for any business. The practice also happens to be illegal, which can open a whole new can of worms for businesses already struggling financially. If matters have gotten to this level of seriousness, your business is in immediate need of help from a financial advisor skilled in financial insolvency. Getting the right advisor on board quickly can mean the difference between your business failing or restructuring and rebuilding.

The Bottom Line

While not all of these signs mean a business is headed toward Insolvency, they are common indicators of financial struggle that should never be ignored. The knowledgeable team at Doug Constable Group can help get your business back on solid footing. Reach out today to schedule a no-obligation consultation.