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Australian businesses are at risk of unpaid invoices now more than ever. March marked the end of the Federal Government COVID-19 Stimulus that has helped keep a number of small businesses afloat by the skin of their teeth. But what will happen now?

Optimum Recoveries are expecting that a large number of small businesses that have relied on the temporary Government measures to stay open will close. Unfortunately, it simply won’t be viable for these businesses to stay open without the cash-injection for their advertising, new digital platforms and staff payments.

There will come a time when these businesses won’t be able to pay their invoices – but how do you prevent this from affecting your own business?

SME Insolvency

Key Insolvency Dates: March and July 2021

March and July will mark some of the key insolvency dates due to the end of Jobkeeper (March) and the beginning of the new financial year (July). As predicted when Jobkeeper was announced, the end of the Government’s economic stimulus will be detrimental to small businesses who all at once will lose their financial assistance, risking unemployment for staff and closure of the businesses all together.

According to the Reserve Bank of Australia, up to 25% of small businesses could be at risk of insolvency. Businesses who have managed to stay afloat with the help of temporary cash-stimulus measures are what we call ‘zombie companies’- businesses that aren’t viable long-term and are only solvent because of financial assistance.

As a result, many small businesses will see May – June as a significant make-or-break moment as they discover whether or not they can remain solvent without Government assistance. The end and beginning of the financial year (June/July) also poses a risk to these businesses. Come June/July, these businesses will be forced to take a closer look at their finances, pay their expected taxes and possibly any extra costs that have been revealed. 

What You Should Expect

If you have clients that you suspect might be at risk of insolvency, there are a few tell-tale signs that might indicate insolvency is on the horizon. You might see your clients begin to display unusual and worrying behaviour.

These can include things like:

  • Invoices not being replied to or paid as quickly as usual
  • Unusual inconsistencies in communication
  • Any downgrades in their operations
  • Loss of key staff and personnel
  • As well as any other gut feelings and signs you might notice
SME Australia

How to Protect Your Business

Knowing how to protect your own business if you have zombie companies as clients is essential, and there are several measures you can put in place to do so.

  1. Be vigilant in your dealings.

In order to protect your business, it’s important to be extra vigilant in your dealings and make every interaction you have with clients be carefully looked over before any money is exchanged.

Some things to do are:

  • Fact-check their financial situation before agreeing to payment plans
  • Ask a credit bureau to conduct a review of your customers – all of your clients, no matter how long you’ve been dealing with them. A credit bureau will be able to notify you of any worrying signs or red flags so that you can act fast and avoid potential repercussions
  • Keep in contact with your suppliers and customers. Regular communication is so important in uncovering any concerning issues before it becomes too late. You’ll be able to pick up on any changes in their behaviour, such as over-promising or escalating excuses
  • Ensure your internal processes and terms are watertight.
  • Get an expert to review your current T’s & C’s, credit management processes and internal policies to ensure your business has adequate risk protection in place.
  • At Optimum Recoveries, we can conduct a health check, identifying any gaps that may leave you susceptible to debt that is hard to recover from.
Insolvency Australia

How Optimum Recoveries can Assist

At Optimum Recoveries we are passionate about not only helping your business recover from debt but implementing effective measures to prevent and manage debt. Part of this process includes helping businesses manage their own clients and ensuring that their actions don’t impact on your business’ success.

Our debt prevention service has three steps which include:

  1. A thorough health check of your existing credit management processes
  2. A customised proposal to help you either refine, improve or overhaul your credit management processes.
  3. In-house training and development to help your team learn how to use your optimised credit management processes.

To enquire about our debt prevention services, fill out our enquiry form here or contact us on (07) 3166 8888.