While there are signs for optimism in the economy – especially for investors – owners and managers of businesses should still be cautious in their outlook, says Todd Gammel, business recovery and insolvency director at HLB Mann Judd Sydney.
“There are still a number of warning signs for businesses that need to be heeded, and even if there is an economic recovery, it won’t happen immediately and for many businesses a difficult trading environment will continue in 2013.
“Indeed, there is a temptation for business owners and managers of businesses that have current operating difficulties to hope that any problems will go away, and that things will somehow turn out OK.
“But the best thing they can do is face reality, acknowledge that they have a problem, and get help before it is too late.
“Businesses that do this stand a much better chance of survival than those that bury their heads in the sand.
“It is possible to turn a business around provided prompt action is taken,” Mr Gammel said
He said there are two main indicators that some businesses will struggle in 2013.
“A number of businesses failed and entered into administration, receivership or liquidation in 2012 and this doesn’t simply stop overnight – so we can expect more to follow.
“It also means there are necessary sales of distressed inventory and assets which will affect other businesses for some time.”
Mr Gammel also pointed to the number of job losses in large companies still being announced, which will affect consumer spending, and indicates that many businesses are still cutting costs to match a reduction in turnover.
“Job reductions in larger businesses may also result in further jobs losses down the line or business closure in some cases.”
According to Mr Gammel we will see a number of drivers of insolvency in 2013, including:
“If any of these scenarios sound as if they affect their business, owners and managers should talk to an adviser or accountant immediately.
“Often establishing a clear plan, taking decisive action and keeping key stakeholders onside can save a business that was otherwise destined for insolvency,” says Mr Gammel.
He adds that some of the steps that can be taken to avoid insolvency or enforced restructure include:
“Financiers are often willing to consider proposals and assess their position when given the opportunity,” Mr Gammel said.
“If insufficient detail regarding a plan or minimal time is provided, it is likely that most financiers will move to protect their position and recover the amount owing.
“The ATO also needs to be managed on a similar basis to financiers to agree an achievable payment plan where required,” Mr Gammel said.
HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.
For more information please contact:
Todd Gammel – Phone: 02 9020 4014
29 January 2013