Invest
12 signs a business is heading towards insolvency
With just 50 days before key government stimulus packages are withdrawn, business insolvency is tipped to rise, according to an industry expert.
12 signs a business is heading towards insolvency
With just 50 days before key government stimulus packages are withdrawn, business insolvency is tipped to rise, according to an industry expert.
Jirsch Sutherland’s national managing partner, Bradd Morelli, described it as crunch time for businesses.
“December 31 marks the end of the insolvent trading moratorium, temporary increase in the statutory demand threshold, the first tranche of JobKeeper 2.0 and, for some states, the commercial eviction moratorium,” he said.
“It’s vital that businesses don’t ignore the warning signs of insolvency – otherwise they could miss the window to take corrective action,” Mr Morelli explained.
He pointed out that directors could be personally liable for insolvency trading, meaning it is vital they understand the risks.
Separately, the CreditorWatch October Business Risk Review shows that 14 of 19 industry groups recorded a decrease in payment times in the month, with many industries reporting consecutive month-on-month falls.
However, it is not all good news for businesses, while they are beginning to generate cash flow, payment times still remain 157 per cent higher, on average, than October 2019.
“Falling payment times and administration rates would ordinarily be considered encouraging signs because they indicate that Australian businesses are generating the revenue they need to survive,” Patrick Coghlan, CEO of CreditorWatch, said.
“However, the fact that payment times remain so high above their 2019 levels gives the game away, while falling administration rates show that government stimulus packages have created a backlog of companies holding on to survival.
“When this support is withdrawn next year, we expect many of these businesses to shed their camouflage and shut up shop because they do not have the cash flow to survive on their own two feet.”
Twelve warning signs your business could be heading towards insolvency, according to Jirsch Sutherland:
- Poor or no cash flow
- Can’t pay your bills
- Can’t pay staff wages or superannuation
- Poor quality books or records
- Net asset / (liability) position
- Losing clients
- Securing special payment arrangements with creditors
- Disputes between business owners and directors
- High staff turnover and lower competence
- Substantial bad debt write-offs
- Physical deterioration or poor appearance of your business premises
- Inability to access finance
RELATED ARTICLES
About the author
About the author
Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more
Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more
Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more
Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more
Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more
Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more
Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more
Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more
Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more
Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more
Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more
Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more
Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more
Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more
Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more
Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more
