Business: Navigating Economic Challenges
As 2023 marked a record-breaking post-pandemic high with 9,159 insolvencies, the trend has accelerated into 2024, signalling a challenging year for struggling companies. It’s been observed that there is a significant increase in wind-up inquiries, defying the usual lull associated with January’s holiday season.
There’s anticipation of a less forgiving landscape for financially distressed companies in the coming months. The shift in creditors’ attitudes, influenced by the impact of insolvencies on their businesses, is expected to result in a more assertive approach to debt collection.
The construction and food sectors are identified as particularly vulnerable, experiencing almost 2,200 wind-ups in the last six months alone, a 73% increase from the same period in 2022, according to ASIC data for 2023.
Alares Credit Risk Insights’ research reveals that total insolvency numbers in 2023 surpassed the peak seen in 2018–19, with court recoveries and winding-up applications trending upward in the final quarter.
Outstanding tax obligations pose a significant challenge for Australian businesses, with the ATO actively pursuing overdue tax debts. Higher interest rates are also contributing to increased court action by banks, surpassing historical levels in December.
Business owners should act promptly to avoid becoming casualties of this challenging environment. Address legacy debt positions by seeking independent expert advice, noting that some financial holes may be too deep to fill without external support.
In the current market, focus on managing costs rather than chasing sales and avoid sacrificing future sustainability to address past financial challenges.
Understanding a business’s costs, cash needs and true performance is crucial in navigating these challenging times, ensuring informed decision-making and sustainable financial health.
Business owners are urged to take a strategic approach, recognising that a focus on profit rather than sales is key to withstanding the current economic landscape.
Take proactive steps today and speak with your Simmons Livingstone advisor for expert advice on managing costs and maximising profit for a resilient financial future.
Call us on 1800 618 800 or via email at admin@simmonslivingstone.com.au.
