Dealing with Financial Distress
A Guide for Tradies
Running a successful business in the trades industry can be tough, especially when financial difficulties arise. Whether you're facing cash flow problems, mounting debt, or unexpected expenses, you're not alone. We specialize in guiding trades business owners through financial distress, offering practical solutions to help you regain control and navigate a path back to profitability. Let us support you in making informed decisions and steering your business toward a stable and successful future.
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Identifying Financial Distress
Cash balance declining
Mounting ATO debts
Unable to pay creditors on time
Not taking a fair wage for yourself
Declining mental health
The Importance of Early Intervention
More options to resolve
Early detection provides time to explore options such as renegotiating debt terms and implementing cash flow turnround strategies.
Protect business relationships
Early communication with suppliers and customers can help maintain trust and continued support and preventing disruptions.
Avoid insolvency
Early action helps preserve cash flow, ensuring the business can meet its short-term obligations like payroll, supplier payments, and loan repayments.
Avoid penalties and interest
Addressing distress early ensures the business remains compliant with regulatory requirements, avoiding penalties, fines, or legal repercussions.
It's never too early, or late, to reach out for help
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Resolving Financial Distress
When businesses face financial distress, they have several options to consider in order to manage and overcome their challenges.
Restructuring
Restructuring can take many forms, from structured mechanisms such as Small Business Restructures (read more on SBRs here), to informal debt negotiations.
Some restructuring types can be very complex and costly to undertake, so there needs to be a clear understanding of how and why the restructure is happening.
Cash Turnaround
Cash turnarounds are part of a broader business recovery process. It involves looking at the core reasons for the financial distress and implementing simple initiatives to improve the situation.
If addressing the financial distress early enough, implementing a cash turnaround strategy may put the business back on a positive path, and avoid more formal appointments such as an SBR.
Controlled Exits
In some cases it can be too late to restructure or implement a cash turnaround strategy. This may be because creditors have issued formal notices to begin winding down proceedings, or it could simply be because the the business owner's appetite to keep the business going has diminished.
In these cases, it's really important to control an exit from the business that protects the directors as much as possible in the circumstances.
Issues for Tradies to Consider
Licence protection
Some insolvency avenues may have adverse affects on operational licences, both for the business and the directors.
Cash flow financing
Often when a business is in financial distress access to credit becomes restricted, making it more difficult to manage out of the problem.
Relationships with key suppliers
Any plan to manage the financial distress should include proactive communication with critical suppliers.
Personal exposure
Directors may hold personally liability for the debts of the business. These should be identified and managed throughout the process.
Our Role: We act for you
It’s important to understand that an insolvency practitioner's job is to act for the creditors. They have strict rules to follow, and as such are typically conflicted from providing the Company, and its director’s, holistic advice that protects the director’s interests as much as possible.
This is where we come in. When appointed we work with you to do the following:
Review the Company’s position and identify the issues that affect the Company and it’s directors personally;
Work with the director’s and their advisors to mitigate these issues as much as possible on behalf of the directors;
Structure, formulate and compile an SBR proposal to take to an RP; and
Manage the SBR process on your behalf, allowing you to focus on the day to day operations of the business.