When COVD 19 restrictions came into play in March 2020, many businesses saw their revenue evaporate. Since then, many have been working very hard to keep their heads above water – largely with the help of government stimulus funding – in the hope that either trading conditions will improve, or more help will arrive to see them through the pandemic.
The question most are faced with is “how long can I hold on?”
One of the major concerns for business owners is the penalties they could face for insolvent trading. This includes personal responsibility for liabilities incurred while their business is technically insolvent.
At the start of the pandemic the Federal Government announced temporary relief from insolvent trading penalties up to 25 September 2020 to avoid an early wave of insolvencies from directors seeking to avoid insolvent trading penalties.
In early September the Government extended insolvent trading penalty relief until 31 December 2020, to allow struggling businesses an extra three months to prepare for trading without the protection of this relief.
What will happen in 2021 when the insolvent trading penalty protection is lifted?
Experts are predicting a flood of insolvencies from business who are not able to pay their bills when they fall due.
Among the large volume of business facing insolvency when this relief is withdrawn, there will be good businesses that, under more normal circumstances, have viable business models. These businesses could thrive in the post-COVID era with access to liquidity and business turnaround skills to see them through this transition period.
To navigate the path through to the post-COVID era, busines owners will need to work with advisors who:
Understand business turnaround (cash flow modelling, creditor management and cost reduction strategies)
Can implement Safe Harbour protection mechanisms if needed
Have access to capital for good businesses with a long-term viable business model
If you are a business owner who would like to know more about what options are available to help you through the pandemic and beyond, then please get in contact for a no obligation chat about your business.
We would also encourage you to consider accessing our Viability Assessment tool. We are currently offering to provide the first phase of the Viability Assessment for free. This involves preparing a 13-week cash flow for your business at no charge.
We are doing this for businesses who are getting on the front foot and taking action to understand their financial position prior to the 31 December 2020 deadline, as now is when you have the best options for positive action.