When does a business need help dealing with the COVID Hangover? — Brendan Giles
As we recover from the impact of COVID-19, many small and medium businesses are facing difficulty dealing with the ‘hangover’.
Steps businesses took to survive through lockdowns, like deferring rent and taxes, seeking holidays on finance payments, maybe even delaying the payment super for employees now have to be dealt with. I call this the ‘COVID hangover’.
This hangover can put a lot of pressure on businesses as we recover from the pandemic. The combined stress of the government withdrawing support, trading recovering slowly, and dealing with the ‘COVID hangover’ will be too much for some businesses.
If you are running a business, or advising clients about their businesses, the key to saving struggling businesses is to seek the right advice early. To help identify when a business might be in need of some expert turnaround or resturcktriong advice, here are some key indicators to look out for.
- Outstanding taxation debts, especially if the debts are more than 60-day overdue or the ATO has issued a payment demand or reminder.
- Non-urgent creditors not being paid on time, such as Superannuation.
- Creditors aren’t getting paid. Significant amounts of accounts payable are outside trading terms.
- Reliance on high costs forms of financing such as overdrafts or credit cards to meet business expenses.
- Customers aren’t paying. Significant amounts of accounts receivable are outside payment terms.
- The company has received a Statutory Demand or wind-up application.
- High staff turnover or unhappiness within the management team. People are jumping ship.
- Significant losses, especially if there have been continued losses over the last two years.
- The directors or shareholders are routinely injecting funds into the business to keep it afloat.
- Negative net assets on the balance sheets.
- Cash flows are insufficient to deal with day-to-day expenses and paying down debt accrued through the pandemic.
If your business, or a client’s, is showing one or more of these indicators, there are many unique opportunities that exist to restructure the business, renegotiate its debts, improve business health and cure the ‘COVID hangover’. The most important thing is to seek help early. The earlier a business gets the right advice, the more options are available, and the greater the chance the business can quickly get past the ‘COVID hangover’.
If you’re interested in the options available to restructure COVID debts, reach out for a free, no obligation chat about your business and how I can help.
Originally published at https://www.brendangiles.com on November 30, 2021.