Reality and the Rose Coloured Glasses
[vc_row][vc_column width=”1/1″][vc_column_text]The festive season is over and reality is knocking on the door.
The Australian Securities and Investments Commission (“ASIC”) statistics show that February company collapses in Australia totalled 1,123, which represents an increase of 117%. This is the highest monthly insolvency figure on record, and represents a 44% increase over the five year monthly average of 780.
While historically there has always been a general increase in the number of insolvencies during February that follows the Christmas/New Year period, February2012 has seen an increase of 31%, higher than for the same month last year and 47% higher than the five year February average of 766.
The latest insolvency figures reflect the difficulties facing many businesses with the Global Financial Crisis (“GFC”) continuing to have a lag effect.
It would appear that the February figure is an early indication that during the 2012 calendar year, the numbers of insolvency appointments are likely to remain at GFC levels, which have been experienced since 2009.
I am seeing the major banks move very quickly to preserve their security.I am also seeing first hand and being told of situations where the Australian Taxation Office (“ATO”) taking unprecedented and in my opinion uncommercial action against companies and businesses in financial distress. I have no doubt that this action is being driven by the incumbent federal government’s pressure on treasury who in turn is pressuring the ATO to collect the outstanding taxation liabilities.
We are seeing a record number of winding up proceedings by the ATO in the Federal Court and in one instance, a garnishee notice being issued within 6 weeks of a business lodging it’s overdue BAS’s and attempting to bring its business affairs back into line with the assistance of the new external accountant.
To any business that is in financial distress, the message in all this is simple and clear, take off the Rose Coloured Glasses and have a look at Reality as this is not the time to be complacent.
The ASIC website sets out a number of factors that may indicate financial distress/impending insolvency, refer to the following link: Indicators of Insolvency.
The list is neither exhaustive, nora definitive indicator of insolvency, however, if your business is experiencing a number of these indicators, I would strongly recommend that you seek independent,external professional advice outside that of your current accountant.
I suggestadvice outside of your current accountant as unfortunately and far too often, I have seen that the current accountant for the business goes to the same optometrist that the business owner goes too.
It is never too early to seek independent professional advice when faced with dealing with a business in financial distress. In this regard, I would recommend that you discuss the issues with one of the following specialists:
- Turnaround Management Specialist,
- Insolvency Practitioner,
- Independent accountant
Alternatively, please do not hesitate to contact me directly and I will recommend an appropriate professional to assist you.[/vc_column_text][vc_separator][vc_message color=”alert-block” message_box_style=”classic” message_box_color=”alert-info”]
Remember: If you are facing financial distress, the timing for a successful turnaround/restructure is Sooner not Later – Act Now!
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