TRANSCRIPT
Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Nick Rheinberger.
ABC Radio Illawarra
Subject: Insolvency figures, small business pulse, ASBFEO assistance
Nick Rheinberger
Bruce Billson is the Australian Small Business and Family Enterprise Ombudsman. Bruce joins us now here on ABC Illawarra. Good morning, Bruce.
Bruce Billson
Nick, great to be with you and your Illawarra listeners.
Nick Rheinberger
Do these insolvency figures from ASIC surprise you?
Bruce Billson
Sadly, no, they are reflecting one of the most challenging business environments that most people can remember. They are in each one of them Nick, a tragedy and a story of dashed hopes and, in many cases, enterprising men and women putting their houses on the line, and all they've got is to create these business opportunities for themselves and others. So, whilst the numbers are very high, each one of them is a tragedy.
They're not, as a proportion of operating businesses – they've been higher before Nick, so – in nominal terms, in actual number terms, they’re about as high as they’ve ever been but not as high as a proportion of businesses.
But then there's also a significant number of people that are running a business but are facing personal bankruptcy, that's another set of figures. And again, that's a disturbing number as well, reflecting those really difficult trading conditions that were captured in your introduction.
Nick Rheinberger
Yeah well, what does that, tell me a bit more about that? You're running a business but you're facing personal bankruptcy.
Bruce Billson
Yeah, well see there's only 2 in 5 of small businesses in Australia are structured as companies. Those company structures comes through those ASIC numbers. 3 in 5 are operating through some other model. They might be an independent contractor, a sole trader, they might be operating through partnerships.
In those cases, if you and I were independent contractors, we went to take a lease out on a property as our business premises, it would be in our personal name, not in our company name. That's where that correlation comes through, and even as you again, picking up on the point that was made earlier in that introductory piece, which was absolutely compelling. Some taxes, if you don't pay them, become a personal liability, and that's where things like unpaid superannuation and the like, directors can end up being personally liable for those.
So many of your listeners, like in my own experience taking out a business loan, they basically say, show us your collateral and want a mortgage over your home or some personal guarantees to make that vital funding available.
Nick Rheinberger
Right, so the person that opens a cafe, it's just them and their husband perhaps, it's probably a partnership, the clothing store downstairs, probably not a company. And these figures what you're telling is they're not even reflected in this ASIC, there's this whole hidden series of personal bankruptcies.
Bruce Billson
That’s right, they come through what's called AFSA (Australian Financial Security Authority) data and that picks up those personal bankruptcies, and they track to see, well, what are the causal factors and there's probably from memory, more than a third are linked to some sort of business activity, so it's a really disturbing time. The business conditions, thank goodness, look like they've bottomed out.
Yeah, we run a pulse, just to check the health check on the small business economy and for the first time since about August 2022, there's been a microscopic uptick of 0.1% after a significant dip post-COVID, you know when there were a lot of supports available for businesses Nick?
When they came off, so did the business conditions and in fact, the number of the businesses that probably had a weak pulse, were kept alive during that time. And so, some of these figures also reflect a bit of a cleaning out of those businesses that, had that help not been there, might not have survived anyway.
So, it’s a challenging time, but most people who are thinking ‘gee, I hope we're at the worst of it,’ there might be a glimmer of light at the end.
Nick Rheinberger
Yeah, it just makes me think of all those construction companies going bust and that probably leaves a whole lot of subbies who are out-of-pocket, who probably pay their own workers but they're out-of-pocket personally, so thank you for pointing this out.
Bruce Billson
So there’s about 7,000 disputes we deal with at my office, about 40% of those are payment disputes. So that's where people have delivered the goods or they've provided the service, they just want to be paid. We've had a significant number saying ‘hey, I'm not getting paid by this business customer of mine, maybe they’re in deep doo doo and if they're insolvent, then they don't pay me and then that presents a problem for my business, because I've already, as you've described, sunk the money into paying the team – I've bought my supplies, my inputs, I'm out-of-pocket – so that, that contagion effect, is also something that was seen.
Nick Rheinberger
It's a whole series of dominos, isn't it? You know, if you’re not getting paid, it's probably because, you know, someone's trying to do the right thing but they just can't.
So that brings us to you Bruce, what help can you as an ombudsman provide businesses that are struggling? What places can you actually solve issues?
Bruce Billson
There’s probably three ways we can help. One is the dispute resolution service that we offer and we do that in partnership with the New South Wales Small Business Commission. So, if it's a state matter we’ll partner with the New South Wales Small Business Commission. If it's a federal matter then we'll get involved, or if it crosses, you know, state borders we’ll get involved.
Now those matters, you know, if you're running a good business and you've not had a challenge with bad paying customers in the past, chasing money can be really tough, Nick. So we provide some resources to help people do that, and if they're unsuccessful, we may get involved.
There's a significant number of businesses in the Illawarra, that have come to us who have had problems with digital platforms, so they might be selling through one of those online digital platforms. Maybe their account gets hacked, they can't access their customers and too often those digital platforms, you can't speak to anybody Nick, I mean, you go on their website and say, what do I do because I can't get into my account? But you have to get into your account to tell us you can’t get into your account. So we get involved with those sorts of things.
The other things we do is we bring other resources together that are available across government. Nick, I wish it was my gift to make every business successful, but it's not. What we aim to do is make sure none fail because they didn't know about the help that's available.
There's help there through the Small Business Debt Help Line. There's help there through some of the emotional well-being supports when it’s feeling like it's completely overwhelming and even if there's disputes with the tax office and the like, we can get involved and be a real ally and asset to those small businesses.
Nick Rheinberger
Well, I do hope you keep up the good work. Thank you. Bruce, great to talk to you today.
Bruce Billson
Take care, best wishes.