Australian Small Business and Family Enterprise Ombudsman Bruce Billson extract of interview with Philip King.
Accountants Daily Insider - Podcast
Subject: Payment times, dispute resolution, tax concierge service, insolvency law reform, disaster preparedness
Hello and welcome to an Accountants Daily podcast. My name is Philip King, I'm editor of Accountants Daily. And today our topic is going to be small business and the problems that small businesses face. And in our North Sydney studio today, I'm lucky enough to have with me Bruce Billson, who is Australian Small Business and Family Enterprise Ombudsman. Hello, Bruce, how are you?
Phil, doesn't that just roll off the tongue?
Well, it almost did, yeah.
Great to be here. I mean, there's certainly some headwinds that the small business community are facing. And I'm delighted to be with you and your audience today.
I started to draw up a list, actually, of some of the topics and I got to about half a dozen and thought there's room for three podcasts here. But I thought maybe the best place to start, particularly given we're recording this just prior to what will be the RBA decision on rates for February, so with that in mind, we don't know the result yet, but payment times, Bruce. And this is payment times by the relatively big end of town to the relatively small end of town. And maybe you can tell us a little bit about why this is top of mind for you and by way of talking us into that topic tell us a little bit about your role more broadly.
Well, we all know that cash flow is king and there's so many businesses that may on paper look like they're quite profitable but if they can't get the money in, that can be really challenging for the business's survival. So, I'm sure all your listeners know and the trusted advisers they turn to point to cash flow as a critical health indicator on a business and payment times are central to that.
Sadly, this is not new. Problems with big businesses not paying small business suppliers in a timely way has been around for some time. There's even been business models built – dare I mention Greensill and others - that have sought to, I suppose, reduce the harm caused by shabby payment times performance. So that's been around for a while.
We've kept a close eye on it. We do that because my agency's role is to help with dispute resolution. That's one of the key functions that we provide. And at the moment, sadly, about 40% of the matters that come our way are related to payment times. So, what's that look like? That looks like a small and family business doing what's asked of them, providing a goods or a service, waiting to get paid for their endeavours in their enterprise.
This has been such a problem, governments have leaned in. The previous federal government introduced a reporting register, so 7000 of our largest corporates have to report quarterly on just what their terms are, so what their ambitions are for payment times, and then what their performance is. And that was a bit of a ‘show and tell’, hopefully a nudge to improve performance, but it hasn't actually improved that much at all.
And still we see far too many small and family businesses waiting way too long to get paid for what they do for their big business clients. And it's just shabby. It doesn't need to be this way. Yet such effort goes into trying to get people to get the income that they've worked for in their business in a timely way. It's surely not too much to ask, Philip.
That number I found quite shocking when I first saw it: four out of ten inquiries to your office concern this issue. And as you mentioned, there's been a payments reporting register in place for a little while, and what's emerged from that is also quite shocking.
Oh, it's terrible.
I know you've probably got the numbers in front of you as well.
I have. It's three out of ten small businesses can count on the 30-day payment window. Now, 30 days is hardly shooting the lights out. We saw during COVID, and to the credit of some of the big corporates and the mining companies they knew how crucial cashflow was during COVID and the impact COVID had on so many business operations, that they committed to pay their small, and in the case of the mining companies, small and indigenous businesses in three or four days.
And they managed to do that and that was thought to be a good corporate citizenry thing to do. Here, and let's call it a business as usual type of environment, three out of ten are managing to pay their bills within 30 days. That's hardly spectacular. You would have thought performance could be better than that. But that's really not great. And then we find a quarter of small businesses are waiting for over four months to get paid.
Now, you imagine if you're carrying that kind of cash flow problem, and if market forces were operating as they should, a big business would think, well, the cost of funds to me has got to be cheaper than a smaller supplier.
If I make the small supplier wait too long, they'll probably send a price signal because of the extra cost to their funds, through to me, and I'll end up paying more as a big business. That would be if the market was purely functioning in its ideal sense. But we know that's not the case. That it's a power imbalance that's played out in ‘take It or leave it terms’, not entirely good relations, including not paying in a timely way. And that's why there's such a focus on it.
And as we see, there is a lot of economic headwinds. Even though we don't know the RBA decision today, we know that the environment is tough for small businesses and the fact that they've been exposed by this register hasn't really changed the game, has it?
And that's probably why it's appropriate the Government is reviewing the register. The policy objective sitting behind it - you know, a lot of things might happen in Canberra that people can't make sense of, but usually there's a policy objective that is what is the motivation for a measure. In this case it was the hope that transparency, that the’ show and tell’ of it all would be enough to prod big businesses to lift their game.
Now, we've been tracking three returns now, so three lots of series of data, and it's not got any better. So clearly that idea hasn't manifested itself. And that's probably for a couple of reasons. There's an awful lot of data in there. There's probably a quarter of those businesses that report, actually don't have a small business customer. So that just gums up the information.
It's a little hard to track and decipher, like a snowstorm of information, it's hard to pull out critical data. Now, I'm fortunate to have the capacity in my agency to have great data analysts who can unpick all of that, park to one side the nonsense entries, you know, like minus figures, the negative figures, people paying bills before they're aware of them. That's a clairvoyant gift. But we've taken some of that out and can get to the nub of the matter. And so, at that level, it's a lot of information. The utility of it in terms of prompting changed behaviour, that hasn't hit the ground running just yet.
And that's in part why the Government's decided to review the register, see how it's going, see if it's a proportionate regulatory burden because I also hear from those big businesses what a pain in the neck it is to produce this information, to have software, to scrape the material, all that sort of stuff. So, maybe it's a big imposition with a virtuous policy objective in mind that hasn't peaked early in its impact. So, you know, we're out there, highlighting this information and really being in partnership with, say, the Business Council of Australia that has its own 30-day payment policy and saying, Gee, I'm devastated about how shabby this is. Surely you must be too, because your message to your members is, you know, 30 days is reasonable corporate citizenry. It's not exemplar behaviour. I would have thought a week might be something to celebrate and let's celebrate those exemplars. But, you know, at the moment it's a lot of fog, when peeled away doesn't point to a great picture at all.
That's an interesting idea. Perhaps, you know, celebrating the winners here.
Just on that, at the moment, the top of the class is 20 days or less. And one of the things that I hope the government might take on, in fact, what we've recommended, is why not have a 14-day or less or seven-day or less category as part of that reporting framework, so that those genuinely doing the right thing can get the glow from that and set the example to those in their industry.
I know in the UK model they've got apps that hang off it that you can quickly do a search to see what a prospective customer’s form’s like. These are the sorts of things that we're aspiring to. And I think the business community should be up for it because there's no question that they can lift their game and they should.
They talk a good game, like you're saying, the BCA, I mean the preferred result is broadly in line with your own. But in the end, market power of big business seems to rule the roost here. So maybe some sort of rating system, we're getting very familiar with online rating systems now, perhaps a little app that tells you, you know, how good or bad your potential business partner is.
Well, that's exactly what we're aspiring to support. I mean, the regulator’s got a job getting the information in, getting it published in the register, and largely that's their function. What we're saying is, well, if the data transfer capability was better, we could then feed that into an app where people could check market segments, check how each are performing.
I mean, dare I say it starts looking a little bit like a league ladder, which is what the BCA is trying not to have, but frankly, if the bottom dwellers aren’t lifting their game, there needs to be some way in which that's visible so that directors and leaders of those companies can say, Gee, we can do better and we should and get that leadership message through because with things like eInvoicing and the like, the ability to pay in a timely way is better than ever.
This is really about appetite. This is really about a preparedness to use those tools to see this as an important contribution as a good corporate citizen, and that's what we're trying to do. So, we're looking at those sort of apps options. But again, the register and the way it's shaped, and the software it uses has an implication for how readily you can analyse it and then put out new product like an app that says, in terms of the advertising and media space, Momentum's performance is this, whereas others might be something else. That would help inform small and family businesses about who they do business with and the terms that they can anticipate or seek to change if they've got any influence over them in the first place.
I made the “mistake” of downloading some of that data, and I sympathise entirely.
It's a huge file. And my data scientists say this is just the way it's structured, it's clunkier than it needs to be. So, there's some scope there. But the data is, as I said, it's a snowstorm of stuff, some of which need not be there, that complicates it and there's scope to improve that.
As Dr. Craig Emerson, who's been appointed by the government, conducts the review, we're pointing to not only the policy objectives and how that can be best advanced, but also the enablement, the capacity for the register to feed and inform and be a positive influence either in reducing the appetite for people to be pretty ordinary or to quote my inner John McEnroe, when I see those numbers, you know, ‘you can't be serious’. It's like after a bad line call. And for those that are doing the right thing to be appropriately recognised for that.
And is this going to become part of the review ambit? Are they covering off the carrot side of it? The good corporate citizen side? What about the stick side? Do we need a little bit more on that side?
And that's the risk that the business community faces. If they don't take this seriously there's other tools, other measures, as is used in public policy speak, that can be brought to bear. And that may well include, you know, mandating performance for certain recalcitrant sectors. I know that's been talked about. And there’s something alluded to of that kind in the Labor election policy.
Basically, I think their insight’s accurate. That despite this register and the transparency and the visibility it's supposed to provide, it's not shifting behaviour. What's needed to shift behaviour? So, my urging to big business is to take it seriously and lift their game because they can, and they have, they should just make that business as usual. This is a BAU cry for the sort of performance that was able to be achieved during COVID by many, just make that the normal way of doing business.
Just like paying your staff properly, just like paying your tax instalments properly, paying your suppliers properly, small and family business. My motto is good business pays. Good business pays across those various dimensions. And that includes being a timely payer to your small and family business suppliers.
On that note, we will take a short break and we'll be back after this.
And welcome back. My name is Philip King. I'm editor of Accountants Daily. And with me in our North Sydney studio today is Bruce Billson. Bruce is Small Business and Family Enterprise Ombudsman. Hello again, Bruce.
Good to have me back. I survived the first break. That’s very kind of you.
Yeah, there's been a few casualties over the years.
We've been talking about a fairly serious topic, in fact, and that's payment times for small business. I mentioned earlier a lot of economic headwinds at the moment. Bruce, your office is strategically placed here. In the event that someone comes to you, and we mentioned earlier quite a lot do, what can you do?
Well, we are a dispute resolution agency as one of our core services. So, we talked about payment times and the number of matters like that. We get about 7000 matters coming our way each year, either through our call centre or further escalated into our case management area. It's a range of things.
We have a formal role in mediation under certain industry codes. Think franchising where there's tensions between a franchisor and franchisee. We get involved and if the parties can't sort it out, they'll come to us and we will case manage and support that dispute resolution process. Perhaps by the appointment of an alternative dispute resolution practitioner. In many cases, though, Philip, a lot of people, a lot of small and family businesses aren't familiar with disputes and their resolution. So those conversations with, say, another business. They want to have a dispute resolved, but they want to keep the relationship intact because they want to keep doing business with them. That's a bit of a skill. So, we help there with building that skill. We say, look, be clear on what the issues are. Be able to articulate what a good outcome looks like. Here's the way in which you can engage the other counterparty. Try these approaches and if you have no luck, come back to us. So, we're very keen on self-help and then through that enable that with some good practice guidance. So that can take a number of forms.
Your audience with Accountants Daily, may be aware we also offer a tax concierge service. So, if you've got a disputed determination from the Tax Office and you're just wondering whether going to the AAT has got legs, we can get involved. We have matters of that brought to our attention. We can have a quiet conversation with the Tax Office, which might say, hey, you know, we've got a case, it looks a bit odd, can you have a second look at it or guide people to the internal review processes?
But if the disquiet with the Tax Office decision is very real and people are thinking about going and challenging it at the Administrative Appeals Tribunal, we will say to them, we will help you check the merits of your case. You put 100 odd bucks on the table as a bit of skin in the game, we’ll fund the rest of an experienced tax lawyer to actually have a look at your material, to see whether you've really got a case. A bit of a reality check. And then if the case looks like it's got some legs, we will then assist its on-boarding into the Administrative Appeals Tribunal so that there's a clear focus on what the issues at dispute are, the evidence is presented well. The AAT loves that because it can get to the heart of the matter and get on with it.
So there's that. There's also dispute matters around industry codes and the like. And then there's commercial disputes where we may get involved just trying to find a way forward, mindful we have no punitive power and we can't impose a solution because of the Constitution of Australia. That needs to go through the court.
But, you touched earlier on power imbalance. Think of a big business and a small business having a dispute. If it went to court, it would go to the Federal Court of Australia. Now, I don't know how many small businesses you know. I don't know many that have got a lazy 300,000 bucks lying around to fund a Federal Court matter that might take two and a half years to be heard. For the average small business that's ridiculous. That's out of reach. So, we work really hard to get it resolved knowing that legal avenue is sometimes way out of reach for the average small business.
So that's the stuff that we do. Now out of those cases, we get insights. We have a-ha's about policies that aren't quite landing right, laws that are a little bit problematic or even a pattern of disputes that might require some other action. That advocacy role we have, we then go and do the policy analysis, consult with regulators and the like, and then we'll put forward ideas that we think will help improve the circumstances for small and family businesses.
And that's another part of our role, bringing that really granular field evidence from small and family businesses, actual case studies, and bringing that to government to say, look, here's some ways that you could improve the - let's call it the entrepreneurial ecosystem for those enterprising men and women creating wealth and opportunity through small business.
So that's the other key plank of our work, as well as providing information and data about just what this small business thing is, because it's a great, eclectic bunch of enterprising men and women. Really hard to get a handle on, sometimes. Occasionally difficult to consult with because there's so many. We bring that kind of insight into the processes of government trying to make government, regulators, programs, decision making, more relevant, more grounded in the reality of life of small business men and women.
Okay, well, you sound like a friend in need for small business. And I know one of the issues that's been front of mind for you recently is the insolvency law review. And you had a few views about this. We saw recently ASIC put out a report on how well the small business restructuring scheme had gone. And I suppose the elephant in the room in that report was how few small businesses had benefitted from that scheme.
No one could accuse that scheme of peaking early. It’s been a slow build up, but that’s part of what we’ve been talking about. We’ve been at the pointy end of that with people saying, hang on, this new measure is just not working for me. And then we work with insolvency practitioners, parties that have been part of that journey, to see what’s been working and what’s not working. So, we were able to bring a really, really, granular field-based insight to that inquiry, having already been saying to government, this mechanism needs fine tuning.
Now, a couple of things about it. It was supposed to be more responsive, it was supposed to cost about a third the cost of a formal administration. And so those first two, the jury's out. And I have a view that they haven't quite met those objectives. It does leave the business owner in control, ‘tick’. It does have a conversation around restructuring as distinct from a wind up. I mean, we've got to get past this culture that if a business gets a sniffle, might even be hay fever, people go and harvest the organs.
I mean, it doesn't look at the capacity for ongoing enterprise with guidance, with restructuring, all sorts of adaptations. What's happened, though, is a couple of things. One, if you're a big creditor, a financier or even the Tax Office, and a small business comes to you saying, look, don't wind me up to get your money because you probably will get much of it, but leave everyone else with nothing and then the business is gone. Why don't you go on this restructuring path? We've got a credible plan to do this. You’ll still get your money, but we’ll keep the employment, we’ll keep the entrepreneurship going, we’ll salvage the business, we’ll have an eye to other stakeholders that just aren't the secured creditors who've also got an interest in the business surviving.
Now that conversation then plays out straight into this restructuring measure and people are expecting it to be about a third of the cost. But then the major creditors say that’s an interesting option but what would I get out of a winding up? So, people have to go and do the winding up exercise anyway and incur the cost, have the restructuring and insolvency practitioner do all that work, just so creditors can weigh up a restructuring versus an insolvency. So, all the cost savings the restructuring was supposed to deliver get wiped out by major creditors still wanting to know what the likely outcome is if they didn’t restructure, and they simply wound up. They’re some of the things we flagged.
The other thing is the law sees a business and a person as separate things. You know, the business is oil, the person is water. Well, I'm sorry, in the world we work in everything’s salad dressing. It's a blend of both. You see this by personal assets being used to secure finance. The way in which director’s liabilities have played out. Even if you don't meet some of your tax obligations as a business, there's scope to get a director penalty notice that puts the individual, you know, spike’s the individual.
So, that neat separation doesn't quite work. And we've been sort of saying, well, maybe we should think about bringing this together and realising this convenient legal distinction doesn't work in the small and family business community where personal interest and assets are interwoven with that of the business and that we need an insolvency mechanism that can support that. That's why this review’s a good review. The first one of such substance in nearly 30 years.
When you talk to people in the insolvency industry, they say exactly that. Australia's fallen behind world best practice because this hasn't been looked at for so long. And they say the SBR, the Small Business Restructuring Scheme, had some good intentions, but it's operating within an environment that's simply too complex. And I think they support you, on the whole as well, in your move to try and draw together two separate strands of insolvency, personal and business, because as you say, they're sort of inextricably linked at the small business level. So, in terms of the goals of this review, what would be your top of mind, want to have out of this review.
We’ve argued for a number of things. Clearly, one of them, though, is get rid of this fiction. You know, there needs to be a single...
Draw the two together.
Yeah, and that reflects reality. Two, the restructuring thing needs to work. At the moment it's rare, and in many cases the practitioners are insolvency practitioners. Now, I'm not that bold to say insolvency practitioners are a bit like, if all I've got is a hammer, every problem looks like a nail, but the business acumen that is about growing a business, about navigating a positive path out for growth and success, may well have skills beyond that of the legal attention that needs to be given appropriately by an insolvency practitioner.
And I see some firms bring both of those skills together, and they're the ones that are making that work because they've got a business growth competency sitting alongside the legal requirements of an insolvency practitioner and that can navigate those fields.
The other things that we thought were important was a little bit more on the education side. Now in Australia if you become bankrupt or an insolvent business, that's a bit of a stain on you. In the United States, if you've not been insolvent, you haven't been trying hard enough. So, there's a whole cultural piece there, which I think is why so many businesses leave it very late in the piece to have the conversations with skilled business growth, insolvency, blend expertise, to think, well, you know, there's still a pulse in the business, but we're heading towards a rocky shoreline. What is it we can do to steer away to make sure we don't run into, you know, a catastrophic event in the business and it's gone. That we can keep a going concern as part of this business. Maybe open up new opportunities and create the livelihoods that are needed, support those, continue to generate wealth and opportunity in the economy. Those conversations need to be had earlier. And so, one of the things we've been talking about is how do we get that mindset where the health of the business, key indicators, financially informed decision making, is a normalised part. And your audience, the trusted advisers, are central to that. So, there's a few ideas around that that we've got.
We think it's too expensive in some cases. And insolvency practitioners do an awful lot of work that they're not paid for. So, when they get to a business that's still got cash and assets in it, it's amazing how the fees are quite steep, because they're actually cross subsidising the work that they're required to do under law that no one pays them for.
So, there's even an argument of a public trustee equivalent for small businesses. Think about this. There are about 80,000 odd businesses that don't continue each year. I use the word don't continue because we don't know exactly what happens to them. They might be deregistered. They might lose their ABN. There’s only about 7000 that are formally wound up.
So, what happens with the others? Are there dangling liabilities? Do people as private citizens carry around the concern that someone might come after them about something that was business related? We don't know. We think there's scope for a very cost effective, cut to the car chase, wind this business up, close it formally, have everyone know where they sit, and then get that sorted in the process.
The last thing is there's an enormous opportunity for regulatory reform here. I mean, insolvency practitioners are required to do certain things and report certain things to ASIC. Now, the number of those reports potentially around misconduct or director malfeasance or something like that, they're reported, but then what happens with them? You know, is there a need to say to these highly skilled insolvency practitioners, don't tell us every little dotting the ‘i’ and crossing the ‘t’ that hasn't been done right. Surface the cases where the regulator needs to get involved and then the regulator does get involved.
So, at the moment there's a whole lot of reports generated. I don't know where they sit in ASIC, but many of them aren’t acted upon. And then, you know, if there are directors doing the wrong thing in the business world, there's a risk they may do it again if they're not held to account. And one of the early warning indicators are these insolvency practitioners reports that in too many cases aren't getting the attention they require.
A lot of really good ideas there, Bruce. Let's go for a quick break and we'll be back after this.
And welcome back. It's Philip King. I'm editor of Accountants Daily, and I am back with Bruce Billson.
It’s the third quarter, Philip.
It's the third quarter, it's game changing quarter.
We've been talking about the problems of small business and I'm afraid we're going to keep the rather pessimistic tone of this podcast if that's what it is, because our next topic is disaster planning and we know that small business has been in the front line of a wave of disasters through Australia over the last couple of years. And one of the shocking things to emerge, I suppose, is in your research you've found very few small businesses have a disaster plan and when the Government responds to this, almost all of the money is spent after the event. What is wrong with this picture, Bruce?
Some of the key take outs. One in four have a disaster plan. Now, you and I are probably old enough to remember the old BCP - business continuity plan. Yeah, that's not the sexiest thing running around, but it's pretty important. And this sits in that group. This is in that family where you're imagining things might not go the way you hope they do and what are you going to do?
Now that might be natural disaster, it might be some black swan event, it might be even ill-health for the business owner themselves if they're the income generator and the livelihoods in the business rely on them being well. What happens if they're not? So, what we were saying was having thought about various scenarios that could really knock the business off track, including a natural disaster, just what are your plans?
What are you thinking about? We're talking about: is there a super vulnerability to a single revenue stream? We see this in agriculture and now you see farmers diversifying to give themselves some protection. Even in the wine industry, not having all your grapes grown in one spot in case their smoke tainted or some event happens. It might be where's your reserves? What have you got as cash reserves in the event there is a delay in payment or something like that.
Where's your data? Where is it located and readily recoverable in the event that technology is taken out or there is a natural disaster. What are your action steps that you're going to take at those critical moments when there's so much going on around you? And let's remember, small and family business owners, by their very nature, are likely to be community leaders. They likely to be involved in emergency service volunteer agencies. They've got families themselves.
So, there's lots of moving parts there in those moments of great stress and lots of pressure. What are those surefooted action steps that you've thought about in advance in a calmer moment that you’ll put into play?
Where's my insurance details? Where's my critical data? What am I going to do with some of my assets in stock? What is that plan? So that's what we were saying. Equipped with that, better able to navigate a natural disaster event and better place to recover.
One of the things that emerged, particularly from the floods up in northern New South Wales and Queensland, was some of the accountants were affected themselves. And some of them had lost records or they had to relocate. Part of the job was getting themselves back up and running, but what they found themselves doing was trying to help small businesses negotiate through all the various schemes and support mechanisms. There was state, there were federal, there were local whatevers, and just finding a road map through the help processes seems to be one of the biggest problems. And it shouldn't be, should it?
Well, you've touched on two of our key recommendations. We floated the idea of a voluntary ‘my business record’ storage area, so key data could be held in that location so that the challenges that you're speaking of, there's at least a way that you could unlock that box and get key parts of your data back. So that was one of them.
Another part of it, though, was about agencies planning for disasters, because most local governments have a DIS-plan, a disaster plan. Where’s small business in that story? Where are they factoring in choices, decisions, strategies for dealing with what's before the community that takes account of the small business interests? Think of Lismore. I visited three dozen disaster impacted communities as part of our consultations. They said to me they knew a flood event was coming when somewhere up the catchment tipped over and they could nominate the number of hours that they had to implement their disaster plan. What happened though was a new incident controller came in who didn't know the local circumstance. Didn’t take on board the local intelligence and wisdom and said, okay, there's a storm coming, evacuation order.
So as soon as that evacuation order is issued, worker’s compensation isn't available for your staff. You don't have that window that you were counting on to relocate critical assets. Hire companies move their most expensive equipment to higher ground. There was stock that was put in different places. They'd been through this before and felt they had the wisdom to know how to navigate it as best they can.
But here, a decision in incident management cut that off and that caused enormous harm and cost. So, factor business interests into the planning. Have them seen to be key stakeholders. Let them know what incident controllers are going to be thinking about and weighing up, and then everyone's as informed as they can be. That helps with preparedness.
But in the event that a disaster does occur, have a designated hub where the support services will go. So, you're not hunting around, shopping around to see, not just government and private, but not for profit support. I know the business community, again the Business Council of Australia has got a fantastic disaster response capability where they bring the know-how of their members to certain areas. It's fantastic, but you don't want to be hunting around for that.
So, have a designated hub. But then have in place a system of ‘tell us once’ to triage that information. Someone who's skilled. And we see this in so many areas of public policy, in service delivery, even in the health situation, where critical information is obtained at the beginning by a skilled person who can extract what's happened to you, what's going on, how can we be most helpful? And then they can be the concierge to navigate people through the various support that's available. So, the help that's most relevant to your circumstance that you've only had to share once and you're not retraumatised over and over again. Get that happening, so whatever helps available, we can get the best value out of it and land where it's most needed. They're just some of the recommendations we put forward.
How optimistic are you, Bruce, because we've seen this play out time and time again and nothing seems to change.
Well, I'm optimistic because I know the government has an eye to improve the way this operates. The hard numbers are for every disaster in Australia, out of 100 cents in the dollar, 97 is spent after the event. And three cents in the dollar is spent prior. So, there's an appetite to do better work around mitigation, around preparedness, about trying to reduce the harm and the consequence of a natural disaster.
Now, people might think, oh, well, okay, that'll save some buildings. Yeah, but it saves an awful lot of trauma. And if you sit down and talk with people who've been through these natural disasters, if we can save some of them from the trauma they've been exposed to, that is an enormous win. But if we can make sure they're in the best place they can be to continue to make their contributions to communities, that's very important.
We see this in some of the disaster impacted areas. We coined the phrase ‘socio-commercial capital’. Sounds a bit wanky, but it's a way of capturing an idea that those social connections that we talk about in a community sense are equally, if not more, valid in a business sense. So if you are part of a local chamber of commerce, you've got a network of peers, you can share information and insights. Experience gets shared as well.
But there's also a sense that there's a collective effort to get the local economy going again because each depends on each other. That is a key, key secret sauce to have. If you're a community where there's wariness between business participants, where one accountant can't stand the other one and they don't want to talk about anything in case there's rivalry, blah, blah, blah, that actually impedes the functioning, the growth and, in the context of disasters, the recovery of those business communities. You’re virtually peer support, crowd sourcing, wisdom, knowledge, experience and insights because there is rarely a problem some other business hasn't had to contend with that you could benefit from what they've learned. To have that, you need these conversations. Those conversations also let you know about the programs that are available, the support that's available. It gets you as equipped as it can be.
Philip, it's not my gift to make every business successful. But it is our mission to make sure no one fails because they didn't know about something that might have helped. That's what gets us out of bed every day.
Bruce, it has been terrific talking to you today. Thanks so much for coming in to our studio in North Sydney. Thank you, Bruce.
Thanks, Phil. Fab to be with you and your audience.
This has been an Accountant's Daily podcast. My name's Philip King. I'm editor of Accountants Daily and I will see you next time.