23 December 2019
Insolvency Practices Inquiry reveals small business pain points
As work on the Insolvency Practices Inquiry continues, my office has heard many harrowing small business stories, shining a light on the failures of the insolvency system as well as the challenges faced by industry professionals.
As part of the inquiry, we have released a discussion paper, seeking feedback on developing a best practice framework for small businesses facing insolvency and for practitioners managing external administrations.
So far, more than 300 small businesses have come forward to share their experiences of going through the insolvency process.
Many have spoken of being left with nothing – no business, a ruined reputation and often no home and broken families. It’s absolutely gut-wrenching.
The overwhelming experience of small businesses has been a loss of control, costs that strip the value of a business and a lack of transparency throughout the process.
We’ve also welcomed constructive feedback from insolvency practitioners, industry groups, lawyers and financial advisors.
They’ve sent the clear message that small businesses experiencing financial difficulties are often leaving it too late to seek help.
What we know is the sooner small and family businesses get help, the more likely it is they can achieve a turnaround or restructure.
ASIC has just released new data revealing more than 8,000 businesses entered external administration in 2018/19. 51% of those businesses reported inadequate cash flow as the key cause of failure.
It’s crucial that small and family businesses experiencing financial difficulties understand they don’t have to go it alone. Rather than toughing it out, lean on a trusted advisor, like an accountant.
Industry professionals have also called for a streamlined insolvency process for small business, with minimal red tape that provides a real option to turn around the profitable parts of the business.
In releasing this Insolvency Practices Inquiry discussion paper, we’ve outlined the key pain points for small businesses as well as the challenges for registered liquidators.
The discussion paper poses a number of questions we are seeking feedback on, particularly around the transparency of the insolvency process.
We have also extended the deadline to share insolvency stories via our online survey or by providing a submission to firstname.lastname@example.org to the end of January 2020.
The final report will be released in March 2020.