Navigating the downturn: Strategies to keep your business afloat
Unlike red wine, debts don’t get better with age – in fact, the longer they linger, the more burdensome they become.
Amid ongoing economic challenges, businesses are feeling the financial squeeze and while economists may quibble over the precise definition of a recession, per capita data shows we’ve just emerged from rocky recessionary waters after seven quarters.
With 82% of business owners struggling to cover rising costs and the ATO intensifying tax collection efforts, the stakes are high. This means understanding how to protect your business and personal assets is now more important than ever.
The economic downturn demands a strategic response to prevent businesses from going under. However, certain strategic manoeuvres can help businesses weather the storm and emerge stronger on the other side.
Put simply, early action and maintaining accurate financial records are essential to staying afloat but there’s still more that can be done to help you steer clear of rough seas, such as paying your superannuation on time because unpaid super can increase risk profiles.
Additionally, use subscription-based software to help manage your records or hire a bookkeeper as this will save you lots of time and stress in the long term.
Up-to-date financial records are critical for effective restructuring. Timely management of business debts and voluntary administration can also help directors retain control during restructuring.
Directors risk personal liability if they fail to act proactively, so understanding legal entity principles is essential for protecting personal assets.
Compromise is key in negotiations with creditors. In Australia, 'bankruptcy' pertains to personal insolvency, while restructuring options exist for businesses with debts under one million dollars.
Act early and sell while the business still holds value. By embracing datadriven strategies, you can often achieve better outcomes and help your business remain successful.
Also ensure there is a charging clause in business contracts to guarantee payment, and if you feel like your business is quickly sinking, assess all your options, don’t just stop with Plan A.
Ultimately, whether you’re battling rising debt or exploring ways to turn your business around, remember you don’t have to go it alone.
Just like a fine wine, strategic financial management can mature beautifully over time and third-party support can help you carefully sift through all your options long before your battle ship begins to sink.
