An inquiry into insolvency practices has been told the system needs to be simplified to encourage businesses to ask for help before it’s too late.
Since the Australian Small Business and Family Enterprise Ombudsman launched the inquiry into how the insolvency sector deals with small business failures, it has been inundated with submissions.
A Sydney Morning Herald article published this week said the feedback so far had highlighted that small businesses feel insolvency processes are a “mystery” and professionals in the space believe businesses tend to delay getting assistance for fear of losing control of their companies.
We agree there needs to be a better model and structure, which is more cost-effective and efficient to help small businesses turn around.
We recognise that it is confronting for small business owners to come back from a difficult financial situation, for a number of reasons – and often, recognising they need help and reaching out to get it, is the very first and hardest step.
Yet the process of actually doing so, presents its own challenges.
The red tape that exists around the processes businesses must engage with to attempt a turnaround makes it harder than it could be. Let’s remove some of the barriers and reduce the complexity of the system. Integrity needs to be restored in the process and protections put in place to protect small businesses from predatory unregulated pre-insolvency element of the market. Better education on financial distress is also needed so that businesses know they should seek assistance as early as possible.
In addition to much-needed reforms – we need a shift in culture. Unfortunately, there is stigma attached to failure in small business, and in seeking help. It needs to become culturally acceptable for people to turn their business around.
Although we believe the focus of the enquiry is quite narrow and politically motivated, the emphasis on small business is important. Let’s face it – they form a significant part of the Australian economy. The Tax Office recently disclosed that small business tax debt has grown by $6 billion in the last few years.
We consider our role as turnaround specialists vital to helping these small businesses return their business to profitability.
We navigate those distressed businesses through the corporate renewal process and help them through the turnaround processes by developing and implementing appropriate strategies.
Via early intervention and an expert and collaborative approach, we give businesses the best chance to recover and then succeed. We come to the table with a fresh set of eyes and complete objectivity.
Ideally, all small businesses who are facing financial difficulties should have the opportunity and support to undertake this process – but in a simplified system.
Hopefully the inquiry, which will have input from a diverse range of businesses, insolvency professionals and experts, free from political agendas, will result in some recommendations that will shake up the system.
The Ombudsman’s office is set to deliver a report by Christmas.
– Chad Rapsey (Co-founder / Director)