With lockdowns being imposed regularly to fight outbreaks of the Delta strain of COVID-19, putting yet more pressure on already struggling businesses, the Australian Small Business and Family Enterprise Ombudsman Bruce Billson has urged the Federal Government and regulators to consider the reactivation of temporary insolvency protections as a means to support small and family businesses.
Billson said that the reintroduction of measures, such as the extension to existing safe harbour provisions, would provide temporary additional protections for small and family businesses that are having to trade insolvent as a result of the reimposed lockdowns.
“Small businesses aren’t like a light that can be switched on and off,” Billson pointed out. “With full respect for the need for public health orders, lockdowns do have a significant and immediate impact on small and family businesses and a cumulative effect when those businesses have endured multiple lockdowns.”
The Ombudsman cited a recent report by CreditorWatch which revealed a 75 per cent increase among businesses entering administration in the last week of June, and that trend is widely expected to continue with payment times stretching out.
“Many have far less cash in reserve, having eaten into savings to get through previous lockdowns,” Billson added. “Bringing back temporary protections that were in place last year, would be a sensible and appropriate policy measure, particularly for those small and family businesses impacted by recurring and protracted lockdowns in Melbourne and Sydney.”
“Crucially, its measures like this that give otherwise viable small businesses more time to recover or turnaround, preventing a wave of unnecessary insolvencies,” Billson added. “By giving a small company breathing space to restructure, you also help mitigate the risk of small business creditors getting swept up in the domino effect of insolvencies.”
The Ombudsman also called on small businesses experiencing financial hardship to sit down with their trusted, accredited financial adviser for a viability assessment.
“We know the sooner a small business owner experiencing financial stress reaches out to an accredited professional such as their bookkeeper or accountant, the better the outcome,” Billson said. “Without the right professional advice, cashflow issues, compounded by falling revenue can prove devastating for the business owner, staff and their families. Now is the time to get expert, tailored advice on the state of your business so you can make an informed decision about the future.”
