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Economic crisis not to blame for small business insolvency problems

The number of insolvencies in small- and medium-sized businesses has increased in recent months, however Mr Andrew Needham, director of business recovery at HLB Mann Judd Sydney, says the economic crisis is not to blame as the majority of businesses were going to run into trouble sooner or later.

“It is only in the past couple of months that we have really seen an increase in the number of businesses going under, and these have mostly had identifiable management issues that led to their collapse.”

Needham says that businesses are not going into liquidation because of trading difficulties, but rather because they haven’t “managed their debt and cash flow appropriately.”

Needham points towards the hospitality industry as an example of this trend, where a number of businesses have gone up into receivership, despite the fact that trading in the industry is holding up relatively well.

He believes that these businesses “over-extended while times were good” and the crisis means that any previous mistakes are “magnified”, leading to “serious problems.”

Needham has urged small businesses to seek help.

“If an owner of a business is having problems meeting debt repayments, the worst thing they can do is bury their head in the sand and hope that everything will somehow turn out OK. It’s vital to put your hand up and ask for help.”

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