Prushka Fast Debt Recovery has revealed, through data sourced from court records, that 953 businesses issued Notices of Winding Up Application during the Oct-Dec quarter. This figure increased 5 per cent compared to the July quarter, and by 6 per cent year-on-year.
The Australian Taxation Office continues to be the largest petitioner, with ATO and other government organisations accounting for 57 per cent of the total company wind ups. Private wind ups account for 43 per cent of total notices issued.
Roger Mendelson, CEO of Prushka, said despite the slight increase in company wind ups the SME sector should feel hopeful about the state of the economy.
“In an overall uncertain environment where Australian households and SMEs continue to expect slow wage growth and growing unemployment, these low numbers, with no indication of a significant spike in the future, should serve as a positive sign for Australians,” Mr Mendelson said.
Mr Mendelson notes, while there is no cause for concern, the small spike in company wind-ups over the past 12 months should prompt SME owners to stay cautious and be wary of the March-April “graveyard” period – the time when most businesses tend to collapse.
“Historically, the first quarter of the new year can be the riskiest for SMEs, often resulting in drained revenue chalked up to holiday leave pay and overdue accounts.
“SMEs can implement simple steps to safeguard their cashflow in these times. Things like prioritising collecting accounts, reducing prices on old dormant stock, and even considering bridging loans if you have a clear strategy in place to repay by the due date can help ease the pressure.”
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Personal insolvency outlook is positive
Further emphasising the current firm economic conditions, the latest personal insolvency statistics released by the Australian Financial Security Authority (AFSA) reveal bankruptcies last quarter were at their lowest level in almost 26 years.
The December quarter 2019 saw 3,385 bankruptcies which represents a 10.6 per cent decline in comparison to the same quarter the previous year. Over 24 per cent of these bankrupts were business related as opposed to personal causes.
“In an economy where Australians are finding it increasingly difficult to access credit, these ASFA figures are an encouraging sign.
“We’re seeing the lessened use of bankruptcy action by creditors, especially in sectors like banks, telcos and utility sector. The historically low total business insolvency reflects a sound and resilient SME sector.”
SMEs at risk of illegal phoenixing
Mr Mendelson also advises small business owners to look for the warning signs of ‘incidental phoenixing’, where failed companies who have ceased trading cause immense pain for SMEs.
“We hear of illegal phoenixing cases, however the overwhelming trend we see is incidental phoenixing. This is where unaware SME owners provide credit to companies which are part of a group of companies which have all failed and cease trading – a massive risk to the livelihood of small businesses.”
“SME owners should exercise extreme caution when advancing credit to private companies – by issuing credit application forms to gather as much information as possible, and also carrying out reference checks before issuing credit and requiring guarantees from directors.”
Notices of winding-up applications (October 2019 – December 2019)
| ATO | OTHER
GOVT |
PRIVATE | VIC | NSW | QLD | WA | OTHER | TOTAL | |
| 2019 | |||||||||
| Oct-19 | 190 | 47 | 148 | 158 | 118 | 69 | 24 | 16 | 385 |
| Nov-19 | 151 | 41 | 145 | 99 | 125 | 63 | 36 | 14 | 337 |
| Dec-19 | 86 | 13 | 132 | 83 | 80 | 39 | 13 | 16 | 231 |
| TOTAL | 427 | 101 | 425 | 340 | 323 | 171 | 73 | 46 | 953 |
| % | 45% | 10% | 45% | 35% | 34% | 18% | 8% | 5% | |
| Total Sources | 953 | ||||||||
Source: Rodgers Reidy daily listing taken from public records. Excludes Voluntary Liquidations.
Prushka CEO, Roger Mendelson, has over 44 years experience as a commercial lawyer. Prushka handles debt and claims recovery for the corporate, small business, medical and insurance sectors – sectors in which it has dominant market share.
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