Welcome to our latest bulletin on what’s happening at Helm Advisory and the latest news in the restructuring and turnaround industry.
What a difference a month makes.
What a difference a month makes.
Recently released numbers that have come from CreditorWatch and Xero, reveal a stark contrast to the corresponding numbers of only one month prior. The pressure is rising on for many businesses.
According to CreditorWatch’s August Business Risk Review, data for August showed a 12.5 per cent month-on-month drop in trade receivables. A significant drop in receivables equates to a significant drop in sales. Also, credit enquiries, which CreditorWatch CEO Patrick Coghlan, describes as “the heartbeat of trade”, declined by 19 per cent from July. This contrasts starkly with a 12.5 per cent increase between June and July. Another stark number to jump out of the Review is an increase of 35 per cent in the number of court cases in August. Meanwhile, the number of external administrations has fallen over July and August, as banks and the ATO continue to show restraint.
Xero tells a similar story. The Xero Small Business Index, which hit a record high of 144 points in June, experienced a drop of 41 points in July, the second largest monthly fall since the index began in January 2017.
According to CreditorWatch, the 3 sectors with the highest probability of default, as at August were:
Accommodation and Food Services
Transport, Postal and Warehousing
Administrative and Support Services.
There is a multitude of debt, equity, grants and hybrid restructure solutions now available to assist during these turbulent times.
The advice to business managers that may be experiencing stress remains consistent. Seek advice sooner rather than later at Helm Restructuring
Cost of doing business expected to continue to increase – are you ready?
For most consumers, being greeted with hand-sanitiser, QR code sign in and social distancing signs is now part of the new normal when entering a business. But being COVID-19 safe comes with a hefty price tag for small to medium businesses, with some spending thousands of dollars operating under mandatory health measures, even as profits shrink significantly. Some have inadvertently been the subject of fines, up to $5000, even as they presumed they had complied with all health orders.
On the 25th
August, in the Daily Telegraph it was reported that Roseville Tennis Club was fined $5,000 for not having a compliant COVID-19 safety plan for its non-operated bar area, despite a safety plan for its patrons for playing tennis. The court upheld the fine on appeal as a breach of health orders. In the article, the President of the club noted that it would struggle to pay its fine. Article Source.
What this demonstrates is that businesses of all kinds need to spend resources on ensuring that its plans are fully compliant with health orders, and for most, this comes at a significant cost. While many businesses are now forced to close, re-opening poses challenges. Many businesses face additional challenges from impositions of current or upcoming costs of doing business may struggle in what is an uncertain future, and wonder if it will be viable to re-open under restrictions. For example a business could be facing reduced numbers allowed on premises, travel limits or border restrictions that may still apply, or you cannot find sufficient staff. The ABS published statistics which indicated which business sector is expected to struggle. 37% of those in arts and recreation services, 25% in wholesale trade, 25% in accommodation and food services, and 23% in retail trade. ABS Source. It is true that including Federal assistance, every state or Territory offers some kind of relief, but this may not meet ongoing costs. For many businesses, budgeting or access to these relief programs can be overwhelming. With the pandemic now spreading to regional areas, the cost of compliance could inevitably be overwhelming compared to their city counterparts. In addition to a further squeeze in cash flow, Credit Watch has noted a rise in business payment defaults, up to 20.19% in June 2021 Credit Watch Source. This may indicate that when re-opening happens, catchup payments may not be possible.
Every decision made now could impact a business’ ability to thrive in the future. This will require extraordinary flexibility, coordination, and resilience during what may be a protracted period of recovery. Developing a plan is vital to ensure ongoing survival to avoid a worst case scenario.
As is our motto, we can steer your client or you on a course to recovery. Contact our restructuring team now for assistance Helm Restructuring
What’s Happening at Helm Advisory - Our Senior Manager with a green finger
Shijun Chan is a Senior Manager at Helm Advisory. He joined the firm in 2018 and brings with him more than ten years of experience in corporate insolvency, specialising in the SME segment. He has previously worked in other specialist insolvency firms and in the insolvency division of a mid-tier firm prior to joining Helm Advisory.
Shijun holds a Bachelor of Commerce (Accounting and Finance) from the University of Sydney. He is a CPA and a member of ARITA.
He has dealt extensively with all forms of formal and informal corporate insolvency engagements, and has extensive experience in the construction, franchise, retail, tourism, clubs and societies and agribusiness sectors. He has also assisted lending syndicates with recovery actions.
Shijun lives in the Blacktown LGA and like many others right now, has been restricted to working from home. Shijun is a member of the Greater Blacktown Business Chamber and is fully aware of the economic pain the pandemic has caused to local businesses there. He is always ready to assist struggling businesses by providing them with a roadmap to recovery. This can range from providing strategies from overcoming operational challenges to formal restructurings to preserve valuable assets.
Outside of work, he enjoys travelling (pre-pandemic), current affairs, running and following the fortunes of Arsenal FC. He is also proud of his carnivorous plants collection, a direct by-product of the current lockdown.
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