'ASIC' overview finds SME's continue to account for a large percentage of corporate failures
A key feature of ASIC's overview was the focus on the SME space which continue to account for a large percentage of corporate failures in Australia.
Once again, a significant percentage small to medium sized companies (86%) that failed, had assets of $100,000 or less with 81% of failed SME's having less than 20 employees with 43% having liabilities totaling $250,000 or less.
The top 3 nominated causes of failure as reported by external administrators, were poor/inadequate cash flow, poor management and trading losses.
Reflected in these numbers is a propensity for SME's to leave financial problems alone hoping they will disappear and thus they often leave it too late. The later they leave it, the greater the chance that external parties i.e. the ATO, financiers or other creditors will force their hand leaving them with minimal scope to address the company's problems.
The key to avoiding this position is to identify and address problems early. This can be done with the assistance of a trusted advisory whether that be the company's external accountant, an insolvency expert or a lawyer.
About the author - Ben Conrad
Ben is based in Melbourne and is a Senior Manager with our Recovery & Insolvency team.
He has in excess of 15 years of experience in insolvency, including roles in professional practice and the credit management division of a major Australian bank and ASIC. Read more...