Insolvency expert Michael Fingland of Vantage Performance is getting worried.
While February and March are usually the highest months for insolvency actions, Fingland saw enquiries to his firm leap 66% in January, which he believes could herald the start of the new wave of company collapses at the SME end.
The key problem areas include transport, manufacturing and discretionary retail, according to Fingland.
This is not exactly unexpected. Corporate undertakers have been telling us for some months that it is a matter of if, not when, we see a spike in the number of insolvencies in the SME space.
The ATO’s decision to allow companies to delay the payment of tax bills allowed many companies to get through the worst of the downturn, but the taxman’s largesse was never going to last forever.
The fading of the Government’s stimulus measures and three interest rate rises are also putting pressure on consumers and businesses alike, despite the steady recovery in economic conditions.
So how do you make sure you don’t get dumped? That depends whether you’re directly or indirectly affected by this new wave.
If your company is suddenly looking shaky, get help. Now. Quickly.
As Fingland points out, the sooner you can get restructuring experts into the business – he’s even helping businesses appoint “Chief Restructuring Officers” at present – the better your chance of turning this around before you need to call in administrators.
If you’re doing pretty well, you should still consider developing a little action plan to get yourself through this period.
Start checking cashflow daily, if you’ve relaxed since late last year.
Start assessing your clients, and figure out if any are in trouble. If so, what would be the impact on your business if they went under? And can you do anything to help (if they are important enough)?
Take a look at your supplier base. If any are wobbly, think about how you could replace them quickly.
And run your eye over your competitors. If you’re in a really strong position, now might be the time to try and take some market share off them, or even approach them with a takeover deal.
Here’s hoping the second wave doesn’t crash down too hard on SMEs. But if it does, make sure you’re already heading towards the shore.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
