Billson calls for return of temporary insolvency protections to help SMEs survive lockdown

Australia’s Small Business and Family Enterprise Ombudsman is calling on the federal government to ‘reactivate’ temporary insolvency protections that will help cushion small and family businesses during public health ordered lockdowns. 

The number of businesses going into administration increased by 75% in the last week of June 2021, according to new data released by CreditorWatch. 

It is amid this backdrop that Bruce Billson, the Small Business and Family Enterprise Ombudsman, argues the government should reintroduce temporary changes to help protect small and family businesses that may be trading insolvent due to lockdown restrictions. 

For those businesses in Australia that have now weathered the impact of multiple lockdowns since the COVID-19 pandemic took hold last year, Billson said there were cumulative effects which the government must also consider.

“Small businesses aren’t like a light that can be switched on and off,” Billson said. 

“Many have far less cash in reserve, having eaten into savings to get through previous lockdowns.

“Bringing back temporary protections that were in place last year, would be a sensible and appropriate policy measure, particularly for those small and family businesses impacted by recurring and protracted lockdowns in Melbourne and Sydney.”

When the temporary measures were introduced to reduce the threat of creditors taking action against SMEs in 2020, Billson said it relieved directors from personal liability when trading while insolvent. 

“Crucially its measures like this that give otherwise viable small businesses more time to recover or turnaround, preventing a wave of unnecessary insolvencies,” the Ombudsman said.

“By giving a small company breathing space to restructure, you also help mitigate the risk of small business creditors getting swept up in the domino effect of insolvencies.”

Acknowledging the role of public health orders that affect ordinary trading, Billson noted that they also had a ‘significant and immediate’ impact on the bottom line for SMEs. 

Until the government moved to provide some temporary relief, Billson encouraged businesses to sit down with an accredited financial advisor. Obtaining a viability assessment from a trusted advisor could help businesses make informed decisions about their future, he said. 

“Without the right professional advice, cash flow issues, compounded by falling revenue can prove devastating for the business owner, staff and their families.

“We know the sooner a small business owner experiencing financial stress reaches out to an accredited professional such as their bookkeeper or accountant, the better the outcome,” Billson said.

This article was first published by The Mandarin.