Bankruptcy or Liquidation: Here’s How to Take the Risk Out of Risky Business
We’ve been talking a lot in the last few episodes about cash flow and working capital, and the important (and often misunderstood) distinction between the two. And cash should be top of mind for everyone right now as we know from experience that going into the pandemic last year 50% of business owners only had 16 days of cash reserves (and 96% of all business owners had <26 days of reserves).
As we are now moving into the recovery phase and most of the government sponsored incentives, subsidies, loans and grants are expiring, businesses must stand on their own two feet and there are going to be casualties. Today’s session is about how to identify whether your business might be in trouble and also identifying and accessing help (if you need it) to restructure and move forward or close safely and cost effectively.
Our guest today is Louisa Sijabat – she is an experienced Trustee in Bankruptcy, Liquidator and Director at Vincents in Sydney. She works with people and companies who are going through a tight financial situation. Louisa is very practical – which is a quality I really admire and respect. She listens to the facts and then advises on the options available. If one of the options is bankruptcy, liquidation, or administration, she will explain what is about to happen, in plain language, and answer all your questions.
Financial Foreplay® Highlights:
1. Bankruptcy is for individuals and insolvency is the equivalent for corporations
2. There are always clear warning signs leading up to an insolvency event – can’t pay your debts as they come due, letters of demand being issued, not wanting to answer the phone because you will have to deal with collection issues etc.
3. There are several professionals you can go to if you need an upfront assessment of where you are at and what your options are – many of these are free
4. A typical small business may be able to liquidate properly for $8000-$10,000
5. A good liquidation/bankruptcy is possible – the key to it being good is that it is well planned with no surprises
6. There are advantages to choosing to put your own company into liquidation however, if cost is an issue, it might make more sense to wait until a creditor petitions you into bankruptcy/liquidation
7. Right now in Australia, over $53b is owed to the ATO by companies and individuals – the second largest group of creditors are the landlords
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