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Insolvencies could spike in coming months! Is the money your business owes you protected?

Insolvencies could spike in coming months! Is the money your business owes you protected?

Experts warn insolvencies could spike in coming months due to COVID-19

Battle victory could be close, but the war is not over – experts are warning insolvencies could spike in the coming months and linger for years post-COVID-19.

The brewing insolvency storm
Various stimulus measures for both individuals and small-medium-enterprises (SMEs) are due to wind-up around September, and this could also come as a shock to the financial system.

Savings.com.au spoke to various experts in the law, accounting and insolvency services industries about the potential rise in insolvency – especially for small businesses – in the coming months and years.

Peter Watson, Director at David Hicks & Co
Mr Watson has identified three key events happening long-term due to COVID-19:

Businesses shoring up long term debt positions and establishing larger working capital and cash flow reserves moving forward.

Principals applying financial checking procedures to ensure suppliers are suitable to complete contractual obligations.

Government reviewing current Corporations Laws to facilitate a reduction in external appointments where possible.

“Businesses need ongoing revenue,” he said.

“Government infrastructure spend will promote revenues across all industries through their different phases – initially in the professional space whilst going through procurement, then in the development/construction space whilst being built and moving into the operational space when complete.

“The benefits obtained by those servicing Government infrastructure spend will then invest and spend in other areas of the economy.”

Last quarter (January to March 2020), personal insolvency rates fell 16.5% on the same quarter last year – the lowest level since the December quarter 1990, according to Australian Financial Security Authority (AFSA) figures.

But that isn’t telling the true story of financial health in the time of coronavirus, various experts are warning, and the biggest negative effects are yet to be seen.

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