6 tips to recover from hardship

According to small business research from Xero, factors such as an increase in payment times and slow wage growth can put pressure on small business owners. The Xero Australian Small Business Index dropped by 23 points between November 2022 and January 2023, and the time to be paid metric rose to 23.8 days, the longest since September 2020.

But businesses experiencing hardship are not alone in finding a way forward; here are six tools, techniques and resources to get back on the track to growth.

1. Access online resources

The Australian Government’s business.gov.au website contains a wealth of information that can support small businesses going through hard times. The website covers topics such as managing suppliers, choosing a pricing strategy, posting on social media and complying with Australian law.

The portal provides advice to handle bankruptcy, liquidation and dissolution, should it come to that. There are also links to a help hotline, web chat and online enquiry form for personalised advice.

There’s no need to search far and wide for information. Right here on this website, the Prospa blog contains:

• Tips from accountants and business advisers about how to change your business structure or make the most of government rebates and subsidies
• Anecdotes from small business owners about how they’ve stopped their businesses losing money or started using generative AI tools
• Strategies business owners plan to use to grow in the future, such as adjusting their pricing or digitising their businesses

Here are two examples of small business owners, previously featured on the Prospa blog, who are responding to challenges.

To help create healthier cash flow in the long-term, Sassy Organics’ Aida Rejzovic has introduced a new suite of products to drive more customer sales.

“These are still certified organic but are not as expensive as some of the higher-end brands that we stock at the moment,” she says.

Meanwhile, to cut back on costs and time Jordan Cullen of Cullen Jewellery has implemented a custom software solution to automate mundane tasks such as inventory and financial management.

“This not only saves time for our staff but also reduces the need to hire additional personnel,” he says.

2. Seek an expert’s opinion

If you’re concerned about the long-term health of your business, consider hiring the services of a small business consultant or financial adviser.

A consultant can help identify areas for improvement, formulate long-term growth strategies and teach you the necessary skills to help you implement changes.

Consider a consultant with the right subject matter experience, and ideally with expertise in your industry and with businesses of similar size. Even better if you can find one with a proven track record of helping small businesses grow.

3. Manage unpaid invoices

If late payments from customers or clients have contributed to uncertainty around your financial situation, consider ways to get invoices paid faster.

For claims under $25,000, you may be entitled to take the issue to your local state or territory’s small claims tribunal. The Australian Competition and Consumer Commission (ACCC) has provided a link to tribunals and agencies across the country.

In extreme cases, a debt collector may chase overdue bills on your behalf. They will issue a letter of demand, which if ignored entitles them to pursue legal action against the debtor.

4. Get tax lodgement assistance

Assistance may also be available from the Australian Tax Office (ATO) for businesses struggling to keep up with tax lodgements as a result of lagging payments.

Under the ATO’s lodgement penalty amnesty program, failure to lodge penalties for eligible lodgements will be remitted without the need to apply. Eligibility criteria include:

• Annual turnover of less than $10 million at the time the original lodgment was due
• Overdue income tax returns, business activity statements or fringe benefits tax returns due between 1 December 2019 and 28 February 2022
• Lodgement of overdue forms between 1 June and 31 December 2023

5. Consider insolvency options

It’s worth considering all your options before giving up on your business completely, but if your business’s debts become unavoidable, bankruptcy may be an option to help you recover.

The Australian Financial Security Authority (AFSA) provides information about and support with insolvency for individuals and small businesses. Free financial counsellors are available and offer confidential services to help you get back on track and plan for the future – and to advise on the insolvency process if you proceed in that direction.

Temporary debt protection from AFSA provides a 21-day protection period in which unsecured creditors can’t take enforcement action to recover money you owe them. There is also information about legal assistance and how to represent yourself in court or at a tribunal, if that becomes necessary.

Before proceeding with insolvency, you could also seek help from your accountant to see if you can get some more time from creditors. The next step is going into voluntary administration, in which an administrator will be put in charge of your business, or a receivership, where a secured creditor appoints a receiver to ensure repayment of debt.

The final step is liquidation, in which the business is wound up and assets are sold to repay debts.

6. Contact Prospa

You can submit an enquiry or call 1300 882 867 during business hours to discuss your options with one of our business lending specialists.

If you’ve missed a payment on your Prospa Small Business Loan or Business Line of Credit because of reduced cash flow, make up the payment by logging into your Prospa App or Prospa Online.

After logging in, you will see a notification to make up for a missed repayment. Simply follow the prompts to complete the payment. Missed payment penalties and late fees may apply.