SME insolvencies advertise the need for financial advice

SMEs are the backbone of Australia's economy, accounting for more than a million of the country's businesses. Because of this, they are integral to the country's employment rate, keeping millions of Australians in jobs. 

However, there are certain challenges to keeping an SME running, demanding advice from financial professionals such as chartered accountants. With reports of hundreds of companies declaring insolvency each month, there has never been a better time to secure business development services.

According to data produced by Jamieson Louttit & Associates and published in an August 17 SmartCompany article, this peaked at nearly 600 companies in May of this year. While the number of businesses becoming insolvent decreased to just under 400 in July, it's still a concerning statistic for the country's SMEs.

The article notes that it's not just the owners and employees who are affected when an SME declares insolvency either, as each closing business has effects on the wider economy. The range of parties that can also suffer in the process includes companies that were part of an insolvent SME's supply chain that are owed money and customers yet to receive goods or services.

SmartCompany reports that a reduction in the wind-up threshold has also impacted SMEs in this regard, as it has been lowered from $300,000 to $30,000.

A representative from the Australian Taxation Office spoke with SmartCompany in the same article, confirming that insolvency is a worst-case scenario and not what the organisation wants to see happening.

"Our intention is to be more active to prevent debts, to provide appropriate help and support when people are in debt, to take the right action to prevent debts from escalating, and to take legal action earlier when it is warranted," they said. 

These scenarios can be extremely detrimental to business development, especially as more and more SMEs throughout Australia are affected.