Managing Small Business Debt

by | Oct 4, 2023

How a Bookkeeper Can Assist a Business in Financial Trouble

Bookkeepers can play a crucial role in identifying the signs of a small business in debt. By closely monitoring the financial records and analysing key financial indicators, they can spot warning signs that indicate a business may be struggling with debt.

Bookkeepers often have the first opportunities to observe changes in a business, both positive and, unfortunately, negative.

By getting involved with their clients by asking questions and testing their clients’ knowledge of the business and its key performance indicators, they can spot the danger signs that trouble is approaching or at hand.

Typically, it is not just one factor that points to the demise of a business; it is generally a culmination of factors, such as:

• A lack of working capital.
• An overall asset deficiency.
• The inability to meet financial obligations.
• Creditors being paid outside of their trading terms.
• The inability to raise further capital or obtain further borrowings.
• Tight cash flow leading to juggling payments.
• Making special arrangements with creditors or favouring certain creditors.
• Overdue state and federal taxes.
• Poorly maintained accounting records.
• Rent not being paid on time.
• Employees not being paid all their entitlements, particularly superannuation.

How a Bookkeeper Can Help

Bookkeepers maintain awareness of the business and are prepared to assist in various ways, including recommending the use and engagement of Insolvency and Business Recovery Services in some instances.

Recognising financial distress indicators and understanding potential insolvency risks empowers a Bookkeeper to guide businesses toward seeking professional help at the right time. Collaborating with insolvency experts can provide struggling businesses with strategic recovery plans, debt restructuring, and legal guidance to navigate through challenging financial situations.

By offering this recommendation, Bookkeepers contribute to the overall well-being of the business and its stakeholders, ensuring informed decisions are made to achieve the best possible outcome.

Once debt problems are identified, Bookkeepers can assist small business owners in developing strategies for recovery.

A Bookkeeper works closely with business owners and insolvency experts to create realistic budgets, establish debt repayment plans, and negotiate with creditors. Bookkeepers can help business owners prioritise debts, explore options for extended payment terms or reduced interest rates, and liaise with creditors on behalf of the business.

Get Ahead of any Issues

Up to date reports and reviews of business information provide visibility to the business. They should lead to raising strategies to improve the business performance, which means a greater understanding of what the business needs to do and when to ask for help and the support options available to them. It’s never too late to ask for help.

Benefits of Conducting a Session with your Bookkeeper

Using the ATO Cash Flow Coaching Kit with a bookkeeper can be used to build on existing knowledge, introduce new concepts and create positive behavioural change. Bookkeepers can use the kit to tailor a conversation with a business owner to help them get the basics right and give them the skills and knowledge to manage their cash flow effectively. The business owner can then make critical decisions, forward plan to maintain viability and meet their super and tax obligations with this knowledge.

Tools to Get Ahead of Any Financial Issues

ATO - Cashflow Coaching Kit

The ATO Cash Flow Coaching Kit is a resource designed for trusted advisers to help small businesses build their cash flow capability, meet financial commitments and remain viable. Good cash flow management is critical to the ongoing success of any business, whether a small business or a large corporation; cash flow is the lifeblood. Helping a business develop and implement a budget can help plan and direct money where it matters the most.

ABA - Financial Assistance Hub

The ABA is pleased to share with their new Financial Assistance Hub, which contains key information for bank customers, including in relation to credit cards, personal loans and buy now pay later, home loans, small business and agribusiness, on ways to navigate periods of financial difficulty and forms of support.

Bookkeeper Session
A business owner can start a conversation with a Bookkeeper about cashflow, conducting a business health check or perhaps introducing a new concept for positive changes in their business. Once an owner has the in-depth details about their business from a Bookkeeper’s perspective, they can then make better informed decisions about where to go moving forward.

Have questions or want a conversation about your business health?
Book a free meeting below!

– Team BKSP