A year ago no one could have predicted or anticipated the length or devastation of COVID-19. Initially, most businesses and employees believed the lockdowns and restrictions would be temporary and business would resume normally before insolvency and loss of employment became the mainstay. But as we are seeing now, our expectations were off the mark.

To date the government has been able to step in and step up, providing programs such as JobKeeper to continue to support both employers and employees. Insolvency laws were temporarily changed allowing businesses protection from creditors and the ceiling on a business’ outstanding debt was temporarily raised to $20,000 before a creditor could secure bankruptcy notices. Commercial rental relief gave businesses rent reductions or deferrals. And, of course, mortgage holidays from the banks gave people some short-term relief. But now, all of these forms of assistance are coming to an end in March 2021 and no extension or replacement is currently forthcoming.

What will this mean for businesses?

With this change of circumstances, Australian businesses now must sink or survive on their own financial accord. There is a concern that insolvency proceedings for small, and larger businesses alike, will begin to climb from March 2021. 

Some businesses will be hit harder than others. For example, businesses that count on open borders and freedom of travel. Any future COVID-19 outbreaks will also affect businesses such as restaurants or venues, especially if restrictions are reinstated. Should this happen without government assistance, the rate of insolvency is sure to rise dramatically.

How can businesses weather any March cliff? 

If you’re anticipating your business may be significantly affected by the end of government stimulus and other relief in March, there are several things you should do to avoid insolvency.  

1. Take immediate stock of your financial situation including cash flow and outstanding debts
2. Clearly calculate all of your costs of continuing to do business and consider where new cost saving measures could be instituted. Cut costs that are repetitive, redundant or no longer necessary in the current climate
3. Review your marketing and advertising strategies to determine if they need to be re-targeted to larger or different markets in an effort to bring in new business
4. Implement up-to-date safety measures and make your customer base aware of your concern for making their experiences as safe as possible
5. Speak with your lenders to determine if there are any measures, beyond government assistance, that are being offered to assist businesses
6. Be open and upfront with your creditors about the current state of your business assets; attempt to work out lesser debt payments with a gradual increase over time and in accordance with a recovering economy
7. And most importantly seek out both legal and financial advice now, before the temporary restructuring relief is removed. By engaging in early planning, you will be in a better position to prevent insolvency.