Accountants across Australia have been encouraged to raise the issue of business closures with their clients as ongoing lockdowns are quickly resulting in the death of a number of businesses.
Recently published data shows that business defaults have increased by 20 percent over the past month. Averaging an increase of 10 percent over the last three months leading up to August 2021.
Despite defaults only rising by 0.6 percent when compared to August in 2020, it is noted that this is the first rise since May 2020 and is therefore a sign of an increasingly difficult time ahead for Australian businesses.
As the time Australians spend in lockdown continues to increase so does the levels of business uncertainty.
At the present time accountants are being relied on heavily to help business clients with grant applications and ongoing eligibility retests. However, there are many cases where now is an important time for accountants to bring up the possibility of business closure as an appropriate strategy for clients who are struggling.
For accountants who are thinking of bringing up the taboo topic of business closure with a client it is a good idea to mention it with clients who are struggling and buying their time through this temporary period of government stimulus that is being disturbed due to the covid-19 pandemic.
Right now, bringing up the topic of business closure for these types of clients is the best way to help their business achieve a smooth closure before government stimulus is discontinued.
As Sydney and Melbourne continue to face ongoing lockdowns, credit inquiries decreased by 19 percent in August, marking the first negative result since September 2020.
Trade receivables also fell by 12.5 percent in August 2021. This means that a large number of businesses are unable to trade or are opting to sit in a holding pattern until the economy reopens.
Although stimulus packages introduced by the state governments have vetoed widespread closures, it is fair to say that external administrations will inevitably rise as lockdowns are lifted.
It is safe to argue that many business owners are hanging onto false hope that they can make up for lost revenue once lockdowns are lifted.
As more Australians work from home this means that many businesses located in the CBD areas will probably never see the return of high levels of foot traffic that occurred in a world prior to the covid-19 pandemic.
Payroll Jobs Drop During The Month of August
As a result of covid-19 enforced lockdowns, payroll jobs across Australia dropped during the early weeks of August.
The Australian Bureau of Statistics (ABS) announced that payroll jobs fell by a further 0.7 percent in the fortnight to Saturday 14th August when compared to a fall of 1.8 percent in the previous two weeks.
The biggest falls were recorded in NSW, down 1.2 percent, followed by Queensland off one percent, the ACT 0.7 percent lower and Victoria dropping 0.6 percent.
“These four states and territories had lockdowns for either all or part of the first half of August, in addition to existing restrictions and border closures across the country,” said ABS head of labour statistics Bjorn Jarvis.
Reserve Bank governor Philip Lowe has issued a warning that the unemployment rate will increase in coming months as the economy takes a dive as a result of covid-19 lockdowns.
Commonwealth Bank group economists expect that the official August labour force data which is set to be released in the final week of September will indicate that there have been around 300,000 job losses with the unemployment rate lifting from 4.6 percent to 5.2 percent.
There were also further indications that the demand for workers is rapidly easing.
Figures released on Thursday 16th September illustrated that job advertisements posted through the SEEK network dropped 5.3 percent in August 2021.
Job advertisements in NSW dropped by 10.7 percent in August, while they declined by 6.3 percent in Victoria.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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