Helping Clients Before Business Closure
Earlier this year we saw new measures for support during COVID-19, including changes to the Commonwealth bankruptcy law.
Because of this measure many businesses have been able to put off bankruptcy and start the recovery process.
However, many other businesses will still face the likelihood of closure because of unmanageable financial difficulty due to COVID-19.
The bankruptcy law changed the temporary debt protection (TDP) period from 21 days to six months, during which time unsecured creditors cannot take enforcement action to recover monies owed to them.
Businesses must apply for TDP with the Australian Financial Security Authority to take advantage of the temporary debt protection period to negotiate payment plans, get financial advice and consider insolvency options.
What can Bookkeepers and BAS Agents do?
As the bookkeeper you will have a close understanding of the financial performance of your clients. You are in a position to initiate conversations with the business owners and discuss their options or advise them to seek other professional help if you do not want to talk about insolvency – it may be a difficult conversation.
Initiating conversations early may prevent businesses actually having to engage liquidators or go bankrupt.
If the business owner does talk to liquidators before talking to the tax or BAS agent, whilst this may be a surprise, try to give the owner the benefit of the doubt… they may feel too close to you or the tax agent to want to have that conversation! They may find it easier to talk about the possibility of liquidation with someone who is not close to the business or them personally.
If you can offer support to the business owner and work with the insolvency advisor, it is possible that the business might continue trading and you may be able to continue with an even better relationship in future.