How can I protect my small business from serious debt issues? How will the government’s methods of dealing with debt influence my small business? How can I manage stubborn debtors?
If you’re a small business owner, these are probably your questions you ask yourself.
The problem is, protecting your business from debt might not always entirely depend on you alone. Debt is a preventable issue, but it can quickly become an overwhelming problem if not dealt with appropriately.
[ctt template=”7″ link=”y78PJ” via=”no” ]Debt is a preventable issue, but it can quickly become an overwhelming problem if not dealt with appropriately. [/ctt]
The Australian government is using two different ways to tackle the debt issue with small businesses. Let’s take a look at these two methods and how they can impact your business.
ATOs approach to tax debtors
The Australian Taxation Office (ATO) announced that starting from July 1, will start notifying credit agencies of businesses with increased tax debts. They will focus on the businesses that haven’t engaged with the ATO to try and find a way to manage their debts.
This means, if you’re a small business with tax debts and haven’t contacted the ATO to help you manage it, you will have a hard time accessing new finances before paying it all off.
How can this influence your business?
- A bad credit rating is hard to restore,
- The legitimacy of the ATO’s tax debt claim might not be always correct.
How can you protect your business? Talk to your accountant if you have accumulated a tax debt. They can mediate on your behalf with the ATO about the best solutions.
ASBFEO approach to debtors
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has issued the Payment Times and Practices Inquiry revealing the problem of small businesses being owed around $26 billion in unpaid debts.
Essentially the issue comes down to the fact that large businesses don’t pay small businesses in time. Small suppliers have to somehow manage their own debts, often resorting to having to access external funding. But paying debt with debt has never been a good idea.
The Payment Times and Practices Inquiry currently focuses on effective ways to improve the payment of large businesses, therefore helping both large and small businesses manage their debts.
You may also be interested in: Checklist To Get You Ready For Tax Time
How to deal with debtors?
Dealing with debtors is a delicate and complicated issue, especially when they are your clients. Of course, there’s also the issue of uncooperative debtors, which is even trickier to handle. It’s best to make sure, ahead of time, that you have taken all the necessary steps to protect your business.
Here are a few useful steps you can take into account to protect your business:
- Make sure your contracts and invoices have clear payment terms.
- Ensure that you have a procedure to follow if a customer breaks the payment terms.
- Keep a record of actions you can take to recover a debt.
- Final letters of demand with the relevant court documents attached. Sometimes this will be enough for your debtor to pay you but you must be prepared to follow through, just in case.
- Employ a debt recovery agency.
- Sell the debt for a small percentage of the owing value.
You can also read about: The Pivotal Thing In Your Business That Can Make Or Break You
Debt is a daunting issue. Nobody wants to have to deal with it, but it’s always better to be prepared rather than taken by surprise. Now that you have a few good strategies to take into account to protect your business, all you need is professional advice.
The specialists here at Shuriken are equipped to give professional advice and handle debt issues. Don’t struggle alone, let us give you a hand. Get in touch today:
