Australia’s financial landscape is changing on a daily basis with the implementation of stricter levels of social distancing measures in an effort to curb the pandemic. Each measure has a direct negative impact on the economy as doors are shut at a Federal level and people are forced to say at home on a state level. However the key driver of staying in business has not changed; that of cash flow. Positive cash flow will keep your business on life support during these difficult times and, at its most basic, will keep food on the table and the lights on.
Businesses are metaphorically tightening their belts, however there are still cash resources presently available. This may not be the case for long.
These times require a delicate balance between acknowledging the financial strain and pressures your debtors may be under, whilst acknowledging that your own bank balance cannot afford to merely overlook the lassitude of debtors making payments.
Prior to the advent of COVID-19, use of letters of demand were highly effective. Given the change in Australia’s economic situation, instead of sending letters of demand we now recommend sending a letter of robust enquiry into a debtor’s ability to make payment in full or offer a sensible repayment schedule. We are finding this to be effective in the current climate.
If you think your business would benefit from a review of creditors over 60+ days, please contact our Kirsten Woolston for a brief no-obligation discussion.
Bankruptcy and liquidation update
As of 25 March 2020, the thresholds have been lifted for bankruptcy notices from a statutory minimum of $5,000 to $20,000 and creditor’s statutory demands from a statutory minimum of $2,000 to $20,000 for a period of 6 months due to COVID-19 measures.
Companies and individuals will also have 6 months, not the usual 21 days, to respond to a creditor’s statutory demand or bankruptcy notice.
This means that if your debt is in excess of $20,000 and you wish to take a step towards recovery of that debt before December 2020, then a creditor’s statutory demand for example, would need to be issued by no later than the end of May 2020.
As with anything, it is best practice to implement plans and make a decision early. It is likely that COVID-19 will have a long-lasting impact on the Australian economy and the small steps that can be taken now will likely do much in mitigation of potential future losses.
Please contact our Kirsten Woolston on (07) 3225 5628 for an opportunity to discuss how we can assist you during these uncertain times.
Kirsten Woolston Senior Associate