September 2022

Edition 1. Vol. 1

Welcome to Edition 1 of Sentinel - our brand new monthly newsletter that we hope will keep you up to date with issues affecting the insolvency profession and the business community.??

Why?Sentinel??It builds on our consistent theme at Beacon Advisory of keeping watch for indicators of troubled business times - keeping watch over the sometimes troubled individuals that operate those businesses, and doing what we can to stand between those individuals and their businesses so that, if we can't keep the ship afloat, the people don't go down too.

This month we talk inflation, family law, construction and ATO.?We sincerely hope you enjoy reading, and find value in staying subscribed to, Sentinel.

Editorial

Spring has sprung and all things nature are starting to?emerge from their winter rest (in places that actually experience ‘winter’).?But, our recent experience tells us that the environment for business seems more challenging than ever, and many businesses are emerging from a long period of underperformance lacking the vital ‘financial nutrients’ they need to grow…or even just keep the status quo.

The interest rate and inflationary context at present is creating a significant amount of concern.?The tightening of credit terms and lengthening of processing times is having a detrimental impact on business finances.?

Residential fixed interest mortgages coming off into variable rates that have a 5, or even a 6, prefix mean that there is less disposable income available for directors to personally support their business operations.?With less money around to fund growth, or at the very least recovery and stablisation, here’s some of what we’re experiencing from the calls and enquiries that we’ve fielded over the past month:

• ATO Director Penalty Notices:? Are on the rise and the ATO is issuing hundreds per day, even down to ‘small’ debts of $20,000.
• Increasing inflation: Is driving up input costs and eliminating margins where fixed revenue arrangements are in place. Think building contracts.
• Increasing interest rates: Is driving down household disposable incomes and reducing the available equity (either as collateral or redraw) to fund business growth.
• Tightening credit: Is an inevitable function of rising inflation and interest rates.
• Supply chain delays: Are driving a lack of availability of stock and inputs, causing fulfilment delays and impacting revenues.
• Labour supply shortages: Are fuelling critical skills gaps that in turn affect production and productivity, leading to further impacts on fulfilment and revenues.?

Our recent conversations have evolved into some fairly honest and frank discussions with business owners.?These discussions are uncomfortable, but necessary, in order to prevent failing businesses taking down people and families with them.?

The soft landing, if there is one, comes in the form of the buoyancy of the labour market in that there are jobs available to accommodate business owners who chose to, or have to, exit a business.?

Whilst we appear to be some way from an ‘insolvency avalanche’, astute conversations with well-engaged business owners are starting those business on paths to these ‘soft landings’, before adverse circumstances become unrecoverable, and adverse outcomes become unavoidable.?

As spring moves into full swing, now is the time for review and action.?If any of the pick-list of badness from above applies to your circumstances, now is the time to reach out for assistance.?A call will cost you nothing .?What will not making a call cost you?

Thought Leadership

ATO Recovery Action: What You Need to Know Now

If your company owes money to the ATO, you should be aware that it may take action without notice to recover that debt.

If you're not careful, unmanaged tax debt could lead to insolvency and the loss of your business.

So what can you do to protect your business? Read on…

Current Matters

Construction Business: We have been working this month with an allied construction business with significant tax debts in an effort to affect an intergenerational business transfer through a voluntary administration and Deed of Company Arrangement.?The key to the outcome is a pre-appointment license agreement that preserves the business undertaking, whilst allowing the licensee to demonstrate its capacity to generate profits and ultimately secure the purchase of the insolvent entity's assets at a premium to auction value.?This will give creditors a far superior return to liquidation and preserve the jobs of a dozen workers.?Watch this space!

Elsewhere, we have been working tirelessly on a consulting engagement with a multi-million dollar large charity.?The engagement involves a complete governance overhaul and reform as well as guidance with the organization's operational plans to return to revenue after an enforced 10-year suspension to its operations - this will be a 'good phoenix' story where no one gets left behind.?Stay tuned!

Finally, we are seeing more and more dispute-driven enquiries.?Clearly, financial pressures are starting to bite in business and that is bringing forth arguments between owners and partners about strategy, expenditure, revenue and importantly profits.?Sadly, more of these matters are accompanied by complex Family Law matters that not only make those matters significantly harder to navigate, but they have real emotional, physical and financial tolls on innocent victims - kids.?These ones break our hearts!

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At Beacon Advisory, we believe that people matter...

This is why we are unwavering in our commitment to help people navigate business challenges, whatever the scale, with empathy, strategy and clear purpose that takes into account the interests of all stakeholders in each and every engagement.

About Beacon Advisory

After three decades in the insolvency and financial services fields, we established Beacon Advisory in May 2021. At Beacon Advisory we deploy traditional insolvency and business advisory services in non-traditional ways through enhanced use of technology, innovation and strategy, underpinned by our delivery philosophy of creativity, collaboration and objectivity. We utilise our significant experience and unparalleled expertise to provide tailored solutions driven by our core principles of quality, integrity and timeliness, so that our clients can move forward with trust, in our abilities and their own, towards a brighter future.