Business Insolvencies Hit a 3.5-year High
According to the ASIC, business collapses hit a 3.5-year high last month, surpassing pre-pandemic trends. The rise in insolvencies can be attributed to rising interest rates and a cooling economy. In addition, the Australian Taxation Office has been cracking down on unpaid tax debt, which is driving more companies to the wall. Data Shows that the construction, accommodation and food services, retail trade and manufacturing industries collectively contributed upto 50% of the 5689 corporate collapses in the first nine months to March 31.
Insolvency practitioners have noticed a significant increase in inquiries and corporate insolvencies over the past couple of months. This is due to rising costs, interest rate increases, and the ongoing increase in inflation. They also note that banks, other creditors, shareholders, and financial sponsors are less willing to extend debt and equity funding to businesses.
Furthermore, many tech companies have recently made staff redundant to remain competitive in the challenging economic environment. However, the mining state of Western Australia is yet to experience much distress.
In the face of reduced consumer spending and capital investment, businesses need to create innovative strategies to stay competitive. Maximising the efficiency of human resources is vital in such a scenario.
Outsourcing lightens the load and gives the internal team the necessary breathing space to come up with survival and growth plans. In such a volatile economic environment, SBA’s back-office support services can be a vital component of a company’s survival strategy.
Source: AFR