Supporting failing businesses: trusted advisers can’t just ‘do the books’

Griffith said that small businesses are missing support in the middle of their business journeys.

“At the beginning, if you start a business, there are heaps of grants, [and] there’s support.

“At the end, we’ve got absolutely wads of information. We’ve got heaps of information [on] what to do when you’re in trouble. So if you have fallen behind with the Tax Office, if you are in trouble, for example, with compliance, there’s lots of information on what to do when you’re insolvent, when it’s over.”

He said that although ASIC has a guidance document that outlines insolvency indicators, ASIC RG 217, business owners usually only receive this information when they are in trouble.

“The problem is it’s too late … Way too late.”

Griffith said that while there’s plenty of support at the beginning of the small business journey and last-ditch support at the end, support in the middle is scarce, which is where all of the important preventative work lies.

Putting out fires with head in the sand

While accountants and tax agents will go straight to compliance in high-stress situations, for business owners, compliance starts to fall away under pressure, Griffith told the brand.

“One of the major problems that any accounting firm owner or bookkeeper will tell you is that when business owners become stressed, they will concentrate on the urgent matters right in front of them. So it goes straight to operations,” Griffith said.

“When they’re stressed, your average business owner will turn all of their focus purely to the immediate operations, management, the day-to-day management of the operations: staff bringing in work, winning work, whether correctly priced or not. They will go straight for that because cash is king. They know that they’ve probably overspent a bit in their bank account. They might be looking at an ATO debt.”

“Then they’ll start putting out fires, straight away dealing with the crisis matters”, he said.

While this may be the knee-jerk reaction for a business owner, accountants have an obligation to be in constant communication with their small business clients, Griffith said.

He said that every business owner saved from putting out fires, or from potentially taking out a high-interest loan they discovered through a finfluencer, is potentially a client who’s going to grow with the business.

“You can’t just do the books. At the end of the year, you must be talking to them and actually proactively saying to them, ’How are things going?’”

“Look at the industry they’re in, provide them with some regular information in your newsletters, and be persistent with the newsletters. Business owners [are] busy by definition.”

Griffith added that the ATO is one of the major causes of distress for small businesses; owners should keep payment plans and reporting early at the forefront of their minds to stand a better chance with the Tax Office, as they will be more likely to be receptive.

“A payment plan is an absolutely necessary avenue that, you know, the accountant should be recommending.”

“You stand a [much] better chance with the ATO if you’re actually talking to them early. They’re much more likely to be receptive.”

Most importantly, he told the brand that the key for accountants is to communicate with their business clients when they start to feel stressed, anxious, or overwhelmed.

Help is available via Lifeline on 13 11 14 and Beyond Blue at 1300 22 4636.