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01 Dec 2023

Insolvency guide to avoiding a festive crisis


5 min


Handy tips to avoid the ‘Bad Santa’ experience.

The mad Christmas rush has well and truly begun which seems to creeps up faster and faster every year.

For many small business owners, they have their sleeves rolled up getting their hands dirty assisting staff to meet tight deadlines put on by customers and closure periods across many industries.

However, it is important that business owners take a moment off the tools to ensure the business can adequately deal with the financial and operational strains that can arise this time of the year.

To assist, we outline the main areas we believe business owners must consider.

Budget budget budget!

It is crucial that business owners invest some of their time over this period in budgeting and forecasting major cash inflows and outflows. The best data to use to budget and forecast is the months before and after the previous Christmas trade. Trends can be formed, and anomalies identified to raise awareness of vulnerabilities and effectively manage cash-flow risks where possible. It is also important to track how the business is performing against the budgeted forecasts and adjusting the budget and your cash flow decisions.

Make use of early discounts, and offer them too

A good cash-flow strategy, particularly those businesses with strong sales leading up to Christmas, is to pay down accounts on or before their due dates, especially creditors offering discounts for early or on-time payments. Vice versa, if you sell goods or services on account, offer the same incentive to boost the inflow of cash to pay unavoidable expenses such as rent and annual leave for permanent staff while trading is closed.

Be aware of who you are selling to

With increased sales comes new customers or existing customers who try to push their credit limits. Business owners may be in merry mood at this time of the year but shouldn’t take any shortcuts by not conducting credit checks and following proper policies and procedures for dealing with sales on accounts. Critically, credit application forms must be signed by the correct legal entity trading the business (e.g. if it’s trading through a trust) and consider obtaining security from the company and a personal guarantee from the director to reduce the risk of uncollectable debtors in the new year.

Limit the expenditure

At this time of the year, cash flow is crucial to cover essential expenses that drives income. Therefore, now is not the time to invest in new business opportunities or technology to innovate business processes. The focus should be driving revenue through limiting expenses that only contribute directly to generating this income. This enables businesses with quieter starts to the new year to use those surplus funds to explore those opportunities while time allows.

Don’t leave out the tax man

While obvious, commonly businesses don’t set aside enough to pay their superannuation and tax obligations for the new year. The superannuation payment is due on 28 January and quarterly BAS statement due 28 February due to the seasonal reprieve the Australian Taxation Office (ATO) allows. The next BAS quarter quickly follows being due on April 28—just two months later. The ATO is on a mission to recover the $77 billion debt book that ballooned out during COVID due to government stimulus and support measures. The recent uptrend in ATO winding ups, issuance of director penalty notices (DPN) and unpaid tax debt reporting to credit bureaus means small business owners must remain vigilant and on top of their lodgments and ATO payments, particularly if subject to a current payment arrangement plan.

External funding

It may be tempting for a quick cash grab from the bank (not a robbery) or the ever-increasing number of alternative lenders, but it’s important to consider whether the short-term gain is just going to cause long-term pain. Consider the pros and cons of short-term loans, business overdrafts, invoice or inventory finance, credit cards among an array of other lending types. Importantly, read the fine print for hidden fees and charges, and calculate how the interest rates and repayment terms will impact the cash-flow budget. In particular, defaults to unsecured business loans may have clauses allowing lenders to charge guarantor’s real property.

If family or friends are looking to chip in funds, ensure a written agreement is executed, and security is taken before the funds are advanced. It may come at a small cost now to ensure this is done properly but it may avoid a greater pain later should the business run into trouble. Treat the family favour like any other professional business and arm’s length transaction.


For the business owners that will have time off for a well-earned break sometime during the festive period, they could use this time to:

  • reflect on the year that has gone

  • consider how business practices could be improved

  • identify what opportunities and risks lie ahead in the new year.

Using the downtime to formulate strategies that could help the business prosper for the year ahead could be invaluable.

If you are aware of any cash-flow concerns that your clients may be having, there is still time to contact any one of our Worrells Principals to discuss options that may be available to them.

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