Many Aussie retailers are feeling the financial strain and expect to explore restructuring or insolvency options in the next six months, new research from national business recovery and insolvency firm Jirsch Sutherland has revealed.
The independent survey of over 1,000 SME directors, almost one-fifth of whom are in the retail sector, identified the key sources of current stress and cash flow and turnover were the stresses keeping many awake at night (over one-third of respondents). Overall, just 10 per cent of respondents cited JobKeeper ending as their primary concern.
“More businesses fail due to lack of cash flow than due to lack of profit,” says Jirsch Sutherland partner Andrew Spring, a retail sector specialist.
“In retail, it’s even more important to be conscious of a positive cash flow cycle, as it can be hard to manage. And in these unprecedented times, it’s vital to take into consideration the conditions when the government’s ‘life raft’ is no longer there.”
According to the survey, one-third of retail businesses polled have taken advantage of JobKeeper and other government stimulus measures but say they’ll probably have to explore restructure/insolvency solutions once they end. Another 25 per cent that haven’t claimed the support payments also expect to consider restructuring or winding up their businesses.
“These are telling statistics and really reinforce the need for retailers to seek professional guidance early,” says Spring.
“While the government measures have helped many retailers stay afloat during these Covid times, there are others that haven’t taken advantage of or been eligible for JobKeeper and other benefits and are still facing hard decisions. Delaying those decisions is likely to only dig those businesses into an even deeper financial hole. And delays also contribute to the ever-increasing stress level of the people involved with those businesses, whether they be owners, employees or creditors.”
When it comes to finding information about insolvency, one-third of respondents say they’ll ask their accountant for a recommendation while over a third (34 per cent) will turn to Google.
“It’s so important to speak with a professional if you’re under financial pressure. There are options out there if you speak up early,” adds Spring.