Adviser says debt accrued in bad years the fatal blow
MANY businesses buoyed by improvements in the economy will still battle to turn their operations around due to debt accrued during the bad years.
Ray Brown, of Professional Debt Solutions at Noosaville, said bankruptcy was often triggered by debtors who were struggling themselves.
"Unfortunately, when the cashflow during quiet times forces businesses to rely on credit to get by, eventually they are in a position where credit is no longer available," Mr Brown said.
"When the cashflow does pick up they are still always behind and find it difficult to get back on top.
"Quite often, in some trades, businesses are owed money from customers or clients who are doing it tough themselves.
"This forces the business to rely on credit until eventually they are forced to declare themselves insolvent."
Mr Brown said the situation was getting "slightly worse" in spite of positive outcomes in Sunshine Coast Council's latest business confidence survey
"The Sunshine Coast appears to be starting to stabilise, but the level of debt that individuals and businesses have accrued through previous tough years is still having an effect now," he said.
"The number of people living above their means and relying on credit to get by is still high.''
Mr Brown said the biggest hurdle appeared to be maintaining high outlays when already heavily in debt.
"Regular cashflow, and keeping up with today's living expenses while already having debts - even though the economy appears to have improved, the day to day cost of living and running a business has gone up along with their level of debt.
"The solution is to set a conservative budget and stick to it. When budgeting take into consideration the quiet time and slow periods.
"Live and run your business within your means, always put money away for your tax. A lot of businesses we put on debt agreements or declare bankrupt have a tax debt outstanding."