Indicators that your clients might be heading toward Insolvency

When a client is in financial trouble, more often than not, they have little to no understanding that they may be headed for insolvency. They ‘put off’ having to deal with their declining financial circumstances, which quite often leads to deeper debt and less empathy from their creditors.

A question we are often asked is, “when is the right time to reach out to your trusted insolvency practitioner?” In order to help practitioners triage their struggling clients, we have put together a checklist of indicators to look out for:

The clients are in a current climate “risk” category such as:

• Building and construction
• Accommodation & food services
• Retail trade
• Transport, postal & warehousing

• They are currently trading at a loss or you have witnesses continued losses over various periods;
• Statutory creditors not being paid on time i.e., State and Commonwealth taxes such as GST, payroll tax and land tax; employee superannuation, wages and/or leave entitlements;
• Creditors being paid past contract / agreed / normal industry terms;
• Suppliers placing them on a Cash on Delivery arrangement or demanding special payments before resuming supply;
• Cheques have been returned dishonoured or EFTs have ‘bounced’;
• Cheques are being issued but not sent or are being post-dated;
• Payment demands being received from solicitors or judgments for unpaid debts being sought;
• Accounting records are not kept up-to-date and / or are hard to find when asked;
• Clear avoidance from your client to simple requests, and / or emails from you are not being responded to in a timely manner;
• Change in client behaviour in dealings with your office;
• Changes in employee status – understaffed and over-stretched;
• Overdraft limit being exceeded on a regular basis;
• Non-payment or delay in payment of rent / lease; and /or
• Limited or no access to alternative funding / finance.

If you have any questions please reach out to one of our experts.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.