3 April 2024
TRANSCRIPT
Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Stephen Cenatiempo.
Radio 2CC Canberra
Subjects: Insolvency and small business; help for small businesses needing support
Stephen Cenatiempo
When it comes to businesses, some of the statistics are quite sobering. There's been a 20% increase in queries from small businesses struggling to manage their debts. Corporate insolvencies are at the highest level in nearly a decade and reached record highs throughout last year, particularly in the construction centre sector but also in accommodation and food services.
But we don't often think about the flow on effects of that. To talk to us about this we're joined by the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson. Bruce, good to have you on the program again.
Bruce Billson
Steve, good to be with you.
Stephen Cenatiempo
Obviously, these businesses going broke is the primary problem here. But we don't often give thought to the small businesses who are owed money by these businesses that go under.
Bruce Billson
Yeah, that's the cascading impact of business failure. We might hear and learn about the headline of the business itself that’s insolvent and they're insolvent because they can't pay their bills. The issue is the bills are owed to other businesses, other small businesses in many cases.
So, you know, if you and I provided services or goods to a business that all of a sudden had to close its doors, we've laid out money, we've had staff time, we've made financial commitments and incurred expenses in order to meet that request from us. And then we're left short as well. And that can have a cascading effect, a domino effect on those supplying businesses who all of a sudden find they’re down forty, fifty, or even in some cases, hundreds of thousands of dollars because a business has gone insolvent. That puts them in a precarious situation as well.
Stephen Cenatiempo
But I think the cascading issue goes a little bit further than that, too, because that small business operator then maybe doesn't go to his local mechanic to get his car serviced, he buys less at the supermarket, he doesn't spend as much at the butcher, etc.. So, I mean, it keeps going and going and going. But I guess the question is, what do we do about it?
Bruce Billson
Well, there's a couple of things. One is to try and make sure we do all we can to have a supportive business environment. At the moment we know there's multiple pressure points. Inflation, interest rates have a triple whammy on small businesses. They're not only having, in many cases to pay those interest rates themselves, it's having an increased cost for them, also for their customers there's an increased cost. And then you see the funds that are available to put into goods and services gets diminished. Labour costs are also increasing. At a time when there's really no easy or sloppy margins for businesses, these cost pressures have a squeeze on their margins and put them in a very precarious situation where the gap between just paying the bills and what you're receiving for income is not great. And anything can knock that off course, and have a really dire consequence for that business and the people that rely on it.
Stephen Cenatiempo
Bruce, I'm glad you raised the issue of interest rates because whenever we talk about interest rates, we talk about mortgage holders, but we very rarely talk about the impact it has on other borrowers, and that includes small business.
Bruce Billson
Almost half of all the loans to small business are secured by the business owner’s house. So, when you think about it, it's not only the need to meet those payments. They might have borrowed money to get through a cash flow slump. They might have been retooling like you were describing, or even just to pay for inputs for the next job that they've got to fund whilst they wait to be paid for it. All of those things have costs attached to them.
But for a small business there’s that added burden that I've got to meet those payments increasing as they are because my house is on the line. It has a really profound impact on their emotional wellbeing and just ups the ante even further for those men and women that have taken on the big responsibility of owning and running their own business.
Stephen Cenatiempo
I often criticise the Federal Government for doing very little to address the inflation crisis we're going through at the moment. But aside from that, and this is not just a criticism of this current government, but the best thing that governments can do for small business is get out of the way. And I know when you were small business minister you understood that. Why don't governments understand that all they need to do is get out of the way, cut red tape and just let businesses get on with the business of doing business?
Bruce Billson
Well, it's a challenging thing, and I think we've spoken about this before. We as a nation seem to be inherently European in our outlook. We don't want anything to go wrong. We want someone to attribute blame to if something poor happens as an outcome in our life. And what that does is it creates a real bias to regulate. People want rules. They want these safeguards, all of which represent another compliance burden on already time-poor small business. Now what happens is when there's those calls for action from government, when the budget's tight, a regulatory response is often the way it's dealt with.
And then you think about those small and family business owners. They're doing their compliance and regulatory obligations at 10 o’clock at night after being everything in the business during the day. So, I think that's a really important conversation we have to have. Many of these regulatory requirements might be a walk in the park for a big corporate that's got 20 people in their compliance area. But for a time-poor small business where they are the compliance professional, they are the marketing person, they are the one that not only runs the business of the business, they're the ones that bring to life that the value proposition for their customers.
We've got to keep an eye on that so there's a chance for us to energise enterprise and really give the small business economy a chance to flourish, when at the moment they are feeling many headwinds.
Stephen Cenatiempo
Bruce, in your capacity as the Small Business and Family Enterprise Ombudsman, what can you do to assist small businesses that that find themselves in this situation through no fault of their own, where they're struggling with cashflow because some other business has gone under?
Bruce Billson
We've got a few tools on our website Steve, that's www.asbfeo.gov.au
The other thing we have is we have some good relationships with others that can help, whether it's the Small Business Debt Helpline that can lean in and be a trusted confidant at a time when someone may well be quite distressed about their financial situation. There's also some coaching programs that help people navigate those challenging times, like New Access for Small Business Owners.
And in many cases, in fact, 40% of the matters that come to my office where we aim to resolve the dispute, involve payments. People just want to be paid. In some cases, some larger businesses just take a bit to longer because they can. We try and highlight the impact that has on the economy. But in many cases it's one small business in a dispute with another small business who might not have been paid by their customer, which then slows up the payment to their small business supplier like we were describing before.
So, there are some options. The other thing too, is if you are feeling that financial distress, don't put your head in the sand. If you've got tax obligations that are due and you can’t meet, reach out, be proactive. Look to take care of yourself so you can make good decisions at that time of distress and reach out to those resources that are there to help with those challenging times.
Stephen Cenatiempo
Bruce, always good to talk to you. Appreciate your time this morning.
Bruce Billson
Thanks, Steve. Take care.
Stephen Cenatiempo
Bruce Billson, the Australian Small Business and Family Enterprise Ombudsman.