Don’t discount knowing the numbers.
How does a business owner know if they are digging a bigger hole if they don’t know their numbers (I can hear you groaning from here)?
The numbers are important and most clients that are having issues have no idea what the true position of the business is.
I want to make it easy for you.
- Don’t worry about reconciling your past 3 years’ bank statements. That’s irrelevant for this exercise. Just grab your latest balances off your internet banking and write down in 2 columns on a piece of paper.
- Match the ‘what I own’ with the corresponding debt that matches it. For example, if I own land that’s worth $ 250k but I owe the bank $ 200k for that land…. I have written an example below …
Shortfall = $46,850
This is not worth going bankrupt over!
These are all the business assets and liabilities. You need to do another separate list for your personal assets and liabilities. If you are going to keep the vehicle then move it onto your own personal list as it will be paid by future income – either a job or a new venture or Centrelink.
It’s all about timing and managing it correctly. Getting out, not necessarily with the shirt on your back, but with your dignity and integrity maintained!
Creditors can be put on payment arrangements or offer a smaller amount in final settlement. I’ve seen the ATO accept half the amount as full settlement of a debt as they knew it would cost more to pursue through the courts. It’s worth swallowing your pride and asking the question.
Property leases are more difficult. You can ask to be released but landlords rarely do. It’s still worth the question. The landlord will expect you to find a replacement tenant before releasing you from your obligations. But it’s a timing game. You may be able to negotiate halfyour regular payments but for twice as long. That way you can get a job and pay it off. Painful, but worth doing. Just compare this amount to your personal worth.
By Angela Fritzsch
Owner and Senior Business Advisory Accountant