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Small business support

Help to close your small business

Should I close my business?

If you’re finding that your small business is no longer viable, you might need to consider closing your business. Making this decision isn’t easy, however, there are resources to help.

CPA Australia offers practical guidance on warning signs your business might be in trouble – both early on and at the critical stage – and actions you can take.

There are warning signs that you probably know about – profits falling, struggling to pay debts on time and cash flow statements showing deficits.

There are however other indicators that you might not have considered to be early warning signs. By recognising and acting on these signs, you might help avoid bigger problems down the track.

Warning signs

Early warning signs that can be missed include:

  • having difficulty accessing new finance from your lenders
  • seeing negative changes in customer behaviour
  • falling behind with BAS lodgements
  • struggling with accounting and record keeping.

If you notice these signs, speak to your accountant or a business advisor about your options to see if they can help you get back on track.

Critical warning signs include:

  • having suppliers demand to be paid in cash or refuse to sell to you
  • seeking finance from less reputable sources
  • finding it more and more difficult to pay your staff or rent on time
  • using GST collections, your own money or super contributions to help pay debts.

If you notice these signs, speak to an accountant immediately.

Accessing resources

Help in closing your business

CPA Australia’s checklist for closing your business in Australia sets out the actions business owners need to consider when closing their business, including:

  • key decisions that need to be made – Is my business still viable? Should I close my business? When should I close?
  • financial considerations including paying off all obligations, notifying your lenders and collecting outstanding debts owed to you
  • leasing considerations – if you are leasing the premises, make sure you know your responsibilities if you close before the end of your lease and if you are unsure, speak with a lawyer, accountant or other relevant professional
  • communicating the closure to employees, contractors, customers and suppliers
  • tax obligations including cancelling your ABN and PAYG, keeping records and making sure all your tax lodgement and payment obligations are met (e.g. outstanding BAS)
  • legal obligations including cancelling your business name and deregistering your company via the Australian Securities and Investments Commission and and cancelling any licensing and permits
  • looking after yourself and your staff including seeking mental health support if you need to and assessing your obligations under the Fair Work Act
  • tying up loose ends including disconnecting services (e.g. water, electricity, phone lines and web hosting), removing your online presence (e.g. social media, company domain and email) and cancelling insurance policies that are no longer relevant.

Looking after your mental health

Closing a business can be a very challenging and stressful experience for a small business owner. If you are feeling stressed, worried or overwhelmed, we encourage you to call the Partners in Wellbeing helpline on 1300 375 330 for free and confidential mental health support and financial counselling.

Australia’s insolvency system reforms

The Australian Government has recently changed Australia’s insolvency system. The changes introduced new processes from 1 January 2021, replacing the temporary debt relief measures introduced in March 2020.

These changes aim to reduce complexity, time and costs and enable more people to restructure their small businesses quickly at this time. The changes include:

  • a new ‘debtor in possession’ model, allowing the business owner to keep trading and propose a debt restructuring plan
  • a new, simplified liquidation pathway for small businesses to allow faster and lower-cost liquidation
  • reduced investigative and reporting requirements for liquidators.

To learn more, download the fact sheet on insolvency reforms and how the changes are supporting small businesses.

Fact sheet on closing your business

Download the Victorian Small Business Commission’s fact sheet on closing your small business.

 

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