Insolvency

How small business can get help

Olivia Pearce — Mon, 02 Sep 2024 22:11:50 +0000

How small business can get help Olivia Pearce Tue, 09/03/2024 - 08:11

02 September 2024

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson interview with Leon Delaney.

Radio 2CC Canberra

Subject: How small business can get help, insolvency concerns, payment times, solving problems with digital platform providers

Leon Delaney

The latest report from the Australian �Թ�� and Family Enterprise Ombudsman has revealed a 50% increase in requests for help from business owners that fear another business which owes the money may have become insolvent or are therefore worried about their own ability to meet their financial commitments. Joining me now the Ombudsman. Bruce Billson, good afternoon.

Bruce Billson

Leon. Great to be with you and your listeners.

Leon Delaney

Well, this is apparently the most significant, most common challenge that small businesses face, getting paid by other businesses.

Bruce Billson

Certainly from our caseload, and there's about 6500 a year, 40% of those are about just trying to be paid. But also they've taken a slightly sharper focus on what's happening with the other party that they're dealing with. We know that many businesses aren't having a particularly profitable streak right now, that cash flow is a big concern for many. And businesses are hoping, whilst they may have taken all proper care in their own financial arrangements, they haven't gone and done some work or supplied things to another business that's running into trouble, and they might end up not being paid and having to carry the cost of the inputs that help them deliver that goods or service. So that risk of a cascading consequence where the difficulty of one business relates to another being caused, that's a real concern. We've seen noticeable uptick in that kind of inquiry.

Leon Delaney

The construction sector in particular is notorious for that kind of thing, isn't it?

Bruce Billson

It is, and that's why it's such a prominent part of our statistics. I think you and I and your listeners have spoken before about the construction sector, particularly when it's fixed price contracts, and there might be a delay in getting some equipment, some material. Maybe it might be harder getting the trained staff, the tradesmen that you're looking for. And the inflation pressures that we understand and talk about as cost of living pressures, are cost of doing business pressures. And you can find yourself part way through a project, and then all of a sudden, the other party - where we've seen quite a spike in insolvencies in construction - is unable to pay its bills, and then that has enormous impacts on your own business, particularly if you've laid out money to help meet that contractual requirement in the first place. So that's that anatomy of that cascading concern where the financial challenges of one business can have a really significant bearing on another business and their ability to pay their bills.

Leon Delaney

And while it is a feature of the construction sector, it's far from being the only sector where this happens. Other businesses also experience a similar thing, don't they, in sectors such as hospitality and similar types of businesses. What can a business do to protect themselves against that?

Bruce Billson

Well, there's a couple of things, and you're right, it's not just a construction industry thing. Hospitality, where margins are pretty tight at the best of times, it can be really significant there with energy costs really making it more difficult. Input costs, you know, even the interest rates are cost of funds for businesses, become more expensive and customers have less to spend. But even in sectors that are doing well, and we've seen recent results for the major supermarket chains, some big businesses are doing quite well, yet we still know one in four of their small business suppliers are having to wait 120 days to be paid.

So that brings into question, well, what can you do about it? It's pleasing that the government's focused on the Payment Times Reporting Register and actually making that more useful, so that a small business can check what the form is of big businesses and take account of that. There's also a range of credit monitoring services. That might not immediately jump to mind, but let's go back to your example. Just say we were doing a subdivision, there's new ones going on throughout Canberra and the region, and we were putting the electricity services in, if we're forking out money for cabling and conduit and substations and the like, you'd want to be pretty confident that the subdivider is actually able to pay the bills when it comes.

You can check these credit reference websites just to see whether they're late on making payments generally, or whether they've got a particular credit risk attached to them. And then you and I could decide, well, we might do that work, but we might want half the money up front before we even start.

The other thing to think about, too is the Tax Office is up and about. And I'm urging the Tax Office to really be using that credit reference notification process more often, and sooner, so that businesses can take that into account when they're dealing with another business. If that other business owes $150,000 to the Tax Office, I'd be wanting to know that if it did become insolvent, I wasn't going to get trumped by the Tax Office and other secured creditors who are going to get looked after way before we get looked after as a small business. They are a couple of steps you can take, along with a little bit of buffer where that's possible.

Right now, one in four small businesses, Leon, are reported to have no cash reserves, so they're really running close to the wire. If you're able to, the recommendation is six to nine months of operating expenditure put to one side so that you can navigate those choppy waters and survive yourself, even if you are faced with the setback like what we've described.

Leon Delaney

Although it can be difficult to accumulate that buffer when trading conditions are as tough as they are at the moment. Now, you've also reported that there's a significant number of small businesses having a lot of trouble dealing with digital platform providers. And of course, these days, digital platforms are pretty much the platform that businesses operate on, aren't they?

Bruce Billson

They are, and it's the fastest growing type of matter we're being asked for assistance with. You and I might be selling miniature goats. They are pure bread. We've trained them well…

Leon Delaney

You come up with such extraordinary examples, Bruce! Miniature goats. I never thought I was going to go into business selling miniature goats with Bruce Billson, but there you go.

Bruce Billson

And there we are at the Murrumbateman market selling them at market day. But when we're not at the market, we might be promoting the personality of our goats on our website, and then people can buy them through Marketplace or other of these digital platforms. And we might think things are pretty good. But then someone might hack into our account. They might take over our account. They might trash talk miniature goats to our disgust.

But more nefariously, they might get in there and start promoting other websites. We might have a credit card linked to that account, and they start spending our money on other things. We reach out to that platform provider, and we go to the frequently asked questions on their website, and it says, if you can't get into your account, get into your account to tell us you can't get into your account. That’s how nonsensical and unhelpful the current arrangements are. So, we try and get involved and speak to a real person. It shouldn't be that hard. These digital platforms need to do better. They need to have internal dispute resolution and assistance mechanisms so that long live the miniature goats.

But I use that in a facetious way to point to a very significant problem. If that's our only channel to our customers, all of a sudden, our business is down, we've got no way of reaching those customers, no way of supporting them and delighting them. And that could potentially have really big implications for our business into the future.

Leon Delaney

I've certainly heard of people having a business presence on social media, and it is their primary platform for selling. And then, for whatever reason, they lose control of the account, they get their account suspended, and all of a sudden they've got no business, and they've got nowhere to turn.

This point you've made about talking to a real person, this harkens back 20, 30, 40, years ago, Bruce, when I was banging on the table and shouting into a radio microphone about the number of big businesses now that when you ring them up, you get an automated recorded message menu system. And I said back then that what we need to do is pass a law that every major government agency, every major public entity and every big business must, by law, employ a real person to answer the phone and direct the call accordingly to preserve the status of proper customer service. It would solve the problem of customer service and unemployment at the same time by creating all those jobs for people to answer telephones. I think I've still got a case, don't you?

Bruce Billson

Oh, visionary stuff. You were before your time then, you are now. What a cunning idea actually having customer service with someone at the other end to give you service. And that's been a central recommendation of ours. We've gone through various digital platform inquiries. The ACCC has done some spectacular work. We know there's things that aren't working right in these sectors and that's what we've been calling for - effective and timely internal dispute resolution and support mechanisms, including scope to escalate to a real person. And if all else fails, they contact us. We get onto them and the deal we've got with some of these platforms is, look, we can recommend to government that they sting you with enormous costs and set up some complicated, expensive system. Or you can work with us to solve these problems. Your call, but we want to do the best by small businesses that rely on these platforms. And boy, can they do better.

Leon Delaney

I think my rule is probably more relevant than ever now that we're facing the age of chatbots and artificial intelligences. Bruce. Thank you so much, and I'll chat to you again soon.

Cyber security tips for small business

Olivia Pearce — Mon, 12 Aug 2024 01:19:05 +0000

Cyber security tips for small business Olivia Pearce Mon, 08/12/2024 - 11:19

31 July 2024

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson interview with Tim Webster.

ABC Radio Sydney

Subjects: ransomware attacks on small business, cyber security tips for small business, insolvency concerns, business continuity planning, changes to privacy laws, energising enterprise, Carly Simon, Warren Beattie, Mick Jagger and James Taylor

Tim Webster

Australian businesses are paying untold amounts of ransom to hackers, but neither the government or the public actually knows how much. That's interesting. The Cyber Security Act, which is yet to be unveiled, would force Australian businesses and government entities to disclose the payments or face fines expected to be brought before the parliament at the next sitting. So, how will small business deal with all of that? The Australian �Թ�� and Family Enterprise Ombudsman is Bruce Billson. He joins us from time to time and we love talking to him. G’day.

Bruce Billson

Great to be with you Tim. And I haven't heard that Carly Simon version either. Everyone remembers that Coming Around Again that was in that Heartburn movie, and, of course, You're so Vain. I mean, that doesn't apply to anyone in this conversation, but that was a big hit.

Tim Webster

Certainly not. 1973 You’re so Vain. Well, the conjecture about who it was about, and I think she eventually said it was a conglomerate. Warren Beatty, Mick Jagger, of all the men she’s known.

Bruce Billson

Warren suffered from being a particularly handsome rooster. Who knows. But that’s not what's on our mind though. The pressures on small business.

Tim Webster

The Cyber Security Act. Now, that's an interesting piece of information. Untold amounts to hackers, but neither the government or the public knows how much. I imagine that's because business doesn't want them to know.

Bruce Billson

Yeah, it's a tricky one because most of the expert advice is don't pay for the ransomware to be released so you can get your data back. But, clearly, in some cases, businesses are making a commercial decision that rather than have the whole capability and their ability to engage in trade and vital data, there are reports that some actually pay the ransomware and then hope that the nefarious figures that are involved in cyber hacking then do the right thing and release their data.

It’s a bit of a contested space, but the expert advice is, overwhelmingly, don't pay the ransomware. But then the same experts are saying for us to be best placed to combat that kind of thing, we need to know what's going on. And therefore, you know, the information perhaps around who's doing the ransomware attack and what you may be asked to pay is something that's really important to those trying to defend us in this cyber security threatening world.

Tim Webster

I know it's a threatening world, but tell me, do you think it's fair to fine people for non-disclosure, whether its 15 grand or whatever it might be, because they’ve already been ‘got’, haven’t they?

Bruce Billson

I don't think it's fair for small business to face what could be a fine that, if it was applied to them, would cripple their business. At a time when small business people are so time-poor and margins are really squeezed, and we know nearly half aren’t profitable right now. If you're hit with a ransomware threat or challenge, I reckon you'd be pretty focused on trying to get your business up and going again. And one of the things that we're finding in this complicated, quite sophisticated regulatory environment, you might not even know to whom it is you need to report this breach, but you inadvertently break the law, and then you're faced with another crippling impact on your business.

We've been urging government to have, almost like an A-Team, that can get alongside small and family businesses that have a cyber event. Have them navigate that process, help them make sure they've got appropriate safeguards, but also help them recover on the other side.

I'd hate to see anything that discourage people reaching out for that help if they feared getting pinged with a fine. So, maybe if it's a bigger organisation Tim, and they've got, you know, technical experts and they know all the organisational structure that happens in this space. Maybe a more punitive response is arguable. A time-poor resource-stretched small business, I’m not so sure about that.

Tim Webster

We were, as you would know, a victim of that CrowdStrike. And it was incredibly dramatic here when you've got a studio full of blue screens. So, it's happening to everybody. Maybe more help from the government rather than hindrance from the government on cyber security?

Bruce Billson

That’s our view. Look, there's some encouraging signs there. In the last budget there was an announcement to set up a small business cyber resource hub. I'm optimistic about that. That's what we've been urging that the government does, so that there's a real sense that government is an ally for small business when getting through these terrible events. Not one where they’re fearful of raising these challenges and therefore not getting the help they want and they need, and then having that really impacting on that businesses opportunity to recover, to get its data back, get systems going and and focus on delighting customers. Not that there's some fine around the corner they might get spanked with.

Tim Webster

My texter – don't forget to put your name on the text so I could acknowledge who you are - but he or she basically says, more regulation and red tape on small business owners like myself. It's none of anyone's business what I pay and to who.

Bruce Billson

I think if you had this support posture, one of assistance rather than of compliance, you get small businesses saying, oh, hang on, this is a change in our economy. I really need to be tooled up and as well-equipped as I can be. And to have the resources of government there to assist in making sure you've got appropriate safeguards, good preventative steps. Good, dare I say data hygiene. Sorry for the jargon, Tim. That'd be great. Then if something happened, somebody can get alongside you to work out what you need to do to get through that event. And then some help on the other side getting back up and going.

I think that posture, so much better, so much more likely to get the right outcome that policymakers are hoping for, rather than having this big fine hanging over a small business for whom, if they pinged, they might not have even known they needed to take those steps and then that fine itself could bring them down as badly as perhaps the cyber threat did.

Tim Webster

Everyone's got so much to do, Bruce. Oh, you got pinged and you feel really guilty. But don't because there's so much of it around. I mean everyone's after your information, your money, every day of the week. I mean the amount of text you get, emails you get. You've going to be so vigilant these days.

And look, Jamie says this. Good point. Don't know why you'd pay the ransom. Couldn't the hackers just copy the information they'd hacked and release it anyway?

Bruce Billson

I'm kind of with Jamie. And I’m not discounting for one minute that a commercial decision is often what's guiding this. But I tell you what, if someone was nefarious enough to have a crack and compromised my system in the first place, if I handed over a substantial chunk of change in the hope that they then do the right thing. That's the thing that I'm wary about with paying ransomware. I would have imagined having good backups, you know, multi-factor authentication to sort of limit what's going on. For your listeners that are in business and maybe use digital platforms, and have a credit card attached to say their Meta Marketplace account, if that gets hacked, do what I do. I use a very low amount credit card for my online transactions. Thinking, you know, if someone does grab that data and has a crack at my credit card, if I can't go back to the people that should have guarded against that in the first place, I at least have kept the credit limit very low. And therefore, the harm to me is minimised.

So, for your listeners and businesses and even consumers that are dealing with those online transactions and having credit cards linked to the advertising spend on digital platforms, have a separate credit card with a really low credit limit on it and minimise that risk. Make sure you've got control over that account. If they've taken the account out and blocked you, make sure there's another way of verifying that you’re who you are. And if all else fails and you’re a small business, get on to us and we'll help out.

Tim Webster

Is that Cyber Security Act a fait accompli? Is that going to happen, or can you convince them to not do it?

Bruce Billson

It's still going through the Parliament, so there's plenty of opportunity for some of your texters and others that have raised some good views, to feed those in because it's really about right-sizing it Tim. You and I've talked about that before, but a small business isn't some shrink wrapped major corporation that's got, you know, technical expertise coming out of their ears. That's not right. It's mum and dad and committed enterprising men and women often doing compliance things 10 o’clock at night to try and make sure that the business of running the business is attended to while they also focus on what the future looks like for their business, how can they delight customers and maybe, you know, innovate to get better value for themselves and the people that rely on the business.

Tim Webster

Alright, let's leave that one. There's a few issues to deal with. A 50% increase in queries by small business about a business they're dealing with, possibly being insolvent or a concern about what to do if they're worried about their own place.

Bruce Billson

There's a couple of things happening here. What we are seeing is that really significant uptick in concerns. We're also seeing people checking on what are called credit reference platforms, where they check to see whether the business they are dealing with has some, let's use the word form of not always paying their bills and the like.

But also we're getting an increase in payment disputes even when work is carried out under the contract or the terms that were agreed. Just getting paid Tim, just getting paid is really a pain point. And when the cash flow is tight and when you see the Tax Office are up and about trying to make sure that people with outstanding tax liabilities are engaging with them. When margins are being squeezed, one of the things you see sometimes there’s this friction in just getting paid and the payment time blowing out. It's a real concern.

So, what we're saying to business is if you've got those concerns there are ways you can check, for small fee you can check on the credit record of those businesses. That doesn't mean don't do business with them. But if you and I were running an electrical business and at a subdivision out in western Sydney, in a growth suburb like that, we've got to spend a bit of money buying all the equipment, the substations. So, we're out of pocket already. And then there's our time and expertise. So not being paid, not only us not being rewarded for our work and our diligence, we're also carrying the costs of the equipment we've had to buy. And therefore, you might say to that that developer I want half that project cost as a down payment before I start, so that I can at least cover the costs of those outgoings for equipment. And when the job's done, I'll come and get the rest.

So, you might change your terms, the way in which you engage. But just making an informed decision about those things where we are seeing an uptick in these payment difficulties, we recommend that as part of your approach to your business.

Tim Webster

Louise from Inverell. Louise says, I've got a small limit on my credit card. I used to make jokes that I should keep it maxed out for safety's sake.

Bruce Billson

She raises an interesting point. It is about managing that risk. I mean, sadly, the experience that you've had in the studio and some of these cyber events, I don't think they're the exception. We're likely to see more of that. It’s almost a new normal where there's such a dependency on technology and digital systems in our economy and our lives. Just taking those steps to safeguard, to prevent a bad event happening, and then to limit not only the risk of it, but the cost of it, they’re the things that that we're urging people to do.

Tim Webster

Now, let's allay the fears of Elyse at Mascot. This discussion about small business and security, making me feel very uncertain about transacting digitally with small business. Unfortunately, it steers me to dealing with larger organisations that are better resourced to protect my data.

Now, just on the back of that text. Also, a text about - look, sometimes on the ABC you have to mention a commercial entity just to make a point – I've been asked about PayPal. I don't, but my wife does, and she's never had any issues with that. So, both texts are sort of going, oh, gee, what do I do?

Bruce Billson

There's some really good points in there. And frankly, those messages are reflecting the sentiment in the business community. There is a heightened anxiety and awareness of these things, but there are steps that you can take within your own control. I mentioned multi-factor authentication. Changing your passwords, trying not to have Timisfab12345 as your password is probably not ideal.

Even the software, you get a notification that there's an update for the software. Tim and listeners, often those updates have safeguards or patches to guard against weaknesses or vulnerabilities in the software. Back up your files. I was involved in building a bank to take on the big banks and we used to have a system, and I know it's at a larger scale, but we used to have a system that backed up almost continuously. So, if one of what frankly was thousands of attacks on our site every week, if one of those worked, we could just go back to the moment and all the data before it was compromised and boot it up again from there. So those backups become really important.

PayID, where you verify who the payer is. One of the things in small business that is a real cyber threat are what's called the invoice substitution scam. So, they’ll sneak into your accounting and invoicing system and you won't even know it. They’ll mess with a PDF, a saved file, and put someone else's banking numbers in there. So it all looks legit. You're expecting this invoice. You pay it on the basis of what's in it. All looks legit. And some nefarious character’s gone and changed the banking details so it whisks that payment off to another account. And before you know it, they've converted it to crypto and you can't track it down. So, ways around that is to verify who you are sending money to, to use things like PayID and those secured systems.

The other one is to consider eInvoicing, which is a much tighter, less vulnerable way of sending invoicing. So, there’s steps that you can take. But needing to be situationally aware is really important.

Tim Webster

Jamie opened a second account and transferred my money to that. So, on the credit card, he's got nothing. And this one from Chris. SMEs and large enterprises should open a business continuity plan for ransomware, including incremental offsite backups. It's critical. And then their own servers would help. That’s Chris. It’s clever.

Bruce Billson

Chris is legendary. I hope he doesn't think we've planted that in there. Chris is absolutely right. We found only about one in four have an up-to-date business continuity plan. And that's where you contemplate things that might knock your business off-course and then think about and plan for and have the bits and tools in place to recover and to make considered choices at that time.

That business continuity plan, it could and should address a cyber-attack. And it'll talk about backups and knowing who your providers are and where you've stored data and key contacts to help you get up and going again.

But it might be dealing with a natural disaster. It might be dealing with a health episode. If you and I were the breadwinners of our partnership Tim and one of us got sick, that's going to bump us off track as much as a cyber-attack.

So, Chris is right on the money there. Think about what might happen that could take you off the course you want to be on and what are you going to do about it. And that's a really great contribution from Chris. Top tip of the day.

Tim Webster

Good on you Chris, thank you. Jenny says you can buy a credit card at one of the big supermarkets for various amounts. You can buy it on the internet and that’s not using your own savings. Lot of this is very clever, Bruce.

Bruce Billson

And really practical too. Jenny's again, right on the money. She's talking about practical steps well within your ability to take them, that actually mitigates against the risk of something bad happening. And then if something bad does happen, you’ve really cauterised the cost and consequences of it. They’re fantastic ideas and I hope your listeners are getting something out of this discussion.

Tim Webster

They obviously are. And thank you very much Chris and Jenny.

Now, before the news rushes up at me. The government's looking at removing the exemption that allows small businesses to not, to not comply with privacy laws. How does business feel about that?

Bruce Billson

Not thrilled, but it's very linked to our earlier discussion. So, under the privacy laws, there's a dozen or so privacy principles that big businesses need to read, absorb, interpret and then apply to their workplace and their enterprise about how they're going to manage data that might be vulnerable or might compromise a person's identity and those sorts of things.

So, you can understand where they're coming from. For many years there's been an exemption for small business, with the exception of sort of health professionals and those sorts of things. There's been a review saying, look, the whole world has changed. We just had a great discussion about it. And so much of our day-to-day life sees businesses having data that's really important to us.

Now is that data is risky to your identity or your economic interest, there's got to be certain duties to make sure you take really good care of it or, in some cases, advice to get rid of data you don't need so that you remove that risk. What the government's talking about is simply removing the exemption so that a small business has got to do all the hoop jumping the big businesses do this.

We’re saying, hang on a minute. Again, a time-poor, resource-constrained small business. Let's get in with some really straightforward, easily implementable action steps that achieve that objective and have good data management that's of advantage to the business as well, not just a compliance obligation. And maybe open up new opportunities to link cyber security safeguards, good data management. It’s a more complicated world to be running a business. But let's not make it needlessly super, super, super complicated where the risk and responsibilities just are completely out of whack.

Tim Webster

Bruce, I'm very glad I'm just a humble old broadcaster. The things small business have to deal with. It's quite amazing, isn't it? Really?

Bruce Billson

We've been tracking this and saying to anyone who will listen, the risks and responsibilities of business ownership continue to grow, but the rewards aren’t growing with them.

We need to really think about that risk-reward balance and make sure being an enterprising man and woman is attractive, it's fun, it creates wealth and opportunity for those business-minded people and those employees that they make possible. And it brings such a vitality to our communities where you might not have a big corporate go to regional and rural New South Wales.

What do you think's driving these regional economies and towns? It's small and family businesses, and we need to make sure we celebrate that and look for ways to energise enterprise so there's more of it and better prospects of success into the future.

Tim Webster

And just while I’ve got 30 seconds, a texter says to both of us. Mick Jagger did backup vocals on You’re so Vain so it couldn't have been him. I think that's right. However, why couldn't it have been him?

Bruce Billson

My mail tells me it was Warren Beatty and let’s remember there was a time when Carly Simon and James Taylor had a thing. That didn't end well. It used to be Her Town Too. There’s a song for you.

Tim Webster

I think she said in an interview it was a conglomerate, so let's go with that. Thanks for your time.

Bruce Billson

Take care and best wishes to you and your listeners.

Tim Webster

And he does join us quite regularly, it’s great. Our �Թ�� and Family Enterprise Ombudsman Bruce Billson.

TRANSCRIPT: Insolvency and small business; help for small businesses needing support

Emily Carter — Wed, 03 Apr 2024 04:29:17 +0000

TRANSCRIPT: Insolvency and small business; help for small businesses needing support Emily Carter Wed, 04/03/2024 - 15:29

03 April 2024

TRANSCRIPT

Australian �Թ�� 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 �Թ�� 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 �Թ�� 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 �Թ�� 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 �Թ�� 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 �Թ�� and Family Enterprise Ombudsman.

What happens when builders go bust

Olivia Pearce — Mon, 01 Apr 2024 21:38:04 +0000

What happens when builders go bust Olivia Pearce Tue, 04/02/2024 - 08:38

01 April 2024

Originally published in the Canberra Times.

By Bruce Billson.

The latest report card on the economy will be no surprise to small business owners. Economic growth is barely limping along.

The combination of sluggish growth, persistently poor productivity, tight labour markets, supply chain challenges, above-target inflation impacting on higher input costs and customer demand, and 13 interest rate rises are taking their toll on small and family businesses.

Over the past year, there's been a 20 per cent increase in queries from small businesses struggling to manage their debts.

Businesses are also becoming increasingly worried about other business they do business with - who might owe them money or worse be on the verge of insolvency.

Requests for help from small businesses concerned that they are owed money by businesses who are insolvent have doubled compared to last quarter. Three-quarters of these were from small businesses in the construction industry.

Corporate insolvencies are at their highest level in nearly a decade and reached record highs throughout the last year in the construction sector. In recent months we've seen some high profile and well-known construction firms call in the liquidators.

It is often not realised that there are more small businesses in the construction sector than any other industry, so it's a terrible truth that when construction falters many small businesses can collapse.

We are also seeing rising insolvencies in industries reliant on discretionary spending such as accommodation and food services.

There is free financial, business know-how and mental health help available and it is important that small business owners take advantage of this before it's too late.

Being able to speak to someone who understands the pressure of running a small business makes a big difference.

Data released by my office shows that 43 per cent of small businesses didn't make a profit in the last full year of reporting. And some three-quarters of self-employed small business owners are earning less than the average total weekly, full-time earnings.

I can't stress enough the importance for a small business to check the credit history of their trade creditors.

Recently there was some controversy about the Tax Office's move to notify credit agencies about 20,000 small businesses with large tax debts.

But if you're doing business with someone who owes the ATO a big sum, wouldn't you want to know? This is a reasonable way of alerting other businesses that if you were to offer trade credit or finance, you might not be paid either. At the very least you should take that into account if you are considering doing business with them and if so, what terms.

Good business pays it taxes, proper employee entitlements and its suppliers in a timely way. Not paying is an unfair advantage over other small businesses who are meeting their obligations. Some businesses think not paying your taxes is a clever cash flow strategy - until they get hit with the penalty interest rate.

It's equally important to get an expert or trusted adviser to look at your business finances - a check-up for the health of your business.

The �Թ�� Debt Hotline operated by Financial Counselling Australia provides financial counselling support, particularly for small business owners who have loans secured against the family home and are uncertain about their future.

For small and family business owners, their identities are interwoven into their business and the stakes are so much higher than just a job.

Many have invested a lifetime - and put their family home on the line - to build up their business, which amplifies the emotional challenges.

Almost 50 per cent of small business loans are secured by personal assets, such as the family home, and 27 per cent of all personal insolvencies are business related.

As is often the case when family businesses face difficult economic conditions, other family members pitch in - all hands-on deck to save the family home.

But this also means the dining table becomes the board table and that can create great stress.

New Access for �Թ�� Owners is a free service developed by Beyond Blue that offers one-on-one telehealth sessions with specially trained former small business owner 'coaches' that work with empathy and knowledge to equip small business owners with straight-forward approaches to managing stress and the feeling of being overwhelmed.

It is common for small business owners to be working long hours, feeling isolated, worrying about cash flow and decision-making and experiencing market pressures all of which makes them susceptible to financial and mental distress.

You might be feeling overwhelmed by the big responsibility of running your own business and it might not be playing out the way you had planned. The passion, excitement and special talents and offer you aim to delight customers with is a long way from "the business of running the business".

Few get excited about lodging a Business Activity Statement with the Tax Office or delving into the numbers to find the story they are telling you about the need for potentially tough decisions now.

Your "numbers" may point to a bit of a wobble in your business and the need to adjust to improve future prospects to best capitalise on your strengths and financial resources. Or should you be considering a dignified dismount while you still have choices based on the trajectory of financials?

An early chat with your trusted adviser if you have one, or an end of financial year business health check and review, might be something to put in place. The Tax Office has produced some really good learning resources that might be useful in supporting your decision-making.

Business know-how and being able to benefit from the wisdom of others can be key to turning an idea into a successful enterprise or turning around a business not firing on all cylinders.

Chances are someone has grappled with the problems you are now facing.

We have resources, tips and tools about mental and financial health available on our website at asbfeo.gov.au
Information about the �Թ�� Debt Helpline is available by calling 1800 413 828 or visit sbdh.org.au/
Information about the New Access for �Թ�� Owners program is available at: beyondblue.org.au/get-support/newaccess-mental-health-coaching/newaccess-for-small-business-owners.

TRANSCRIPT: Insolvency

Emily Carter — Tue, 04 Jul 2023 02:42:23 +0000

TRANSCRIPT: Insolvency Emily Carter Tue, 07/04/2023 - 12:42

04 July 2023

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson interview with Tom Elliott.

Radio 3AW

Subject: Insolvency figures, small business conditions

Tom Elliott

Things are tough on business, and that's important because if businesses are going bankrupt, that must mean that obviously people start losing jobs. Unemployment might increase. The Reserve Bank is not being very helpful about this. Neither, I believe, is the State Government or indeed local councils, which keep pushing up rates and so forth. Anyway, joining us on the line now Australian �Թ�� and Family Enterprise Ombudsman. Bruce Billson, good morning.

Bruce Billson

Tom, I hope your family and your listeners are well, sir.

Tom Elliott

Thank you. That's very kind and same to you. I read these figures, business bankruptcies across Australia are up 17% in the 12 months to June 30 just gone. In Victoria the figures are even worse. Business bankruptcies up 39%. Do you think things are going to get worse or better for businesses in the next 12 months?

Bruce Billson

The immediate outlook is a bit grim. There are many headwinds, increasing pressures on businesses. It’s a fairly challenging time anyway. You touched on interest rates, input costs are up around energy, you've seen changes in the rates of pay. And let's not forget that half of all small business loans, Tom, are secured by a mortgage over someone's home.

So you get this double whammy effect every time interest rates go up. The costs go up, the debt servicing for the business goes up. But also there's a change in consumer behaviour. So, plenty of headwinds are there. It's worth recalling that a lot of the rates of insolvency are coming off quite a low base. But they're back about or slightly over where they were pre-COVID.

But there's something else going on in the background as well. We're seeing a 50% uptick in court actions where people enforce their rights to take to be paid and things of that kind.

Even credit inquiries Tom, where businesses are, you know, exercising a bit of due diligence on who they're doing business with. So they're checking out what the financial robustness is of the businesses they're dealing with. That's up 85%. There's real nervousness out there.

The other thing if I could just throw it in there, we did just pass a pretty significant milestone. Half a trillion dollars a year of economic growth is contributed to the Australian economy by small businesses. Two in five private sector jobs, there you go that's small business. Two and a half million businesses around the country are providing so many livelihoods for so many. But they're not big incomes Tom.

Tom Elliott

Do you think the Reserve Bank thinks about small or medium sized businesses when they talk about rising rates each month?

Bruce Billson

Look, I'd like to think it's front of mind. I guess my job every day is to try and make sure that small and family businesses are front of mind of decision makers. And when there was that discussion about what should the future shape of the Reserve Bank look like, we said, look, don't forget small business.

I mean, these are really vital contributors to our economy. They provide so much opportunity, but they're not cashed up, Tom. I mean 74% of Victorian small business owners, according to the last data set we could get, earn less than male total average weekly earnings. So that's three-quarters earn less than total male full time average weekly earnings.

A third are owned by women and that's fantastic. But only 8% of those Victorian small business owners are under the age of 30. So we really need to think about how do we energise enterprise and get more people contributing to the economy in this way as well.

Tom Elliott

Finally, if too many businesses go bankrupt that's going to put pressure on unemployment. And right now the job rate is near historic lows. But if businesses keep going bust at the rate that we've recently seen, do you think soon unemployment will start to creep up?

Bruce Billson

Yeah, I think that is the risk. If we get more challenges in the economy, small businesses will have to look very, very carefully at what the size of the team is that they can carry. And let's remember, Tom, the small business owner is the last one to be paid. So there's an awful lot of pain being absorbed by the owner before the difficult decision of letting one of the team members go. But this is likely to be the consequence of this higher than familiar rates of interest and the inflationary pressures will start to eat into levels of employment. And that's got to be a concern for all of us.

Tom Elliott

Thank you. Bruce Billson, the Australian �Թ�� and Family Enterprise Ombudsman.

TRANSCRIPT: Micro, Small and Medium-sized Enterprises Day, Insolvency Figures

Olivia Pearce — Wed, 28 Jun 2023 04:02:29 +0000

TRANSCRIPT: Micro, Small and Medium-sized Enterprises Day, Insolvency Figures Olivia Pearce Wed, 06/28/2023 - 14:02

27 June 2023

TRANSCRIPT

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson interview with Glen Bartholomew.

ABC News Radio

Subjects: Micro, Small and Medium-sized Enterprises Day, Insolvency Figures

Glen Bartholomew
Small business is worth more than half a trillion dollars to the Australian economy. That data was released on what is World Micro, Small and Medium Enterprises Day by the �Թ�� and Family Enterprise Ombudsman Bruce Billson, who joins us now. Good afternoon.

Bruce Billson
Glen, fab to be with you and your listeners, sir.

Glen Bartholomew
People may be surprised to know that 98% of our businesses are a small business, that is it employs fewer than 20 people. How is the sector faring after what's been a difficult couple of years for many?

Bruce Billson
Well, the statistics point to an interesting picture of still enthusiasm. We've seen a significant growth last financial year in small businesses contribution to the economy. Still, we see increasing numbers of people forming small businesses. More so in areas that have been more affected by COVID. But we also pick up that there's a lot of small businesses not making a profit. And interestingly a lot of your listeners might not appreciate this immediately, about 70% of small business owners earn less than average total male weekly earnings. It's not super profitable, but their motivation maybe for some of the other reasons that people get into business. They've got a real excitement about what they're doing, a purpose to their life, they like the flexibility, the mode of engagement. So, a bit of a mixed story there, Glen.

Glen Bartholomew
But the value to the economy surging by 15% in 21-22 more than $500 billion, a third of our GDP. And not surprisingly, a pretty big employer too.

Bruce Billson
Yeah, that's right. That half-trillion dollar contribution is something that deserves to be celebrated on this International Micro, Small and Medium Enterprises Day. And when we look at the more than 5 million jobs in the economy that small businesses generate, that's a really significant economic contribution. But also, let's not lose sight of the self-employment story here. There's about 1.6 million Australians that don't work for somebody else. They work for themselves. They're self-employed, they go about their livelihoods through that mode and often they're not seen brightly enough on the radar screen. And that's something we also want to highlight and celebrate. That's an extraordinary contribution to the economy.

Glen Bartholomew
More than 5 million people employed, as you say, nearly double the amount supported by big business. So does the sector get the recognition it deserves or is it often drowned out by big business?

Bruce Billson
Well, there's never too much recognition for small and family businesses because let's remember these are the community-based entrepreneurs that are providing livelihood opportunities and vitality to the neighbourhoods and communities and regions that we live in.

They're also least likely to have lobbyists, big industry association and big voices. So, what we aim to do is bring their story, their issues and concerns and opportunities to improve the environment within which they operate to government, as well as being an ally in resolving disputes they may have with other businesses, with big corporates and with government.

So that's our contribution and it's a chance for us to recommit all of us as citizens of Australia to the vital contribution enterprising men and women of small business make.

Glen Bartholomew
What then are the biggest issues facing small business right now? Is big business finally paying its bills on time yet?

Bruce Billson
Well, they haven't peaked early on that one, Glen. Still, we've got about one in four big businesses taking more than 120 days to pay their small business suppliers and only about a third that are paying in within a month. Now payment times within a month, that's hardly spectacular. That's not too much to ask. Yet we've got about a third achieving that outcome.

And so what we say to big business is play your part. These small and family business suppliers are vital to your supply chains. There’re cost pressures in businesses, margin squeeze there that many are feeling. And I mentioned earlier that there's a number that aren't particularly profitable and there's many that aren't earning a large income from their entrepreneurial activities.

Glen Bartholomew
Can I ask you about that? Around 43% failing to make a profit. Three-quarters of small business owners taking home less than the average wage. So how are they surviving?

Bruce Billson
Well, this is the thing. They are motivated by their business. They have their personality in many respects and their identity interwoven into their enterprise. But they are also not living an income blessed life. They're really having to deal with the cost-of-living pressures that households are feeling. And let's remember, half of all small business loans are secured by a mortgage over the person's home. So, all those pressures that consumers are feeling are also there for small business off the back of, in many cases, quite modest incomes. But they're probably thinking look, we are optimistic we small business people, they're looking forward to the future. There's still some optimism about improvement in their circumstances. So, they're probably looking to trade their way out and delight more customers as a way of improving their income in years to come.

Glen Bartholomew
But on the downside, I guess perhaps some of them aren't surviving. Giving the latest figures from ASIC showing the highest rate of business insolvencies in more than seven years. More than 7100 companies collapsing in the 12 months to June. On track to exceed the pre-pandemic levels of such collapses. How concerned should we be that these failures now are spreading beyond construction to other areas like childcare, retail and healthcare?

Bruce Billson
We should be concerned because it does reflect many headwinds that small and family businesses are facing. It also reflects a change in posture, Glen. We knew during the COVID era and shortly after it, the Tax Office, big lenders, other financiers, others with trade credit were in a support and assist mode, trying to be as helpful as they can be. Now, there is a time of those arrangements being brought back to a more regular setting. That does mean for people that have had those accommodations previously that they may have now the time to deal with those debts that may have accumulated during COVID.

We're also seeing businesses trading with other businesses making more inquiries about the financial resilience of those that they're doing business with, just to make sure the terms and conditions that they're engaging on with those small businesses reflects their financial strength as well.

So, there's clearly a heightened sense of awareness about that financial vulnerability. It's why the best thing we can do is get behind those small and family businesses on this international day, show them that we value that community and do our bit to help vitality in those businesses.

Glen Bartholomew
Perhaps a little message for the Reserve Bank ahead of the next meeting in a week's time as well. Of course, there was a government inquiry into insolvencies. I know you've made a submission to that. Let's see where we go in that direction. But for the moment, Bruce Billson, thanks very much for your time.

Bruce Billson
Glen, great to be with you and your listeners, sir.

TRANSCRIPT: Payment times, dispute resolution, tax concierge service, insolvency law reform, disaster preparedness

Emily Carter — Mon, 13 Feb 2023 22:20:10 +0000

TRANSCRIPT: Payment times, dispute resolution, tax concierge service, insolvency law reform, disaster preparedness Emily Carter Tue, 02/14/2023 - 09:20

10 February 2023

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson extract of interview with Philip King.

Accountants Daily Insider - Podcast

Subject: Payment times, dispute resolution, tax concierge service, insolvency law reform, disaster preparedness

Philip King

Hello and welcome to an Accountants Daily podcast. My name is Philip King, I'm editor of Accountants Daily. And today our topic is going to be small business and the problems that small businesses face. And in our North Sydney studio today, I'm lucky enough to have with me Bruce Billson, who is Australian �Թ�� and Family Enterprise Ombudsman. Hello, Bruce, how are you?

Bruce Billson

Phil, doesn't that just roll off the tongue?

Philip King

Well, it almost did, yeah.

Bruce Billson

Great to be here. I mean, there's certainly some headwinds that the small business community are facing. And I'm delighted to be with you and your audience today.

Philip King

I started to draw up a list, actually, of some of the topics and I got to about half a dozen and thought there's room for three podcasts here. But I thought maybe the best place to start, particularly given we're recording this just prior to what will be the RBA decision on rates for February, so with that in mind, we don't know the result yet, but payment times, Bruce. And this is payment times by the relatively big end of town to the relatively small end of town. And maybe you can tell us a little bit about why this is top of mind for you and by way of talking us into that topic tell us a little bit about your role more broadly.

Bruce Billson

Well, we all know that cash flow is king and there's so many businesses that may on paper look like they're quite profitable but if they can't get the money in, that can be really challenging for the business's survival. So, I'm sure all your listeners know and the trusted advisers they turn to point to cash flow as a critical health indicator on a business and payment times are central to that.

Sadly, this is not new. Problems with big businesses not paying small business suppliers in a timely way has been around for some time. There's even been business models built – dare I mention Greensill and others - that have sought to, I suppose, reduce the harm caused by shabby payment times performance. So that's been around for a while.

We've kept a close eye on it. We do that because my agency's role is to help with dispute resolution. That's one of the key functions that we provide. And at the moment, sadly, about 40% of the matters that come our way are related to payment times. So, what's that look like? That looks like a small and family business doing what's asked of them, providing a goods or a service, waiting to get paid for their endeavours in their enterprise.

This has been such a problem, governments have leaned in. The previous federal government introduced a reporting register, so 7000 of our largest corporates have to report quarterly on just what their terms are, so what their ambitions are for payment times, and then what their performance is. And that was a bit of a ‘show and tell’, hopefully a nudge to improve performance, but it hasn't actually improved that much at all.

And still we see far too many small and family businesses waiting way too long to get paid for what they do for their big business clients. And it's just shabby. It doesn't need to be this way. Yet such effort goes into trying to get people to get the income that they've worked for in their business in a timely way. It's surely not too much to ask, Philip.

Philip King

That number I found quite shocking when I first saw it: four out of ten inquiries to your office concern this issue. And as you mentioned, there's been a payments reporting register in place for a little while, and what's emerged from that is also quite shocking.

Bruce Billson

Oh, it's terrible.

Philip King

I know you've probably got the numbers in front of you as well.

Bruce Billson

I have. It's three out of ten small businesses can count on the 30-day payment window. Now, 30 days is hardly shooting the lights out. We saw during COVID, and to the credit of some of the big corporates and the mining companies they knew how crucial cashflow was during COVID and the impact COVID had on so many business operations, that they committed to pay their small, and in the case of the mining companies, small and indigenous businesses in three or four days.

And they managed to do that and that was thought to be a good corporate citizenry thing to do. Here, and let's call it a business as usual type of environment, three out of ten are managing to pay their bills within 30 days. That's hardly spectacular. You would have thought performance could be better than that. But that's really not great. And then we find a quarter of small businesses are waiting for over four months to get paid.

Now, you imagine if you're carrying that kind of cash flow problem, and if market forces were operating as they should, a big business would think, well, the cost of funds to me has got to be cheaper than a smaller supplier.

If I make the small supplier wait too long, they'll probably send a price signal because of the extra cost to their funds, through to me, and I'll end up paying more as a big business. That would be if the market was purely functioning in its ideal sense. But we know that's not the case. That it's a power imbalance that's played out in ‘take It or leave it terms’, not entirely good relations, including not paying in a timely way. And that's why there's such a focus on it.

Philip King

And as we see, there is a lot of economic headwinds. Even though we don't know the RBA decision today, we know that the environment is tough for small businesses and the fact that they've been exposed by this register hasn't really changed the game, has it?

Bruce Billson

And that's probably why it's appropriate the Government is reviewing the register. The policy objective sitting behind it - you know, a lot of things might happen in Canberra that people can't make sense of, but usually there's a policy objective that is what is the motivation for a measure. In this case it was the hope that transparency, that the’ show and tell’ of it all would be enough to prod big businesses to lift their game.

Now, we've been tracking three returns now, so three lots of series of data, and it's not got any better. So clearly that idea hasn't manifested itself. And that's probably for a couple of reasons. There's an awful lot of data in there. There's probably a quarter of those businesses that report, actually don't have a small business customer. So that just gums up the information.

It's a little hard to track and decipher, like a snowstorm of information, it's hard to pull out critical data. Now, I'm fortunate to have the capacity in my agency to have great data analysts who can unpick all of that, park to one side the nonsense entries, you know, like minus figures, the negative figures, people paying bills before they're aware of them. That's a clairvoyant gift. But we've taken some of that out and can get to the nub of the matter. And so, at that level, it's a lot of information. The utility of it in terms of prompting changed behaviour, that hasn't hit the ground running just yet.

And that's in part why the Government's decided to review the register, see how it's going, see if it's a proportionate regulatory burden because I also hear from those big businesses what a pain in the neck it is to produce this information, to have software, to scrape the material, all that sort of stuff. So, maybe it's a big imposition with a virtuous policy objective in mind that hasn't peaked early in its impact. So, you know, we're out there, highlighting this information and really being in partnership with, say, the Business Council of Australia that has its own 30-day payment policy and saying, Gee, I'm devastated about how shabby this is. Surely you must be too, because your message to your members is, you know, 30 days is reasonable corporate citizenry. It's not exemplar behaviour. I would have thought a week might be something to celebrate and let's celebrate those exemplars. But, you know, at the moment it's a lot of fog, when peeled away doesn't point to a great picture at all.

Philip King

That's an interesting idea. Perhaps, you know, celebrating the winners here.

Bruce Billson

Just on that, at the moment, the top of the class is 20 days or less. And one of the things that I hope the government might take on, in fact, what we've recommended, is why not have a 14-day or less or seven-day or less category as part of that reporting framework, so that those genuinely doing the right thing can get the glow from that and set the example to those in their industry.

I know in the UK model they've got apps that hang off it that you can quickly do a search to see what a prospective customer’s form’s like. These are the sorts of things that we're aspiring to. And I think the business community should be up for it because there's no question that they can lift their game and they should.

Philip King

They talk a good game, like you're saying, the BCA, I mean the preferred result is broadly in line with your own. But in the end, market power of big business seems to rule the roost here. So maybe some sort of rating system, we're getting very familiar with online rating systems now, perhaps a little app that tells you, you know, how good or bad your potential business partner is.

Bruce Billson

Well, that's exactly what we're aspiring to support. I mean, the regulator’s got a job getting the information in, getting it published in the register, and largely that's their function. What we're saying is, well, if the data transfer capability was better, we could then feed that into an app where people could check market segments, check how each are performing.

I mean, dare I say it starts looking a little bit like a league ladder, which is what the BCA is trying not to have, but frankly, if the bottom dwellers aren’t lifting their game, there needs to be some way in which that's visible so that directors and leaders of those companies can say, Gee, we can do better and we should and get that leadership message through because with things like eInvoicing and the like, the ability to pay in a timely way is better than ever.

This is really about appetite. This is really about a preparedness to use those tools to see this as an important contribution as a good corporate citizen, and that's what we're trying to do. So, we're looking at those sort of apps options. But again, the register and the way it's shaped, and the software it uses has an implication for how readily you can analyse it and then put out new product like an app that says, in terms of the advertising and media space, Momentum's performance is this, whereas others might be something else. That would help inform small and family businesses about who they do business with and the terms that they can anticipate or seek to change if they've got any influence over them in the first place.

Philip King

I made the “mistake” of downloading some of that data, and I sympathise entirely.

Bruce Billson

It's a huge file. And my data scientists say this is just the way it's structured, it's clunkier than it needs to be. So, there's some scope there. But the data is, as I said, it's a snowstorm of stuff, some of which need not be there, that complicates it and there's scope to improve that.

As Dr. Craig Emerson, who's been appointed by the government, conducts the review, we're pointing to not only the policy objectives and how that can be best advanced, but also the enablement, the capacity for the register to feed and inform and be a positive influence either in reducing the appetite for people to be pretty ordinary or to quote my inner John McEnroe, when I see those numbers, you know, ‘you can't be serious’. It's like after a bad line call. And for those that are doing the right thing to be appropriately recognised for that.

Philip King

And is this going to become part of the review ambit? Are they covering off the carrot side of it? The good corporate citizen side? What about the stick side? Do we need a little bit more on that side?

Bruce Billson

And that's the risk that the business community faces. If they don't take this seriously there's other tools, other measures, as is used in public policy speak, that can be brought to bear. And that may well include, you know, mandating performance for certain recalcitrant sectors. I know that's been talked about. And there’s something alluded to of that kind in the Labor election policy.

Basically, I think their insight’s accurate. That despite this register and the transparency and the visibility it's supposed to provide, it's not shifting behaviour. What's needed to shift behaviour? So, my urging to big business is to take it seriously and lift their game because they can, and they have, they should just make that business as usual. This is a BAU cry for the sort of performance that was able to be achieved during COVID by many, just make that the normal way of doing business.

Just like paying your staff properly, just like paying your tax instalments properly, paying your suppliers properly, small and family business. My motto is good business pays. Good business pays across those various dimensions. And that includes being a timely payer to your small and family business suppliers.

Philip King

On that note, we will take a short break and we'll be back after this.

And welcome back. My name is Philip King. I'm editor of Accountants Daily. And with me in our North Sydney studio today is Bruce Billson. Bruce is �Թ�� and Family Enterprise Ombudsman. Hello again, Bruce.

Bruce Billson

Good to have me back. I survived the first break. That’s very kind of you.

Philip King

Yeah, there's been a few casualties over the years.

We've been talking about a fairly serious topic, in fact, and that's payment times for small business. I mentioned earlier a lot of economic headwinds at the moment. Bruce, your office is strategically placed here. In the event that someone comes to you, and we mentioned earlier quite a lot do, what can you do?

Bruce Billson

Well, we are a dispute resolution agency as one of our core services. So, we talked about payment times and the number of matters like that. We get about 7000 matters coming our way each year, either through our call centre or further escalated into our case management area. It's a range of things.

We have a formal role in mediation under certain industry codes. Think franchising where there's tensions between a franchisor and franchisee. We get involved and if the parties can't sort it out, they'll come to us and we will case manage and support that dispute resolution process. Perhaps by the appointment of an alternative dispute resolution practitioner. In many cases, though, Philip, a lot of people, a lot of small and family businesses aren't familiar with disputes and their resolution. So those conversations with, say, another business. They want to have a dispute resolved, but they want to keep the relationship intact because they want to keep doing business with them. That's a bit of a skill. So, we help there with building that skill. We say, look, be clear on what the issues are. Be able to articulate what a good outcome looks like. Here's the way in which you can engage the other counterparty. Try these approaches and if you have no luck, come back to us. So, we're very keen on self-help and then through that enable that with some good practice guidance. So that can take a number of forms.

Your audience with Accountants Daily, may be aware we also offer a tax concierge service. So, if you've got a disputed determination from the Tax Office and you're just wondering whether going to the AAT has got legs, we can get involved. We have matters of that brought to our attention. We can have a quiet conversation with the Tax Office, which might say, hey, you know, we've got a case, it looks a bit odd, can you have a second look at it or guide people to the internal review processes?

But if the disquiet with the Tax Office decision is very real and people are thinking about going and challenging it at the Administrative Appeals Tribunal, we will say to them, we will help you check the merits of your case. You put 100 odd bucks on the table as a bit of skin in the game, we’ll fund the rest of an experienced tax lawyer to actually have a look at your material, to see whether you've really got a case. A bit of a reality check. And then if the case looks like it's got some legs, we will then assist its on-boarding into the Administrative Appeals Tribunal so that there's a clear focus on what the issues at dispute are, the evidence is presented well. The AAT loves that because it can get to the heart of the matter and get on with it.

So there's that. There's also dispute matters around industry codes and the like. And then there's commercial disputes where we may get involved just trying to find a way forward, mindful we have no punitive power and we can't impose a solution because of the Constitution of Australia. That needs to go through the court.

But, you touched earlier on power imbalance. Think of a big business and a small business having a dispute. If it went to court, it would go to the Federal Court of Australia. Now, I don't know how many small businesses you know. I don't know many that have got a lazy 300,000 bucks lying around to fund a Federal Court matter that might take two and a half years to be heard. For the average small business that's ridiculous. That's out of reach. So, we work really hard to get it resolved knowing that legal avenue is sometimes way out of reach for the average small business.

So that's the stuff that we do. Now out of those cases, we get insights. We have a-ha's about policies that aren't quite landing right, laws that are a little bit problematic or even a pattern of disputes that might require some other action. That advocacy role we have, we then go and do the policy analysis, consult with regulators and the like, and then we'll put forward ideas that we think will help improve the circumstances for small and family businesses.

And that's another part of our role, bringing that really granular field evidence from small and family businesses, actual case studies, and bringing that to government to say, look, here's some ways that you could improve the - let's call it the entrepreneurial ecosystem for those enterprising men and women creating wealth and opportunity through small business.

So that's the other key plank of our work, as well as providing information and data about just what this small business thing is, because it's a great, eclectic bunch of enterprising men and women. Really hard to get a handle on, sometimes. Occasionally difficult to consult with because there's so many. We bring that kind of insight into the processes of government trying to make government, regulators, programs, decision making, more relevant, more grounded in the reality of life of small business men and women.

Philip King

Okay, well, you sound like a friend in need for small business. And I know one of the issues that's been front of mind for you recently is the insolvency law review. And you had a few views about this. We saw recently ASIC put out a report on how well the small business restructuring scheme had gone. And I suppose the elephant in the room in that report was how few small businesses had benefitted from that scheme.

Bruce Billson

No one could accuse that scheme of peaking early. It’s been a slow build up, but that’s part of what we’ve been talking about. We’ve been at the pointy end of that with people saying, hang on, this new measure is just not working for me. And then we work with insolvency practitioners, parties that have been part of that journey, to see what’s been working and what’s not working. So, we were able to bring a really, really, granular field-based insight to that inquiry, having already been saying to government, this mechanism needs fine tuning.

Now, a couple of things about it. It was supposed to be more responsive, it was supposed to cost about a third the cost of a formal administration. And so those first two, the jury's out. And I have a view that they haven't quite met those objectives. It does leave the business owner in control, ‘tick’. It does have a conversation around restructuring as distinct from a wind up. I mean, we've got to get past this culture that if a business gets a sniffle, might even be hay fever, people go and harvest the organs.

I mean, it doesn't look at the capacity for ongoing enterprise with guidance, with restructuring, all sorts of adaptations. What's happened, though, is a couple of things. One, if you're a big creditor, a financier or even the Tax Office, and a small business comes to you saying, look, don't wind me up to get your money because you probably will get much of it, but leave everyone else with nothing and then the business is gone. Why don't you go on this restructuring path? We've got a credible plan to do this. You’ll still get your money, but we’ll keep the employment, we’ll keep the entrepreneurship going, we’ll salvage the business, we’ll have an eye to other stakeholders that just aren't the secured creditors who've also got an interest in the business surviving.

Now that conversation then plays out straight into this restructuring measure and people are expecting it to be about a third of the cost. But then the major creditors say that’s an interesting option but what would I get out of a winding up? So, people have to go and do the winding up exercise anyway and incur the cost, have the restructuring and insolvency practitioner do all that work, just so creditors can weigh up a restructuring versus an insolvency. So, all the cost savings the restructuring was supposed to deliver get wiped out by major creditors still wanting to know what the likely outcome is if they didn’t restructure, and they simply wound up. They’re some of the things we flagged.

The other thing is the law sees a business and a person as separate things. You know, the business is oil, the person is water. Well, I'm sorry, in the world we work in everything’s salad dressing. It's a blend of both. You see this by personal assets being used to secure finance. The way in which director’s liabilities have played out. Even if you don't meet some of your tax obligations as a business, there's scope to get a director penalty notice that puts the individual, you know, spike’s the individual.

So, that neat separation doesn't quite work. And we've been sort of saying, well, maybe we should think about bringing this together and realising this convenient legal distinction doesn't work in the small and family business community where personal interest and assets are interwoven with that of the business and that we need an insolvency mechanism that can support that. That's why this review’s a good review. The first one of such substance in nearly 30 years.

Philip King

When you talk to people in the insolvency industry, they say exactly that. Australia's fallen behind world best practice because this hasn't been looked at for so long. And they say the SBR, the �Թ�� Restructuring Scheme, had some good intentions, but it's operating within an environment that's simply too complex. And I think they support you, on the whole as well, in your move to try and draw together two separate strands of insolvency, personal and business, because as you say, they're sort of inextricably linked at the small business level. So, in terms of the goals of this review, what would be your top of mind, want to have out of this review.

Bruce Billson

We’ve argued for a number of things. Clearly, one of them, though, is get rid of this fiction. You know, there needs to be a single...

Philip King

Draw the two together.

Bruce Billson

Yeah, and that reflects reality. Two, the restructuring thing needs to work. At the moment it's rare, and in many cases the practitioners are insolvency practitioners. Now, I'm not that bold to say insolvency practitioners are a bit like, if all I've got is a hammer, every problem looks like a nail, but the business acumen that is about growing a business, about navigating a positive path out for growth and success, may well have skills beyond that of the legal attention that needs to be given appropriately by an insolvency practitioner.

And I see some firms bring both of those skills together, and they're the ones that are making that work because they've got a business growth competency sitting alongside the legal requirements of an insolvency practitioner and that can navigate those fields.

The other things that we thought were important was a little bit more on the education side. Now in Australia if you become bankrupt or an insolvent business, that's a bit of a stain on you. In the United States, if you've not been insolvent, you haven't been trying hard enough. So, there's a whole cultural piece there, which I think is why so many businesses leave it very late in the piece to have the conversations with skilled business growth, insolvency, blend expertise, to think, well, you know, there's still a pulse in the business, but we're heading towards a rocky shoreline. What is it we can do to steer away to make sure we don't run into, you know, a catastrophic event in the business and it's gone. That we can keep a going concern as part of this business. Maybe open up new opportunities and create the livelihoods that are needed, support those, continue to generate wealth and opportunity in the economy. Those conversations need to be had earlier. And so, one of the things we've been talking about is how do we get that mindset where the health of the business, key indicators, financially informed decision making, is a normalised part. And your audience, the trusted advisers, are central to that. So, there's a few ideas around that that we've got.

We think it's too expensive in some cases. And insolvency practitioners do an awful lot of work that they're not paid for. So, when they get to a business that's still got cash and assets in it, it's amazing how the fees are quite steep, because they're actually cross subsidising the work that they're required to do under law that no one pays them for.

So, there's even an argument of a public trustee equivalent for small businesses. Think about this. There are about 80,000 odd businesses that don't continue each year. I use the word don't continue because we don't know exactly what happens to them. They might be deregistered. They might lose their ABN. There’s only about 7000 that are formally wound up.

So, what happens with the others? Are there dangling liabilities? Do people as private citizens carry around the concern that someone might come after them about something that was business related? We don't know. We think there's scope for a very cost effective, cut to the car chase, wind this business up, close it formally, have everyone know where they sit, and then get that sorted in the process.

The last thing is there's an enormous opportunity for regulatory reform here. I mean, insolvency practitioners are required to do certain things and report certain things to ASIC. Now, the number of those reports potentially around misconduct or director malfeasance or something like that, they're reported, but then what happens with them? You know, is there a need to say to these highly skilled insolvency practitioners, don't tell us every little dotting the ‘i’ and crossing the ‘t’ that hasn't been done right. Surface the cases where the regulator needs to get involved and then the regulator does get involved.

So, at the moment there's a whole lot of reports generated. I don't know where they sit in ASIC, but many of them aren’t acted upon. And then, you know, if there are directors doing the wrong thing in the business world, there's a risk they may do it again if they're not held to account. And one of the early warning indicators are these insolvency practitioners reports that in too many cases aren't getting the attention they require.

Philip King

A lot of really good ideas there, Bruce. Let's go for a quick break and we'll be back after this.

And welcome back. It's Philip King. I'm editor of Accountants Daily, and I am back with Bruce Billson.

Bruce Billson

It’s the third quarter, Philip.

Philip King

It's the third quarter, it's game changing quarter.

Bruce Billson

Championship quarter.

Philip King

We've been talking about the problems of small business and I'm afraid we're going to keep the rather pessimistic tone of this podcast if that's what it is, because our next topic is disaster planning and we know that small business has been in the front line of a wave of disasters through Australia over the last couple of years. And one of the shocking things to emerge, I suppose, is in your research you've found very few small businesses have a disaster plan and when the Government responds to this, almost all of the money is spent after the event. What is wrong with this picture, Bruce?

Bruce Billson

Some of the key take outs. One in four have a disaster plan. Now, you and I are probably old enough to remember the old BCP - business continuity plan. Yeah, that's not the sexiest thing running around, but it's pretty important. And this sits in that group. This is in that family where you're imagining things might not go the way you hope they do and what are you going to do?

Now that might be natural disaster, it might be some black swan event, it might be even ill-health for the business owner themselves if they're the income generator and the livelihoods in the business rely on them being well. What happens if they're not? So, what we were saying was having thought about various scenarios that could really knock the business off track, including a natural disaster, just what are your plans?

What are you thinking about? We're talking about: is there a super vulnerability to a single revenue stream? We see this in agriculture and now you see farmers diversifying to give themselves some protection. Even in the wine industry, not having all your grapes grown in one spot in case their smoke tainted or some event happens. It might be where's your reserves? What have you got as cash reserves in the event there is a delay in payment or something like that.

Where's your data? Where is it located and readily recoverable in the event that technology is taken out or there is a natural disaster. What are your action steps that you're going to take at those critical moments when there's so much going on around you? And let's remember, small and family business owners, by their very nature, are likely to be community leaders. They likely to be involved in emergency service volunteer agencies. They've got families themselves.

So, there's lots of moving parts there in those moments of great stress and lots of pressure. What are those surefooted action steps that you've thought about in advance in a calmer moment that you’ll put into play?

Where's my insurance details? Where's my critical data? What am I going to do with some of my assets in stock? What is that plan? So that's what we were saying. Equipped with that, better able to navigate a natural disaster event and better place to recover.

Philip King

One of the things that emerged, particularly from the floods up in northern New South Wales and Queensland, was some of the accountants were affected themselves. And some of them had lost records or they had to relocate. Part of the job was getting themselves back up and running, but what they found themselves doing was trying to help small businesses negotiate through all the various schemes and support mechanisms. There was state, there were federal, there were local whatevers, and just finding a road map through the help processes seems to be one of the biggest problems. And it shouldn't be, should it?

Bruce Billson

Well, you've touched on two of our key recommendations. We floated the idea of a voluntary ‘my business record’ storage area, so key data could be held in that location so that the challenges that you're speaking of, there's at least a way that you could unlock that box and get key parts of your data back. So that was one of them.

Another part of it, though, was about agencies planning for disasters, because most local governments have a DIS-plan, a disaster plan. Where’s small business in that story? Where are they factoring in choices, decisions, strategies for dealing with what's before the community that takes account of the small business interests? Think of Lismore. I visited three dozen disaster impacted communities as part of our consultations. They said to me they knew a flood event was coming when somewhere up the catchment tipped over and they could nominate the number of hours that they had to implement their disaster plan. What happened though was a new incident controller came in who didn't know the local circumstance. Didn’t take on board the local intelligence and wisdom and said, okay, there's a storm coming, evacuation order.

So as soon as that evacuation order is issued, worker’s compensation isn't available for your staff. You don't have that window that you were counting on to relocate critical assets. Hire companies move their most expensive equipment to higher ground. There was stock that was put in different places. They'd been through this before and felt they had the wisdom to know how to navigate it as best they can.

But here, a decision in incident management cut that off and that caused enormous harm and cost. So, factor business interests into the planning. Have them seen to be key stakeholders. Let them know what incident controllers are going to be thinking about and weighing up, and then everyone's as informed as they can be. That helps with preparedness.

But in the event that a disaster does occur, have a designated hub where the support services will go. So, you're not hunting around, shopping around to see, not just government and private, but not for profit support. I know the business community, again the Business Council of Australia has got a fantastic disaster response capability where they bring the know-how of their members to certain areas. It's fantastic, but you don't want to be hunting around for that.

So, have a designated hub. But then have in place a system of ‘tell us once’ to triage that information. Someone who's skilled. And we see this in so many areas of public policy, in service delivery, even in the health situation, where critical information is obtained at the beginning by a skilled person who can extract what's happened to you, what's going on, how can we be most helpful? And then they can be the concierge to navigate people through the various support that's available. So, the help that's most relevant to your circumstance that you've only had to share once and you're not retraumatised over and over again. Get that happening, so whatever helps available, we can get the best value out of it and land where it's most needed. They're just some of the recommendations we put forward.

Philip King

How optimistic are you, Bruce, because we've seen this play out time and time again and nothing seems to change.

Bruce Billson

Well, I'm optimistic because I know the government has an eye to improve the way this operates. The hard numbers are for every disaster in Australia, out of 100 cents in the dollar, 97 is spent after the event. And three cents in the dollar is spent prior. So, there's an appetite to do better work around mitigation, around preparedness, about trying to reduce the harm and the consequence of a natural disaster.

Now, people might think, oh, well, okay, that'll save some buildings. Yeah, but it saves an awful lot of trauma. And if you sit down and talk with people who've been through these natural disasters, if we can save some of them from the trauma they've been exposed to, that is an enormous win. But if we can make sure they're in the best place they can be to continue to make their contributions to communities, that's very important.

We see this in some of the disaster impacted areas. We coined the phrase ‘socio-commercial capital’. Sounds a bit wanky, but it's a way of capturing an idea that those social connections that we talk about in a community sense are equally, if not more, valid in a business sense. So if you are part of a local chamber of commerce, you've got a network of peers, you can share information and insights. Experience gets shared as well.

But there's also a sense that there's a collective effort to get the local economy going again because each depends on each other. That is a key, key secret sauce to have. If you're a community where there's wariness between business participants, where one accountant can't stand the other one and they don't want to talk about anything in case there's rivalry, blah, blah, blah, that actually impedes the functioning, the growth and, in the context of disasters, the recovery of those business communities. You’re virtually peer support, crowd sourcing, wisdom, knowledge, experience and insights because there is rarely a problem some other business hasn't had to contend with that you could benefit from what they've learned. To have that, you need these conversations. Those conversations also let you know about the programs that are available, the support that's available. It gets you as equipped as it can be.

Philip, it's not my gift to make every business successful. But it is our mission to make sure no one fails because they didn't know about something that might have helped. That's what gets us out of bed every day.

Philip King

Bruce, it has been terrific talking to you today. Thanks so much for coming in to our studio in North Sydney. Thank you, Bruce.

Bruce Billson

Thanks, Phil. Fab to be with you and your audience.

Philip King

This has been an Accountant's Daily podcast. My name's Philip King. I'm editor of Accountants Daily and I will see you next time.

ENDS

Storm clouds to clear for Northern Australian small businesses

admin — Fri, 10 Dec 2021 03:53:37 +0000

Storm clouds to clear for Northern Australian small businesses admin Fri, 12/10/2021 - 14:53

04 May 2021

The Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson says insurance premiums will be more affordable for small businesses in Northern Australia, under a new Federal Government scheme to launch next year.

Mr Billson welcomed plans for a reinsurance pool to be backed by a $10 billion Federal Government guarantee to cover cyclone and flood damage across Northern Australia from July 1, 2022.

He says the scheme, which is broadly in line with a recommendation in ASBFEO’s Insurance Inquiry, will make a significant difference.

“This is certainly a welcome step in the right direction when it comes to ensuring essential insurance coverage is accessible to small businesses,” Mr Billson says.

“Our Insurance Inquiry revealed that small businesses have been crippled by rising insurance costs and some can’t get it at all.

“A reinsurance pool will go some way to addressing this key barrier for small businesses in Northern Australia.”

Mr Billson says he also recognises barriers still exist for SME insurance coverage in other parts of Australia.

“In the course of our Insurance Inquiry, we spoke to over 800 small businesses – about 12% of those were from Northern Australia,” Mr Billson says.

“That means there are still many small businesses out there experiencing difficulties with accessing necessary insurance coverage.

“My office is ready and willing to work collaboratively with the government, relevant agencies and the insurance industry towards making essential insurance products affordable and accessible for small businesses across the country.

“Ultimately insurance is a necessity for small businesses to operate, which is why it is vital these products are accessible so they are protected when things go wrong.”

Ombudsman launches Review of Discretionary Mutual Fund proposal

admin — Fri, 10 Dec 2021 03:10:58 +0000

Ombudsman launches Review of Discretionary Mutual Fund proposal admin Fri, 12/10/2021 - 14:10

04 June 2021

The Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson has today launched a Review of the Discretionary Mutual Fund proposed for small businesses in the amusement, leisure and recreation sector unable to secure essential insurance coverage.

Mr Billson says the self-generated review, will build on ASBFEO’s Insurance Inquiry as well as ongoing feedback from the Australian Amusement, Leisure and Recreation Association (AALARA) on behalf of its members – many of which face imminent closure without adequate insurance coverage.

“Our country shows that we all love so much are facing a bleak future because small businesses, such as ride-operators, cannot get insurance coverage,” Mr Billson says.

“Closure of these small businesses will mean significant job losses and hurt local economies.

“Our Review will be a deep dive into the inaccessibility of insurance for amusement, leisure and recreation businesses, so that we can provide further advice to the Australian Government on what measures could help these small businesses secure the insurance products needed to remain in operation.

“At the core of this Review, my office will independently examine AALARA’s proposal to establish an industry-owned and operated Discretionary Mutual Fund as the most effective and durable solution to the sector’s insurance crisis.

“We will consider if this proposal will resolve the insurance issues in the sector, the responsibilities and obligations it would impose, its adequacy in satisfying regulatory requirements as well as other options that may assist these businesses.”

“This Review will use the Ombudsman’s internal expertise and seek external expert advice on complex issues, such as specialist legal, financial sustainability and actuarial matters.”

AALARA President Shane McGrath welcomed ASBFEO’s Review of its proposed Discretionary Mutual Fund, which it is seeking to establish in partnership with Aon.

“The amusement, attractions, leisure and recreation industries are facing catastrophic consequences without necessary insurance coverage,” Mr McGrath says.

“ASBFEO’s Review will provide vital information to the Australian Government about the challenges our members are up against regarding insurance accessibility, as well as what that means for these businesses and what support could help address insurance issues faced by the sector.”

A final report is expected to be completed in August.

Ombudsman’s report says the show must go on

admin — Fri, 10 Dec 2021 02:32:57 +0000

Ombudsman’s report says the show must go on admin Fri, 12/10/2021 - 13:32

20 October 2021

The Australian �Թ�� and Family Enterprise Ombudsman, Bruce Billson, has today released an interim report into the insurance crisis facing Australia’s amusement, leisure, and recreation sector.

“There is a clear and present danger facing the amusement and recreation sector because an inability for these businesses to get insurance cover means that many of the attractions people know and love won’t be able to operate,” Mr Billson said.

“The lack of insurance coverage could lead to the closure of businesses in the amusement and leisure sector, significant job losses (particularly in regional areas), stranded assets and loss of economic activity generated by metro and regional shows and amusement parks.”

The report, The Show Must Go On, explores whether a Discretionary Mutual Fund (DMF) can be a durable solution and discusses required legislative reform by states and territories to ensure it is ‘fit for purpose’. It also highlights the need for DMF to be recognised and accepted as a suitable solution by councils and showground managers.

Mr Billson said the interim report seeks urgent feedback from all stakeholders by 3 November to the ideas and questions raised in the report.

“We are calling for submissions from those in the industry so we can further understand any issues before we release a final report to government,” Mr Billson said.

“As businesses look to re-open after lockdowns, this issue is a shattering blow for those small and family businesses in the amusement, leisure and recreation sector which will be forced to stay shut because they can’t get insurance.

“There is a very real possibility shows won’t go on - something has to be done for the show to go on. A DMF may represent the only workable solution.”

The ASBFEO has been reviewing a proposal by the Australian Amusement, Leisure and Recreation Association (AALARA) to establish a DMF as a solution to the critical and immediate need for insurance in the sector.

The interim report found the lack of affordable insurance was not the fault of the amusement industry but due to a “hardening” in the global insurance market. Very few insurers are willing to insure the industry, and premiums – when available – had risen by as much as 200 per cent.

“In many instances the policy is priced such that it may as well not exist because small operators have no capacity to pay for the cover they need to continue operating,” the report says.

“In the case of the amusement, leisure and recreation sector, there isn’t an offering that provides full coverage.”

Public liability insurance coverage is a legal requirement for the operation of rides at showgrounds and fixed installations, both through contractual obligations and obligations imposed on councils and other landowners by state and territory governments.

DMFs operate to provide cover on a discretionary basis to a group of individuals or organisations that have a similar risk profile. Under a DMF, members who meet requirements would have access to a certificate of protection, enabling them to operate these amusement rides.

The Show Must Go On interim report and overview and Submissions should be sent to: inquiries@asbfeo.gov.au by COB 3 November 2021.

Media contact: 0448 467 178

Case studies available on request