6 tips to help businesses avoid financial difficulties
Small business owners can face many challenges that impact their finances. It could be something small, like an unpaid invoice every now and then, or something bigger, like a natural disaster or an out-of-control business debt.
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Big or small, these financial pressures can build up and become something you can’t control. Financial Counselling Victoria outlines 6 tips to help businesses avoid financial difficulties.
It’s always a good idea to review your finances, even if your business is doing well.
1. Make time to check your finances
Many small business owners are financially savvy, but sometimes it’s difficult to know what to do or how to understand your finances, particularly when you’re under stress.
Prioritising time to review your business’s finances (and knowing how to do this) is a key first step for any business owner aiming to gain control of their financial wellbeing.
As well as reviewing your business’s balance sheets, if you have any loans, guarantees or other financial arrangements in place for your business, it’s important to review them.
You should also consider what payments your business is required to make, for example, payments to employees, tax, compliance payments, rent, invoices, and utilities.
Seeking financial support and advice can help you take control of your financial situation.
Joe's story
Joe (name changed) hadn’t done his tax returns and had fallen behind in his business payments when a natural disaster hit. Feeling overwhelmed, he worked with a financial counsellor to check his finances and to identify and prioritise his next steps. By working through his debts and obtaining hardship relief, he could take control of his finances and return his focus to operating his business.
2. Check your business structure
It’s always important to know how your business is structured. Are you a sole trader, a partnership, a company, or a trust? This information will help you understand your responsibilities and the options available to you.
In particular, if your business is a company and you are a director of that company, you will have significant legal responsibilities. You need to act in the company’s best interests, and your company must not trade while it’s insolvent.
For more information on business structures, visit the Australian Securities & Investments Commission’s website.
3. Act early
The most important thing you can do when dealing with a financial problem is to address it as early as possible.
While financial problems are stressful, being proactive will give you more options about what to do next.
The options available to you will depend on your situation.
4. Seek business advice from experts
Professional advice can be very useful in sorting out what to do next.
If your business has financial problems (or if you think it might), you should consider seeking professional advice from a trusted, qualified adviser, such as an accountant. You might also need to seek legal advice, depending on your situation.
Insolvency and restructuring a business are options you can take to address serious financial trouble. They are complex processes, and if you are contemplating one of these solutions, you will need help from a qualified professional.
For more information, visit the Australian Securities & Investments Commission (ASIC) and see: Protecting your small business.
5. Seek financial counselling
You don’t have to go it alone. Financial counsellors are professionals who can help you work through your financial problems. They provide you with practical advice and support and will refer you to other supports where they can.
The Small Business Debt Helpline is a free, confidential and independent service and is available for small business owners. It has a team of qualified financial counsellors available who can help you work through your financial situation.
Contact a financial counsellor by visiting the Small Business Debt Helpline.
If you have been impacted by a natural disaster, you may also be eligible for help through the Partners in Wellbeing Helpline until Monday 30 June 2025.
For more information, visit the Partners in Wellbeing website.
Olive’s story
Olive’s (name changed) business was impacted by flooding and despite thinking she was comprehensively covered her insurance claim was denied. Olive sought help from a financial counsellor, who was able to identify the issue. Olive’s insurance broker had mistakenly told her that the policy covered floods when they were actually excluded.
The financial counsellor advocated for Olive in a claim against the insurance broker. Olive received the payout she would have been entitled to had the policy covered flooding. This allowed her to quickly reinstate her premises and open for trade.
6. Take care of yourself as well as your business
Sometimes, it’s helpful to reflect on your small business goals along with your personal aims and consider whether your business is manageable as it currently operates or whether it is right for you. Running your business in a different way or winding it up might be the best solution for your financial situation.
It can be emotionally difficult to contemplate these options if your business has been a big part of your life and identity.Advice and information are available to help you look after your mental health while you are considering your options.
Studies show that mental health and financial problems are linked. Having financial problems can impact your mental health, which in turn can impact your financial decision-making. As well as seeking help for financial problems from a financial counsellor, it’s often a good idea to get support with your mental health.
You can find more information on support available on the Business Victoria website.
business.vic.gov.au
