Skills shortage pushes SMEs to the brink, says Insolvency Australia

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Nationwide skills shortages are becoming a key factor in forcing businesses into insolvency, with SMEs hardest hit, Insolvency Australia said.

Director Gareth Gammon said the hospitality, tourism and construction sectors were particularly vulnerable.

“We are in uncharted waters, staff shortages are rampant in many sectors and the unemployment rate is at an all-time high of 3.5%,” Gammon said.

“This is one of the biggest challenges facing businesses, especially SMEs.”

Oracle Insolvency Services managing partner Nick Cooper said most of his company’s recent insolvency appointments have been in the hospitality sector, where labor shortages are greatest. big problem.

“The hospitality industry, in particular, is struggling to find workers,” Cooper said. “In addition, the supply of components, raw materials and services is becoming problematic for many companies.

“While commercial suppliers suffer from staff shortages, there are delays in supplies and so on to keep a business going, there are also delays in postal and freight services, due to the lack of staff.

“More recently labor shortages have also impacted the financial services industry, even when opening bank accounts with major banks we have seen the turnaround time drop from one day to two weeks.”

Domenic Calabretta, CEO of turnaround specialist Mackay Goodwin, agreed that labor shortages were becoming a problem in insolvencies.

“It’s certainly one of many factors in the current business cases we’re facing, along with tight cash flow and squeezed margins,” Calabretta said.

“This creates a domino effect where staff shortages lead to loss of customer service and ultimately lead to reduced revenue.”

Mr Calabretta said government measures to ease staff shortages with changes to visa rules may not come quickly enough to help, with some taking more than a year from request to supply.

Construction companies were particularly at risk, he said.

“We are seeing serious problems in the construction sector with several large, well-known companies going into liquidation,” Calabretta said.

“Labour issues are also being exacerbated by the rapidly rising cost of building materials, leaving many companies struggling to meet quotes that may be a year or more out of date in price, at least when a job is assigned.

“Job vacancies for Australian engineers are at their highest level in a decade, with the pandemic creating state border closures and the departure of many foreign workers who have left Australia to return home – and they haven’t come back here yet, which leaves a huge skills shortage.”

Auxilium Partners chief Bob Jacobs said builders who entered into fixed-price contracts during the government’s construction stimulus accounted for a large share of the insolvencies.

“Unfortunately, insolvency practitioners have little or no assets to recover for creditors,” Jacobs said. “I suggest that craftsmen and building suppliers reconsider their payment terms.

“Creditors should not be treated like a bank and cash on delivery avoids domino effect insolvencies.”

He added that another factor was the resumption of debt collection by the ATO in May, when it began issuing 30 to 40 Directors Penalty Notices (DPNs) a day.

Mr Jacobs said the move was counterproductive when it came to keeping businesses afloat.

“[It] meant directors had to act, with most opting for voluntary administration, deeds of corporate arrangement (DOCA) or liquidation,” Mr. Jacobs said.

“I think the initial impact will be business insolvencies, while personal insolvencies will also increase, but probably a year or two behind the increase in business filings.

Skills shortage pushes SMEs to the brink, says Insolvency Australia

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Last update: July 25, 2022

Posted: July 26, 2022

josh needs

josh needs

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Josh Needs is a reporter for Accountants Daily and SMSF Adviser, the leading sources of news, strategy and educational content for professionals in the accountancy and SMSF industries.

Josh studied journalism at the University of NSW and previously wrote news, feature articles and video reviews for Unsealed 4×4, an off-road automotive website. Since joining the Momentum Media team in 2022, Josh has written for Accountants Daily and SMSF Adviser.

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