“Seek help before it’s too late”, an insolvency specialist has said, following an increase in the number of businesses worried about the impacts of the coronavirus on their activities.
Australian businesses affected by the impact of the coronavirus (nCoV) should seek professional help immediately and not take a head-in-the-sand approach, said national insolvency and business recovery specialist Jirsch Sutherland.
The company is predicting that having already suffered the affects of the slowdown in China’s GDP, the Australian economy will bear the brunt of the virus, with worry increasing among businesses in the tourism and retail sectors.
“There is a number of knock-on effects, such as falling demand for Australian produce, such as seafood, which affects food suppliers; local Asian restaurants being shunned (some have temporarily closed); and international university students delaying coming back to their courses. And then there’s the domino effect on landlords, restaurants and cafés,” explained Bradd Morelli, national managing partner, Jirsch Sutherland.
Recognising the many uncertainties surrounding the virus, Mr Morelli predicted that the effects on many businesses will be lasting.
“Fixed costs for businesses, such as wages, rent, utilities, financing costs and statutory liabilities, are not affected by the sales decline. But the anticipated downturn in revenue will have a huge impact on working capital, and those businesses without sufficient reserves may find themselves suffering cash-flow issues,” he said.
He advised: “If this occurs, business operators should seek assistance immediately to try to minimise the impact.”
Mr Morelli explained that it’s not just the drop in customer and sales numbers that’s of concern, it’s also the threat to supply chains, which could affect businesses that use products made in or supplied via China.
“The closure of factories and transport links for any period of time will inevitably lead to massive disruption and supply issues once existing stocks are exhausted. For a small business, this can be catastrophic. Particularly if suppliers only have enough material or product to support some customers — that is, the larger customers,” he said.
According to Kee Guan-Saw, current chairman of the Chinese Chamber of Commerce of Victoria (CCCV), the longer the coronavirus is a threat, the greater the number of Australian businesses that will be affected.
“We have clients in the tourism and food and beverage sectors that are already being impacted, and while they are currently handling the situation — for example, the F&B businesses are getting staff to take annual leave — if this is a prolonged crisis, then the impact will become greater,” Kee noted.
“Another client has an inbound tourism business and the coronavirus has cut her client base. The business is trying to get back deposits worth hundreds of thousands of dollars from hotels and various attractions; if they’re successful they will be okay, but if not, then the business will suffer. And looking forward, if the coronavirus endures and the federal government issues a full travel ban, many businesses like this will be devastated.”
Kee believes the situation will get worse and that “cooperation” is crucial.
“A lot of cooperation is needed to help businesses survive,” he added. “For example, landlords and banks need to ‘chip in’ to provide support, such as allowing delayed payment of rent and loans, or by implementing payment plans.”
In order to help as many businesses as possible, Jirsch Sutherland has set up a coronavirus hotline — 1300 547 724 — for business owners and directors needing guidance.
Maja Garaca Djurdjevic is the editor of My Business.
Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe.