Company administrations jump 75 percent in Feb

By: Graham Gardiner


Company administrations were up 75 percent in February, with 1,236 businesses entering administration, according to the Australian Securities and Investments

Company administrations were up 75 percent in February, with 1,236 businesses entering administration, according to the Australian Securities and Investments Commission (ASIC).

Figures for February 2008 show a modest 706 companies going into administration, whereas this year’s numbers reflect the pressures of a global recession.

ASIC says 2008 was 11 percent higher than 2007 for company administrations, and 2009 will continue to sky-rocket as many businesses resign to closing their doors.

Ian Renton, business owner and author of Debt Collections Made Easy, says there are three key reasons for failing businesses.

These include: lack of customers, high expenses and lack of cash.

"Lack of cash is the key factor. It is the most challenging. Lack of cash is something that few people can grasp easily," he says.

"There are many resources to help with marketing. Similarly, accountants and business consultants can help businesses minimise their expenses.

"When it comes to generating cash and in particular, collecting the money that is rightfully theirs, then business owners simply lack the skills and resources to do a thorough job. As a result, previously good businesses are just running out of cash."

Renton says business owners are getting worse at collecting their money, because successful credit managers are not rewarded like successful sales managers.

In the case of a small business, there is no credit manager, so the task falls on one person which is likely to have other duties.

Regular follow-ups, minimum reliance on the telephone and developing strong customer relationships are recommended by Renton to improve financial success.

You can also follow our updates by liking us on Facebook