What’s in store for your business in 2016?

Company Insolvency     |     January 25, 2016

At the start of every year, there should be an air of confidence across an enterprise. The summer break has provided good time to reflect on what has gone right and wrong in 2015 and there may even be plans in place to get the business off on the right note.

However, in certain industries across the country, leaders may return to experience poor business conditions – placing emphasis on how they manage this situation. In fact, according to Dun & Bradstreet’s Business Expectations Survey for Q1 2016, this is something that many enterprises could face at the beginning of the new year.

Lack of optimism across the board

Based on the survey, many business leaders have lowered their expectations for a range of areas including capital investment, profit, sales and employment.

Dun & Bradstreet calculated the Actual Indices which is the “percentage of businesses reporting an actual increase in activity minus percentage of businesses reporting an actual decrease.” This returned poor results in nearly all the categories and suggests that many leaders aren’t predicting great returns in the early months of the year.

What industries are showing promise in Q1 2016?

While the results painted a poor picture for this quarter, there are some industries which could experience a positive few months. Dun & Bradstreet noted that both the transport, communication and utilities and the services sectors saw an increase in their respective Expectations Index.

Economics Advisor to Dun & Bradstreet Stephen Koukoulas explained this in more detail.

“While off the recent highs, business expectations remain firm, tracking solidly above the long run averages. The Governor of the Reserve Bank of Australia, commenting on current economic conditions, noted this last week, ‘Business surveys indicate that firms report conditions to be, if anything, above their long-term average in some key sectors’,” he said.

“The disappointing aspect for the economy is that ‘actual’ conditions for sales, profits, employment and capital expenditure remain below these positive expectations, a point borne out in recent economic growth figures.”

Fragility of Australian economy exposed

These statistics coincide with the results from the Australian Chamber of Commerce and Industry’s National accounts figures from the September quarter.

The main finding was that while business confidence is improving, there is a fragile undertone to the economy and this could jeopardise growth moving into the new year.

Australian Chamber Director of Economics and Industry Policy John Osborn cited that Australia is at a crossroads which makes government decisions key.

“It’s encouraging to see a small rise in business profits, but they are still less than they were a year ago. This leaves many businesses reluctant to invest which acts as a handbrake on growth,” he said.

“Giving businesses the incentive to invest and become more productive is the key to improving Australia’s prosperity and that means progressing reforms to tax, workplace regulation and other red-tape as quickly as possible.”

Could this lead to an increasing number of insolvencies?

With more Australian businesses struggling to get a foothold in their industry, this has the potential to cause more insolvency cases in 2016. Of course, according to the Australian Securities and Investments Commission, the top nominated cause of business failure in the 2014-15 year was inadequate cash flow or high case use (44 per cent of all reports).

This was followed by poor strategic business management (42 per cent of reports) and trading losses (34 per cent).

While it is important to discuss the potential for the Australian economy and particular industries, it is up to the business leader to address issues such as insolvency and receivership before there is no return. This is where the team at Corporate Lifeline can help.

With experts to assist with every financial difficulty, you can trust us to help move your business in the right direction in 2016. For more information, contact us today.