Indicators of Insolvency - Agribusiness

The question of insolvency is very important; how do you assess it? What are the warning signs? We have developed a checklist of items which either individually or together may indicate the existence of insolvency problems. 

If you have answered YES to any of the below indicators, please contact Macks Advisory. The earlier the action is taken, the better the outcome.

Key Indicators of insolvency

  Inadequate cash resources

  Statutory creditors not paid on time i.e. Superannuation, PAYG, GST, Payroll tax, wine equalisation tax and income tax

  Trade creditors outstanding past agreed terms

  Exceeding overdraft limit with bank

  Not complying with terms of loan facility with bank or have passed deadline to reach agreement with lender

  Suppliers have stopped supply or insisted on COD terms only

  Cheques are being dishonoured

  Accounting records in disarray. Are the annual financial accounts prepared by an external accountant and are they up to date?

  Legal action by creditors i.e. Issuing Statutory Demands

  Creditors being paid in part payments(i.e. Round sum cheques being written out, cheques drawn to cash, etc)

  Slow debtor recoveries (shown by increase in debtor ageing)

  The business has a working capital deficiency

  The businesses’ balance sheet shows a deficiency of assets to liabilities

  Trading at a loss

  Insurance may be inadequate

  Unable to plant seasonal crops due to cash flow shortages

  Delaying necessary repairs and maintenance due to cash flow shortages

  Poor animal health & inadequate stock nutrition

  Disease of stock or crops. Farm plans and adequate crop and grazing rotation thus avoiding disease and overgrazing

  Environmental concerns – risk of contamination and resultant fines & remediation costs under Environmental Contamination Acts

  Adversely affected by drought

  Substantial sell off of core breeding herd to fund short term cash requirements

  Stock agents stop dealing due to poor credit history

  Loss of water rights or suspension of licences due to non payment resulting in inadequate water for needs

  Additional off-farm income required to meet farm expenses and day to day costs

  Operating with no or inadequate licencing