The small business sector in Australia is having a hard time of late, with many businesses becoming insolvent.

This insolvency crisis has reached levels not seen since the global financial crisis many years ago, highlighting the pressing challenges that small businesses are facing. Notably, it underscores the crucial role that accounting and advisory firms can play in supporting these businesses and helping them find a way to survive.

Small Business Insolvency Levels In Early 2025

In November 2024, Australian business insolvency levels in general reached a four-year high owing to pressures brought about by the higher cost of living and other economic issues.

High prices and high interest rates are keeping spending at a minimum, while businesses have to adapt to rising costs in rent, electricity and paying an increased minimum wage. All in all, this has resulted in a significant number of businesses going under.

As it stands, those businesses that are entering external administration grew by 39% in one year, particularly in the construction, accommodation, food services and other service industries.

The largest number of insolvencies came from New South Wales, which saw as many as 4,634 businesses running into trouble during the 2023–24 financial year. Overall, 0.33% of companies (about 11,000) entered external administration compared to the number of companies registered in total.

The Leading Causes of Insolvency

The primary factors contributing to the surge in small business insolvencies are regulatory challenges, input cost inflation and cost of living pressures. With the high rise in cost of living, many households have had to reduce their consumer expenditure, which has impacted many businesses that rely on this expenditure to survive.

Input cost inflation has also caused a squeeze on profit margins, making it difficult for businesses to maintain their financial stability. Input materials and services cost so much that it is difficult for small businesses to make a substantial profit.

In addition, new regulations such as mandatory climate-related disclosures and other strict compliance requirements have made it more burdensome for small businesses to continue their operations in a profitable manner.

How Accounting and Advisory Firms Can Help

If your business is facing these kinds of pressures, an accounting and advisory firm like Infuse Advisors & Accountants can play a key role in helping you avoid insolvency.

Conducting a financial health assessment can help your small business evaluate its financial statements, while cash flow analysis can also help identify potential liquidity issues early on so that you can intervene in a timely fashion.

Further, we can help you manage your cash flow better by optimising your receivables and payables, ensuring sufficient liquidity to meet your operational needs.

It is also helpful to have expert budgeting and forecasting to make informed decisions and ensure that your tax compliance and planning are up to speed. You don’t want to run into a situation where you are having a dispute with the ATO and incurring additional penalties.

If needed, we can even help you enter into restructuring and turnaround services so that you can restore profitability without having to shut your company’s doors entirely.

Here at Infuse Advisors & Accountants, we offer life-saving business advice and accounting services for small businesses. Contact us today to get started.