Dealing with an insolvency practitioner
For an accountant, an insolvent client is far from the ideal scenario. Many directors overlook the severity of their financial problems, even when the warning signs are staring them in the face.
Accountants are usually aware of impending financial challenges long before insolvency occurs. Unpaid taxes are not a substitute for cash flow, and when debt starts to accumulate, it’s usually time to have a difficult conversation.
Protecting a client’s interests whilst navigating a minefield of debt, statute, emotion and compliance can be an exhausting process.
This article will provide guidance on how accountants can best support their clients before and during insolvency proceedings.
Have those tough conversations early on
The days of leniency and collaboration from the Australian Taxation Office are over. With more than $50 billion in outstanding, collectible debt, the ATO is Australia’s largest and most prolific creditor.
Honest, early conversations with clients concerning un-lodged BAS, outstanding statutory debt, director debit loan accounts and operating losses are more important than ever before. Do not wait for a Director Penalty Notice (and the threat of personal liability) to address the situation. Early intervention is proven to ensure better outcomes.
Communicate openly and honestly with the insolvency practitioner
Unfavorable findings during insolvency investigations can naturally strain the relationship between a client and their accountant. Still, it’s important to remember that insolvency practitioners are not trying to get accountants (or their clients) into trouble.
Insolvency practitioners and accountants work as a team, to provide the best outcome for all stakeholders whilst ensuring compliance with the statutory requirements. Insolvency practitioners strive to preserve the relationships between accountants and their distressed clients.
The takeaway
Early, honest conversations regarding financial difficulty will only improve a client’s long-term outcome. Insolvency practitioners do not seek to complicate your relationship with your client. We are here to help resolve your issues whilst observing the legal and ethical boundaries and our responsibilities to all stakeholders.
