What to do when you're in debt

Having your business in debt can be a daunting experience, but there are positive steps you can take to get your business finances back on track.    

Assess your financial situation

The first thing you should do is take stock of your debts and the money owed to you.

Consider setting up a basic bookkeeping system to help keep track of your financial situation or speak to an accountant or business adviser.

Prioritise your debt

Prioritising your debt can be a quick way to get creditors off your back. Begin by identifying what you can afford to pay now, what you can pay later and when to go on a payment plan.   

A budget can help plan and direct your money where it matters the most. Read how to do a budget on the Australian Investments and Securities Commission’s (ASIC) MoneySmart website. 

Chase up money owing to you

Now is the time to contact late or non-paying customers. If you're having problems receiving money owed to you, find out what to do when you haven't been paid.

Talk to the organisations you owe money to

Speaking to your creditors early can prevent further late penalties or calls from debt collectors. When you talk to them:

  • explain your circumstances
  • ask if any hardship provisions are available
  • ask if you can extend the due date, make a partial payment or go on a payment plan
  • make sure you keep a record of your conversation.

If your debt has been passed onto a debt collector, there are certain laws they need to comply with. Find out what your rights and responsibilities are when you’re dealing with debt collectors (PDF 1.1MB) on the Money Smart website.

Seek advice and help

There are many agencies and experts who can help you manage your debt. These include:

Find more organisations that provide information and support to help you with your health and wellbeing on the ATO website.

Contact your bank

Talk to your bank about your finances and explain the steps you’ve taken so far.

Preparing a profit and loss budget or cash flow forecast can give your bank an insight into the issues your business is facing. This can help when applying for financial hardship.

For information on how banks can help you, read the Small Business and Dealing with Debt fact sheet on the Australian Bankers’ Association’s website.

If you feel you can’t reach a solution with your bank, consider conciliation through the Financial Ombudsman Service Australia.

Apply for bankruptcy or insolvency

Before you do anything, seek help from a professional, such as an accountant. They may be able to suggest ways you can repay your debt that don't involve bankruptcy or closing your business.

There are different insolvency arrangements that apply to sole traders and partnerships and companies. You can find information about bankruptcy and insolvency and how it applies to your business structure in our bankruptcy topic.

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