2.TTRM – PRELIMINARY REVIEW AND FEEDBACK

ABRT – Turnaround Training Reference Materials

2.TTRM – PRELIMINARY REVIEW AND FEEDBACK

2.1 Purpose of this subject

Where there are areas of concern, the next logical step is for the director or business owner to undertake their own preliminary review and seek feedback.

This stage is about reviewing basic financial and operational visibility, testing assumptions, understanding urgency and deciding whether further action or advice is required. This DOES NOT does not mean a formal insolvency review at this point. At this stage a formal insolvency assessment would be premature. Before reaching any conclusions or causing alarm, the relevant information must be properly identified, gathered and reviewed and feedback obtained.

It is important that feedback is obtained from the appropriate professional supports to ensure that information is properly interpreted and assessed in context.

2.2 Key areas of concern at the preliminary review stage

This list is intended to prompt reflection and help surface areas that feel relevant or uncertain. At this stage, simply noting which points stand out is often enough. The aim is to restore visibility and understanding, not to analyse, verify or draw conclusions, and to identify whether any areas may warrant further discussion or support.

Directors or business owners may consider the following areas.

2.2.1 Early pressure points

• Working harder for the same money

You are flat out but there never seems to be spare cash. Jobs take longer, cost more or need rework. Discounts become normal just to keep work coming in. Turnover looks fine but the business feels tight all the time.

Question: Are you working more hours or taking on more jobs but still not seeing extra money left at the end of the month?

• Only focusing on this week (short-term thinking bias)

Your attention shrinks to the next bill, payroll or BAS. Anything further out feels too hard to deal with. Reports stop being useful because they do not help with today’s problem.

Question: Are most of your decisions about getting through this week rather than planning the next few months?

• One customer taking over

You rely too heavily on one main client (putting all eggs in one basket). They start pushing prices down or paying later. You feel like you cannot say no because losing them would hurt badly. Work stays busy but risk quietly increases.

Question: If one main customer stopped giving you work, would your cashflow be in trouble straight away?

• Workarounds replace systems

You stop trusting the accounting software. You track things in your head or on scraps of paper or spreadsheets. Numbers are “about right” but not checked. Once this becomes normal, proper records fall behind fast.

Question: Are you relying on rough figures or memory because the books are not fully up to date? This might be in relation to cashflow management or where quoting for new work.

• The family home starts entering your thinking

You start thinking about your personal guarantees or your home when making everyday business decisions. You delay payments to buy time. Tax and super get pushed back because you want a buffer.

Question: Do thoughts about your house or personal guarantees affect how you decide which bills get paid?

• The bank or lender starts asking more questions

The bank, lender or broker checks in more often or asks for extra information. Limits stop increasing. Nothing has been cancelled but the tone feels different. You start holding onto cash just in case instead of keeping records tidy.

Question: Has your bank become more cautious or asked for more information than it used to?

• A big job or contract has ended or might soon end

A key contract is due to finish or is only rolling month to month. No clear renewal. You avoid thinking too far ahead because the future feels uncertain. Paperwork and systems slide because it feels pointless to plan.

Question: Is a major job or contract coming to an end with no clear replacement lined up?

2.2.1 Cash position, cashflow and short-term funding

Whether there is a high level understanding of current bank balances, near-term obligations and whether short-term commitments are being met without constant deferral.

Are you putting enough cash aside to meet your tax and super obligations? Have you been running separate bank accounts for GST and PAYG withholding to avoid BAS-time cash shortfalls, or does it all still sit in the main trading account until lodgment time?

Are you having to dip into personal bank accounts or move money between related companies to pay suppliers because business cashflow and GST or PAYG obligations are all intermingled and not properly reconciled?

2.2.2 Financial visibility – Management accounts (Profit and Loss/Income Statement and Balance Sheet) information)

Whether financial information is current, accessible and understood by the decision-maker. A lack of visibility or reliance on guesswork is itself a concern. Every director should be able to ask their accountant or bookkeeper for an up-to-date profit and loss statement and balance sheet.

These provide a basic snapshot of performance, assets and liabilities. If the figures are unclear or concerning, the director can ask for an explanation in plain terms. If reasonably accurate management accounts can’t be produced, then you should find out why.

Is there a bookkeeping issue or administrative backlog that needs to be addressed before this can be accurately reviewed?

Records and receipts – have you fallen behind on retaining invoices and transaction data to the point where you cannot confidently state that your current financial position is accurate and up to date?

2.2.3 ATO – Tax and statutory pressures

Whether there are outstanding tax lodgements, arrears or correspondence from revenue authorities that are causing concern or being avoided.

Do you need to agree a payment plan with the ATO? Have you defaulted on a payment plan or do you anticipate you will shortly default ?

Have you received any early ATO correspondence yet such as an Activity Statement lodgment reminder, a failure to lodge notice or an account statement showing overdue amounts (eg superannuation)?

• Accounts payable
  Whether there is a simple view of who is owed money, how overdue amounts are and whether any creditors are being delayed or prioritised. An accountant or bookkeeper can provide this information or explain where it is recorded.

Do you have suppliers chasing you? Have credit limits materially altered? Have you been placed onto cash on delivery terms?

• Accounts receivable
  Whether customers are paying on time, debtor days are increasing or cash is becoming trapped in unpaid invoices. Knowledge of own customer or client can then be used to update this for known risks, provisions, potential bad debts and actual bad debts.

It’s often difficult to press your customers and clients for payment when they’re your source of income – would you benefit from having a dedicated accounts receivable function, outsourced credit management or debt collection service?

• Personal financial pressure
  Whether personal financial obligations are coming under strain, such as missed or at-risk mortgage payments, increasing reliance on personal credit or concern about the sustainability of drawings taken from the business.

Do you have concerns around drawings, loans to shareholders or what may have been referred to as Division 7A (Div7A) exposure?

• Wages and remuneration adequacy
  Whether wages being paid to the owner and employees are adequate, sustainable and compliant, or whether underpayment, overpayment or deferral is occurring to manage cashflow.

Do you foresee cashflow issues with regards to superannuation looming?

• Personal capacity and distraction
  Whether health, family or personal matters are affecting availability, focus or decision-making in a way that is beginning to impact the business.

Am I delaying or avoiding decisions because I lack the capacity or focus to deal with them properly?

Have advisers or staff raised the same concerns more than once because I have not acted on them?

Is my personal situation materially reducing the time and attention I can give to financial oversight and compliance?

• Lenders, guarantees and borrowing stress
• 
  Whether there are concerns about business or personal loans, interest rates, refinancing pressure or the ability to continue servicing debt.

• Rent and occupancy costs
  Whether rent or lease payments are affordable, whether arrears are emerging or whether occupancy costs are disproportionate to revenue.

• Creditor pressure and disputes
  Whether there are unresolved disputes, threatened enforcement action or deteriorating relationships with key creditors, suppliers or customers.

• Operational strain
  Whether staffing shortages, pricing pressure, margin erosion, under-quoting or delivery challenges are creating ongoing stress that management feels unable to resolve in the normal course of business.
• Business identity and structure
  Whether the business structure is understood and reflects how the business actually operates, including which entities are involved, who controls decisions and whether there is personal exposure through guarantees or security.

Do you know why you are using various trading or discretionary trusts? Do all corporate entities serve a purpose?

• Insurance coverage
  Whether insurance is current, adequate and appropriate for the risks being carried, or whether coverage has lapsed or is no longer fit for purpose.

• IT systems and business infrastructure
  Whether accounting systems, payroll, billing, inventory or IT infrastructure are effective and supporting the business, or whether system limitations and workarounds are creating risk and inefficiency.

• Regulatory and licensing matters
  Whether the business relies on licences, approvals or regulatory compliance that could be at risk due to distraction, delay or non-compliance.

In many cases, this information can be obtained by asking an accountant or bookkeeper to provide it, or simply to explain where it is held and how it can be accessed. Directors are not expected to assemble detailed records themselves at such an early stage.

How this aligns with director responsibilities

This preliminary review stage supports core director responsibilities by encouraging active monitoring rather than reactive crisis management, prompting investigation when difficulties emerge, supporting informed engagement with advisers and reducing delay when time sensitivity matters.

It is about better gaining comfort around decision-making and addressing any niggling concerns that are affecting performance.

What this stage does not require

At this stage, directors are not expected to determine solvency definitively, produce formal reports or forecasts, appoint advisers prematurely or escalate unnecessarily. The goal is clarity, not conclusion.

Summary

A preliminary review is a practical step between unease and action. By gathering basic information and speaking with an appropriate person, directors can regain perspective, understand urgency and decide what comes next.

This subject provides a reference framework to support that step, operating before formal assessments, protections or processes apply.