Critical Warning Signs That Your Business is Suffering Financial Stress

Statutory Demand Notice

A Statutory Demand Notice is a written, formal document from a creditor requesting payment of outstanding debt. If you receive a statutory demand, you have 21 days to pay your debt. If you choose to ignore the demand, your business will be presumed to be insolvent, which can leave you exposed to applications to wind up the company.

Receiving a statutory demand notice is a major sign that you’re experiencing financial stress.

ATO Debt Collection Warning Letter

The ATO has powers under the Taxation Administration Act 1953 to collect debts that are owed to them. If you’ve received a letter from the ATO warning you about debt collection actions, it’s likely that your ATO debt is significantly overdue. Receiving a debt collection warning from the ATO is a sign of severe financial stress and shows that the ATO is preparing to take more serious action.

The ATO can take actions that include:

• Issuing a notice to your bank, employer, or other parties requiring them to pay your outstanding debt
• Issuing a Director Penalty Notice for company debts
• Hiring a collection agency to recover payments
• Commencing bankruptcy or liquidation proceedings against you or your business

Letter of Demand

Letters of Demand are usually issued by suppliers or businesses who have already tried unsuccessfully to get you to pay an invoice for goods or services they’ve provided. The letter will state how much you owe the business, the products and services they delivered and when the invoice needs to be paid by.

Receiving letters of demand can be a sign that you’re experiencing financial stress or cash flow problems, and it’s your final chance to pay the debt before serious action takes place.

Director Penalty Notice (DPN)

A Director Penalty Notice (DPN) is a penalty issued to a Director of a company by the Australian Taxation Office (ATO). DPNs are typically issued for failing to meet Pay As You Go (PAYG), Goods and Services Tax (GST) or Super Guarantee Charge (SGC) obligations.

The ATO can sometimes hold directors personally responsible for outstanding PAYG, GST and SGC debts, and any director of the company may receive a notice. Even if you have resigned from a company, you can still receive a DPN for unpaid debts incurred while you were a director of the company.