Understand Finacial Viability with VedaScore

How financially viable is your small business? There’s an online tool to help you work that out.

According to the Australian Financial Security Authority (AFSA), most debtors are male. Since 2008, the proportion of male debtors is at least 56% of all insolvent debtors. This figure hold true with regards to a business related personal insolvency as well, outnumbering women more than 2 to 1.

AFSA figures released for the 2015 calendar year detailed the following numbers of business-related insolvencies.

Male – number Female – number
Bankruptcy 3,105 1,266
Debt agreements 512 230
Personal Insolvency 63 17

Source: www.afsa.gov.au

Online assessment

It’s not news that running a small business is challenging – emotionally and financially. On the financial side, data from MarketInvoice indicates that Australian small businesses are the world’s slowest at paying outstanding invoices, which in turn is compromising their competitiveness and survival.

In response, Industry Capability Network (ICN) has launched a new tool aimed at helping small and medium companies understand their own financial viability, using VedaScore, provided by data analytics company Veda.

“We know the Federal Government is concerned about businesses’ cash flow,” said ICN Limited Executive Director Derek Lark.

“Unfortunately, as the MarketInvoice 2016 data shows, Australian businesses are still lagging. So as the leader in finding businesses with the right capability to win major projects here and overseas, ICN is well-placed to also help Australian small and medium enterprises understand their credit position. This new avenue means that not only are we able to offer independent validation of technical expertise, but now also moving into viability.”

From 23 March 2016 new subscribers to ICN Gateway (that hold a current ACN and Veda has sufficient data on) will be able to download their VedaScore to give them a better understanding of their credit rating.

VedaScore sums up a company’s credit file in a number between 0 and 1200, calculated against the average for all companies in the country. This score is collected from such things as payment information, public filings (for example ASIC), court judgments, payment defaults, collections, and other information.

Small Business is focus

The Turnbull government has been open in its support of startups, and via its crowd-sourced equity funding (CSEF) legislation is intent on making access to finance easierfor small businesses and start-ups that may have difficulty accessing equity funding due to the costs of disclosure and other requirements.

“The Government crafted this Bill after extensive stakeholder consultation and considering international models,’ said Minister for Small Business and Assistant Treasurer the Hon Kelly O’Dwyer.

“Australia’s new CSEF model is internationally competitive with the issuers able to fundraise up to $5 million each year, which is higher than the US and New Zealand cap,” Minister O’Dwyer said.

Australia’s new model:

  • allows unlisted public companies with less than $5 million in assets and less than $5 million in annual turnover;
  • sets an investor cap of $10,000 per issuance per 12-month period (this is higher than the average in New Zealand and the UK);
  • provides a five year holiday from some reporting and governance requirements for unlisted public companies; and
  • will protect investors with a cooling off period of five days after making an investment (this is shorter than Italy and in some cases in the US).

No stigma in not being viable

Another piece of legislation recently passed by the government  – the Insolvency Law Reform Bill – enhances protections for creditors and improves the efficiency of companies being wound up.

“We are adjusting Australia’s personal bankruptcy and corporate insolvency regimes to provide financially distressed businesses with the best opportunity to restructure, or be wound up efficiently where the business cannot be revived,” said Minister O’Dwyer.

“The Bill reduces unnecessary regulatory costs in the winding up process including through better facilitating the electronic provision of documents, and aligning administrative rules across personal and corporate insolvency.”

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