Claude Trimboli founder of Charles and Co, a boutique debt advisory and restructuring firm, talks about the complexities of insolvency and restructuring for small businesses. They discuss insolvency, the responsibilities of business owners, proactive measures to avoid insolvency, and the importance of engaging with the ATO.
@Claude Trimboli from @charlesandco talks about the complexities of business liquidation and restructuring. The discussion covers the critical importance of understanding cash flow, the role of early intervention in financial distress, and the emotional toll on business owners facing insolvency.
Claudio emphasizes the need for proactive measures, mental health awareness, and the collaborative approach necessary for navigating these challenging situations.
The discussion highlights the significance of having a solid grasp of financial numbers and the value of seeking help from trusted advisors.
Other important discussion topics include;
https://treasury.gov.au/sites/default/files/2020-12/simplified-debt-restructuring-fact-sheet_0.pdf
Michael (00:00.13)
Finished.
Okay, welcome into edition 146 of Small Business Banta. Michael Kerr, your host. I'm very pleased to welcome in Claude Trimboli. Morning, Claude, from Melbourne.
Claudio Trimboli (00:15.396)
Good morning Michael, I'm thrilled to be here. Thanks for having us. I'm looking forward to the opportunity to share some insights and help some small business owners around town.
Michael (00:24.842)
I love it. So we were just chatting and you want to, we started to talk about your professional life and what we're going to be chatting today about. Claude is a insolvency practice practitioner, restructuring practitioner. And we'll get, we'll dive into that. But Claude was just mentioning that you grew up in a small business family. Do you want to just tell us, you know,
Repeat what you told me because it's very relevant to our audience and then lead on to where you are today and then we'll dig into this topic of insolvency.
Claudio Trimboli (00:58.179)
Yeah, yeah.
Claudio Trimboli (01:05.46)
Absolutely. Thanks, Marko. You're all saying...
prior to going live on air. So, Melbourne born to Italian immigrants. Mum and Dad, Denizh High School. Dad was a shoemaker. Mum was a housewife. We grew up in the inner northern suburbs of Melbourne. So, I literally helped Dad make and sell shoes from the age of 10. So, I had a front row seat, Small Business 101, which I'll call it, with Dad making shoes.
and selling them around town. I was, I know the trials and tribulations that small business owners go through.
Michael (01:46.964)
And family business, yeah. Yeah.
Claudio Trimboli (01:48.582)
and especially family businesses and the challenges that family businesses face and sitting around the dinner table and the like and you know there are challenges we will know that as a small business owner but then you have family dynamics at play as well so as I said I've had a front row seat from the age of 10 which and I business resonated with me I just enjoyed the aspect of
business.
And then that led me into some high school studies which were very focused on business, economics and accounting. Then went into university, like enough to complete a degree in business with a major in accounting. Then I landed at a national accounting firm in Melbourne, top 10 firm with various divisions.
And as luck would have it, I was working in the Insolvency Restructuring Division of that firm for about four years. During that time, became a Chartered Accountant, qualified Chartered Accountant. Then did what most young men were doing back in those days. I ride a passage, went to London, where I lived and worked for about three years. Always in the Insolvency Restructuring space.
I returned to Melbourne where I kind of retooled on the Australian Insolvency Restructuring Dynamics. Then about 10 years ago I set up my own shop. So we run a boutique restructuring insolvency firm from the Melbourne CBD. So we work with lot of small business owners who face challenges that we all do as small business owners from time to time.
Michael (03:45.826)
Right, what's the name of the firm, Claude?
Claudio Trimboli (03:48.346)
Yeah, good question. Charles & Co. So the firm is called Charles & Co. To connect the dots, it goes back to my father in a way. So my father's name is Italian, it's Caramello. But when he came to Australia in the 60s, most...
People call him Charles or Charlie. So it's kind of a Tip tip my head off to dad because as I said as a as a 10 year old he taught me the ropes on small business and the basics Yeah, yeah, absolutely absolutely
Michael (04:12.013)
Yeah.
Michael (04:17.462)
Yeah, on cobbling, being a cobbler. Yeah, up in the Northern suburbs of Melbourne, what a rich history and culture up there. We were up there last weekend and drove up and down Sydney Road and you can see the remnants of some old shoe shops and factories and all sorts of old manufacturing.
So it's a wonderful place. So now you're in the thick of insolvency and restructuring.
What we want to do today is talk about insolvency, why it happens, what are the risks that you might see coming in a business that you need to do something about to avoid an insolvency, what are the ramifications personally, legally, and you've no doubt had plenty of exposure to business owners
And you've seen some good outcomes and maybe some really sad outcomes. So I guess we're trying today to explain a little bit more about what insolvency is and the related areas of restructuring so that owners can perhaps be better placed to see where they're in trouble and then ultimately take some the right advice to try and avoid that.
At its very core, can you just talk briefly about insolvency, what it is and what are the basic ramifications for an owner?
Claudio Trimboli (06:09.81)
Yes, Marko, very good question. at the basic level, if a business is unable to pay its debts as and when they fordue, that's the technical definition of insolvency. It comes down to your cash flow test, your liabilities more than your assets, and if it becomes...
to overwhelming for a business owner where they cannot pay those debts. The business owner under the Australian law has an obligation if the company is not able to pay those debts as and when they're for due not to trade the business because it is insolvent.
And if they continue to trade under that insolvency dynamic, the business owner, the rector can be held what we call personally liable. So as we know, when you set up a company, there is a separate legal entity between personal debts and company debts. So a business owner wants to avoid that.
That's at its basic terms and if the business owner decides to place the company into an insolvency event, they come and see someone like me. In simple terms, we sell all the assets to the company, put that into a pot and then pay down liabilities of the entity. Once we've done that, the company is then deregistered. It is an exit strategy from that point of view.
Claudio Trimboli (08:10.54)
Tell Michael.
Claudio Trimboli (08:17.326)
Y'day Michael, bless you.
Michael (08:29.952)
Claude, my internet dropped out. It's one of the bug bears of where I've moved to. I'm really sorry about that, but do you want to just, we were just chatting about, yeah, the definition of insolvency. Do you want to just pick up where we were? Maybe we can, I can edit it out. It'll be fine. It's just, yeah.
Claudio Trimboli (08:31.748)
Did I lose you?
on.
Claudio Trimboli (08:54.35)
Yeah, it's... Yeah. Yeah, all good. All good. So yeah, as I was saying, it's in basic terms insolvency is when a business cannot pay its debts as and when they fall due. So a business owner slash director of a company, if that happens...
The director slash business owner has a positive obligation under the Australian law not to trade a company whilst it is in solvent. If the director or business owner does that, they can be held personally liable for those debts which are incurred during that process. So yeah.
Michael (09:40.756)
Right, so on that, you referred specifically to directors and companies there. So if an individual business owner was trading as a sole entity, are they carved out or are there a different set of responsibilities?
Claudio Trimboli (10:00.698)
Yeah, good question. So you've got to separate the two. We have companies. So when you set up a company and you have a director and shareholders and a director can trade that company. And the beauty of that is you have your separate legal entity. So under the company laws, the company is liable for those debts. Then on the other side of the coin, you can have a sole proprietor.
where you're running a business as a sole proprietor and if you do that then you can become bankrupt personally. they're two distinct, distinguishable, the two separations. So it was best.
Michael (10:45.448)
Yeah, and that's why a lot of small businesses, even with one employee essentially and one shareholder, often structure with a company for that very reason to have primarily the company responsible for the debts. Even though the reality is if you're going to borrow, you're probably signing a guarantee. But there is at least some separation.
prima facie between you and the entity, the company.
Claudio Trimboli (11:19.202)
Yeah, is the benefits of setting up a different structure is to segregate the debts between company debts and personal debts. And that is why when that company is not able to pay its debts is when the Twilight Zone of personal responsibilities comes into play.
So that's in its basic terms insolvency. And then if the director decides to put the company into liquidation scenario, they can appoint someone like me to liquidate the company. In simple terms, what we do, we sell the assets of the company and then pay down the liabilities once that process.
Michael (11:44.682)
Yeah.
Michael (12:05.214)
Yep. So the owner loses control in an insolvency. They've lost control of their business. If it gets to that stage and you're involved doing what you're required to do. it's, and this is the, I guess the nub of the conversation today is that you referred to the Twilight Zone and
And as an owner operator of a business, and let's for the moment, put aside the structure, whether you're a company or a sole trader, you've got to know, and I think most people do, when cashflow is really tight, but at the point where you can't pay your debts.
what, what, what should we have been doing weeks before that to, try to avoid the really awful scenario of a, of an insolvency where you do lose control and, you, you take control, sell assets and it's all over. So what, if we go back in the cycle, what are we talking about? for an owner to
proactively do to avoid this.
Claudio Trimboli (13:31.384)
Yeah, no, good question. Liquidation is the last resort. It is an exit strategy of the business. You want to be proactive. The critical aspect is, and unfortunately, I see this a lot of the time with small business owners, it is a heading to sin mentality sometimes.
So comes back to the basics. The critical aspect is to have some really good understanding of the numbers. I'll go back to accounting. Accounting is the language of business. So as a business owner,
Perhaps you need to get a basic understanding of the numbers, if not a good advisor to help you with that. When I started 20 odd years ago in this industry, the books and records were in a box, and they'll deliver that box to you. Now with the beauty of cloud accounting, it is a great tool for business owners to use.
Michael (14:34.368)
Thank
Claudio Trimboli (14:47.546)
properly, accurately, and that's kind of your first line of defence. If you've got a really good read on the numbers, you know, your basics, money in, money going out, and you can review that on a regular basis, whether it's weekly or monthly.
So you can see sales are deteriorating, can be proactive and say, okay, sales have gone down a little bit, what can we do to pick up sales? And if you see perhaps certain costs increasing, you're spending too much money on perhaps fuel or marketing, can we adjust the cost structure? So it goes back to money in, money out, and having that
Michael (15:37.47)
Yeah.
Claudio Trimboli (15:39.904)
real discipline, whether it's weekly or monthly, there really is discipline around the numbers. I always use the health analogy, you you might have an illness, but the sooner you identify that illness, the more options and time you have to actually cure that illness. It's very similar to the business life.
Michael (16:05.824)
Yeah, it's, and, I think there's a, the evolution of cloud accounting and the ability that most business owners I've ever met, just about every one of them knew exactly how much was in the bank or not. And if there were creditors screaming or, or if there were, but I think the point is to go back. There's, that's you've, you know, at that stage,
That's managing by the city pants. And what we're trying to say is that there's information available. And if it's, if it's not you, certainly you're sitting with your accountant and going through the numbers, but also understanding the numbers. Like this is the power of this cloud accounting. It's also, it's not just a, if you want to drill down, you can, you can start to look at your business from the point of view of what
What bits are profitable? What, what's not, and profit doesn't equal cashflow, but, but, know, if you're going to fundamentally make your business better, you need to, you need to understand every line of your P and L and, and, and from that, you start to say, well, I don't need that expense or I need to drive more of these sales or I need to get rid of that stock or, but you know, this is, it, and I think the tricky is taking time out of.
a very busy day or week to look at your numbers with a little bit more of a microscope and not just feel like you've met your compliance obligations and you're okay. the point you make about the ability to really deeply understand your business from your cloud accounting numbers and yourself or with a good advisor is well made.
Claudio Trimboli (18:02.776)
Yeah, like you said, Mike, we're having the discipline where you sit down, you spend an hour or two a week, and you get a really good feel where you're at early. And if things are turning south, you can correct course.
instead of waiting too late is when sometimes people come and see us. yeah, early action, early identification and being proactive, putting a two or three step process in place where you're constantly looking at those numbers gives you the better options of surviving and turning the ship around, absolutely.
Michael (18:43.818)
Yeah. So at the moment, pretty broadly, I think the sentiment is that the economy is pretty tough. I think there are businesses out there that know how to manage their way through just about anything, but are you seeing an uptick in insolvencies? had the last two episodes, interestingly, of Small Business Banner have been
Olga Koski from who's a practitioner in managing tax office debt, which is the tax office are going after more businesses now for debt that have been outstanding for a long time. that's another potential trigger. we also had, we had James Meldrum come in and talk. He's,
at the end of a voluntary administration nearly after 12 months and 18 years in business. And there was some really sobering, but really helpful advice in both of those discussions, was essentially not, well, certainly James and his wife, Monica had a, you it was.
very complicated, lot of, you know, quite a few external factors, but 18 years into going to VA was heartbreaking. He reflected on what he learned and that was really helpful. very much like you, was talking about not putting your head in the sand and communicating with the ATO in that case. So, yeah, so are you seeing more...
insolvencies and what's primarily driving them.
Claudio Trimboli (20:34.594)
Good question. Yeah, we'll have to go back a few years to realise where we're at in time. We do go through cycles. So we've had a very low interest rate environment for very long time. Then COVID hit our shores, all shores around the world.
and the government did what the government had to do. Interest rates went to zero, literally. We had a lot of stimulus in Australia and the world. think the Morrison government spent about 500 million dollars worth of stimulus packages. And then we had the tax office, historically collecting tax debts.
during those two, three year period hitting pause on tax collections and actually providing funding to small businesses via JobKeeper and Cash Flow Boost and the like. And that caused probably unintended consequences. At that point in time, we all thought it had to be done. Fast forward.
four or five years later now and that's kind of turned. We've had interest rates increase dramatically in a space of a very short time. We've had inflationary pressures, cost of business have gone up dramatically, especially in the construction space. And then the tax office, had, probably Olga touched on this in the last episode.
Last reading, think in 19, collectible tax debts were about 25 billion. They doubled in about five years. I think it was about 50 billion at the moment. And small businesses make 65 % of that, which is about 30, 35 billion worth of outstanding tax debts.
Claudio Trimboli (22:48.122)
And now that's what's driving some challenges in the small business community, business in general, which has increased insolvencies to actually record levels. I think we had on ASIC numbers 11,000 nationally of companies going into external administration in 23-24.
The last peak was around 10 years ago in 2013. But also some context, I think there's about 3.4 million companies in Australia. So 11,000 divided by 3.4 million is about 0.3 % of companies going to an external administration.
and in 2013 we had about 2 million companies. So there was about 0.5 % of companies going to external administration in a year. So in context, in comparison, although the numbers are big, given the broader economy of Australia, the numbers are still proportionally okay. Saying that, it is a challenging time because of interest rates and the tax man. The tax man is the biggest driver.
Michael (23:41.95)
Yeah.
Michael (23:54.516)
Yep.
Michael (24:03.615)
Right.
Claudio Trimboli (24:04.659)
especially in these small businesses. So we see a lot of inquiries off the back of the tax office being more aggressive in that regard. definitely.
Michael (24:19.924)
And it's pretty hard to hide from the ATO.
Claudio Trimboli (24:25.452)
It is. As I said, it goes back to the unintended consequences. The tax man was very accommodating for a very long time, which may have, you know, changed business owners' perspective a little bit. You know, it's unfortunate, but there's been a massive build-up of tax debts.
Michael (24:47.604)
Yeah.
Claudio Trimboli (24:48.566)
over the period of time. you're right, you've got to engage, back to your point, you have to engage with the tax office. Heading the same mentality won't work because they'll push really hard and the two biggest tools they're using is what we call a Director Penalty Notice, which goes back to what we discussed earlier in regards to the corporate entity.
So under a corporate entity and you're a director of a company, those tax debts are quantified within the corporate structure. But the ATO has a strong tool to issue what we call a Director Penalty Notice, giving the director literally 21 days to do one of three things, which is pay the debt.
Small Business Restructuring will touch on it which is a new restructuring tool for business owners. Liquidate or put the company into administration. If you don't do one of those three things in those 21 days, the director becomes personally liable, going back to that personal liability.
Michael (26:01.065)
Yeah, 20 and 21 days is.
So such a short amount of time to, if you haven't thought through your options, I can imagine it would just completely overwhelm anybody that gets one of those DPNs.
Claudio Trimboli (26:23.466)
It is very overwhelming. It's kind of the ATO's, think it goes back to engagement. It is the ATO's kind of second-last resort. Because after the director can be noticed, they generally go down the path of winding up the company.
Michael (26:39.986)
Okay, yeah.
Claudio Trimboli (26:41.05)
And yeah, so it is a last resort. It goes back to engagement, engaging with the ATO, with your current advisor, hopefully putting a payment plan in place to manage that tax down. But what we're also seeing in our space is what we call a small business restructuring. I think you touched on business owners losing control.
Michael (26:43.008)
Hmm.
Michael (26:53.054)
Yep. Yeah.
Claudio Trimboli (27:07.812)
when a company goes into liquidation. So because of COVID, the government in 2021 introduced a new insolvency regime, you call it. It's called a small business restructuring. It's a mechanism where a business owner can engage someone like myself to look at his business and work out.
If that business was to liquidated, what would be the return to the creditors? It's generally the ATO. And then propose a plan to the tax office, which is a better outcome to liquidating the business. And during that process, the business owners actually remain in control of the business.
Michael (27:59.541)
Right.
Claudio Trimboli (28:00.0)
as yeah, is a really strong tool. It has been the flavor of the month for us. We've had about literally one a month that we've engaged with business owners and we've been able to get compromises on tax debts, which is manageable and gives the business owner a reset phase where the balance sheet is reset at a reduced compromised liability position.
Michael (28:22.367)
Yep.
Claudio Trimboli (28:29.85)
So that's been really helpful for business owners.
Michael (28:29.96)
And yeah, okay. So that like, it's a bit of breathing space, but the owner's got to be all over. How am I going to restructure the business and how am I going to communicate with the, the ATO? Is it always, is it generally the ATO or are there other creditors bringing actions as well?
Claudio Trimboli (28:55.072)
It is generally the ATO at the smaller end of town, Michael, because as we know, you don't have to pay the tax office to keep the lights on in the building, or pay your employees to keep on coming back to work, or pay your supplier to deliver the coffee, to deliver the goods of the coffee to make the coffee. So generally speaking, the tax office, you're able to delay paying
Michael (29:05.876)
Yep. Yeah. Okay.
Michael (29:15.926)
Yeah, deliver the goods.
Michael (29:20.19)
Yeah.
Claudio Trimboli (29:24.956)
the tax office and they're generally the biggest creditor in an insolvency situation.
Michael (29:31.646)
Yeah, okay. So in that scenario, you'll get a hell of a shock about the value or the realizable value of your business, which is probably negative in many cases, unless you can restructure the debt and pay back over time. I'm assuming that mostly it's pretty well negative or
Yeah. And probably very sad after X amount of years of putting in a lot of yourself and time, energy, money, and having facing down, looking down the barrel of a, of a negative equity or in your business.
Claudio Trimboli (30:16.984)
Yeah, it's a tough part of the space that we work in. Yeah, well, I go back to my formative years as well with Dad and being a cobbler. He put a lot of years into that business. Luckily, he was able to survive through the ups and downs, and especially...
The 90s recession when interest rates were, it tells me 15, 17 percent reflecting the other day with him because I was complaining about interest rates being, know, falling a bit at the moment. So he had a giggle at me. So yeah, no, blood, and tears. It is unfortunate when that business owner has a realisation over many, many years there is no significant value.
Michael (30:46.866)
Yeah. Yeah.
Claudio Trimboli (31:07.116)
in those circumstances because of the build-up of some tax debts and liabilities.
Michael (31:13.31)
Yeah. Yeah. It's look, I do want to come to that and, and talk about some of the, the stories, the, the good and the bad, but, and the impact on, the individual and the impact on you. Cause I'm sure you see some, some really awful situations that you wish didn't happen. But so when this small business restructuring, creates a bit of time and space for the owner.
You're, you're involved and other restructuring advisors are involved keeping an eye on the, on the business and the owner. So what is a, obviously there's a, an upfront effort to try to restructure the business, restructure the debt. And then, so is that, is that a, a lot of cashflow analysis to kind of drill down on what the business can.
comfortably repay while meeting all its other obligations and then more regular reviews of cashflow projections. Is that the guts of it?
Claudio Trimboli (32:25.738)
Good question, Michael. So, it is a very short timeframe. It's usually 30 business, 35 business days that the whole process entails. So, in 20 business days, as advisors, restructurally advisors, as I said, we sit down with the business owner and its current
Michael (32:37.895)
Okay.
Claudio Trimboli (32:54.873)
Generally speaking the accountant and go through From our experience because we've done so many Yeah liquidations We have a really good knowledge if you liquidate this business. What's the outcome? So that's a starting point in regards to
Michael (33:10.846)
Well, and typically what in a liquidation sense, is that really an auction of an ad in the paper and an auction of assets at whatever you can clear them at? Is it that dramatic?
Claudio Trimboli (33:27.539)
Good quick, haven't got much time, so you're right, we advertise, we do social media channels these days through auctioneers that we use, through other social media, we do have a very quick sales process per se.
Michael (33:27.776)
Because you haven't got much time.
Claudio Trimboli (33:47.596)
Small business restructuring point of view, we don't do that advertising. We do a high level review. What will be the outcome to the creditors, generally the ATO, and then work backwards, reverse engineer. So this is a liquidation scenario, and it might be, hypothetically speaking, it might be, you know.
10 to 20 cents in the dollar potentially and that's kind of to the creditors it's spot on to the creditors unfortunately when it gets to that kind of level there'll be nothing to the owners it's a way of restructuring your debt so that's kind of our baseline starting point and then from there we work out okay you got to offer the creditors a bit more than that so it might be you know 25 30 cents in the dollar
Michael (34:14.368)
to the creditors. Yeah. Yeah, nothing to the owner. Yeah.
Claudio Trimboli (34:39.93)
so much money is required. So there's two ways you can make that payment. It could be through a lump sum payment in 60, 90 days, and we need to work out with the business owner whether he's got the means to do that. And then we communicate that to the creditors, generally the ATO. Or if it's from monthly cash flow projections.
We sit down with the business owner and the current accountant and get an insight into the cash flow projections and we say to the creditors, IEATO, we've looked at the cash flow projections and we feel comfortable that the assumptions are reasonable given the circumstances and the business owner can make these payments over a period of time to compromise that debt. So that's all done in about 20 business days.
Michael (35:35.454)
Yeah, yeah, so it's, it, yeah, it's, it's very incredibly hands on and dynamic. It's probably underselling how, how, you know, how quick and, and high stakes it is, but
Claudio Trimboli (35:36.483)
to present.
Claudio Trimboli (35:50.298)
Yeah, but there's a lot of pre-planning leading up to that as well, Michael. And it goes back to being proactive and reaching out to someone like me with your advisor where we sit down and the first option is always to what we call informally restructure the company's affairs. We put some three or four key points in place to, as we said, can we increase sales? Can we cut some costs?
Michael (35:57.418)
Yep.
Michael (36:17.787)
Yep.
Claudio Trimboli (36:20.83)
Can we rationalize the business, just get back to its core and focus on that? So that is the first step. So can you do that? If you can do that and work away through those challenges, fantastic. But then if that's not working, you go probably to phase two, which is what we call a formal restructure for the small business restructuring.
Michael (36:23.966)
Yep. Yep.
Claudio Trimboli (36:50.33)
Or if you don't qualify for the small business restructuring, because there's qualifications dynamics, you look at doing a voluntary administration, a date of company arrangement. So a date of company arrangement where you compromise debts and hopefully you can continue the business. And then third phase is the final phase, close the chapter, liquidation. So it's kind of the three levels of the work that we do. We do the informal restructure.
Michael (37:11.348)
Yeah, right. Yeah, yeah.
Claudio Trimboli (37:19.098)
and that comes back to what I was saying before when we touched on it's early action gives you more options. Back to the health analogy, know like stage one, two, three of cancer, if you get it late you've got really low prospects of surviving. So it's acting early and going through stage one which is a what we call informal restructure. It's outside the public eye in a way and you can work in the background with the business owner and put those two, three key.
Michael (37:32.384)
Yeah.
Claudio Trimboli (37:50.071)
Restructuring tools in place, you increase sales, custom costs, rationalize the business, get some more equity in play, perhaps some more debt refinance to give you that kind of runway and rooming space to restructure the company's affairs. Before you go to potentially stage two, which is what we call a formal restructure, which is your small business restructure or your voluntary administration, have that.
is your next toolkit. But if it's too late in the process, you unfortunately have to consider the exit strategy, which is your liquidation, unfortunately.
Michael (38:24.255)
Yeah.
Michael (38:28.062)
Yeah. No, look, it seems like we're the ATOs at the bottom, a lot of the work you do and you know if you've got ATO debt and you know, you can't ignore it. They're not a bank. They're chasing money. So it goes to getting on top of your business. look, I look at numbers pretty much every day.
leading into the sale of a business and what's it worth. And I sometimes evaluate it from the point of view of what's it worth if we have to sell tomorrow? And what about in three years if you change a few things? So it's not dissimilar to the process you go through, it's always a little bit of a, mostly it's a shock or a
And some owners then decide they're going to do something about it. And some don't, but the, I think central in all of this is having a better handle on your numbers. it's everyone gets jacked off with all the, the compliance, but I guess with cloud accounting, can, you can nail all that stuff pretty
pretty easily, but you can go a step or two further and use your numbers to evaluate your business. it intrigues me every time I look at a set of numbers that owner's been in that business for 20, 10, 20, 30, 40 years, and it is their business and they think of it in a particular way. And so often that business is actually two or three different kinds of businesses.
And it's, really hard to classify and to then to explain to somebody else. If it's a cafe that serves coffee and, and, and toasties, it's pretty straightforward, but there's a hell of a of businesses that are a mixture of wholesale retail online services, repairs. And, but that, you know, that's, you don't, know, like when you're wanting to sell your business, you don't want leave.
Michael (40:56.286)
that to the end, you want to be working on potentially selling off some parts of those business or streamlining it or restructuring without the threat of any debt recovery, just because it makes it a more sellable, more valuable business. But it's just about numbers and getting over, do your compliance, but then go to the next stage and what is...
What is the underlying performance of my business? Can I make my balance sheet work better for me? And, and, but yeah, especially if you've got ATO debt or other banking debt that's, that's, that's, challenging you just got to get on with your numbers. what do you, do you get
Owners reaching out to you typically or is it their advisors, their accountants?
Claudio Trimboli (41:56.73)
Good question. 80 % of our business comes from other accounting firms. your general accountant, your trusted advisor, who's dealt with that business owner for many, years, we've built some really good relationships with those accounting firms around Melbourne.
and they trust us because we do the work, we're very collaborative as well. It goes back to what you touched on before. The hardest bit is to see business owners go through an insolvency situation, but also the most rewarding is to help them come out of that particular dark, what call dark phase.
And I've seen the evolution over the 20 odd years in regards to the resources which are at our disposal.
and the awareness of the community, mostly around mental health as we all know. It is a tough spot to go through and sometimes as business owners we just get into our own little heads and pride comes into place and we want to show that we can do it all and do with it all. But yeah, we've got some really, for example, Beyond Blue, which I generally guide business owners to consider. There's some really good tools around.
that and I use them as well in my first two three years of business. Taking care of yourself number one you know number one is just take care of your mind your body your spirit
Claudio Trimboli (43:43.32)
have some really good daily practices, whether you go for a walk or go for a swim or whatever you do, kick the ball around or walk the dog, just something to clear the mind. And then, know, eating healthy, then get unhealthy, you know, sometimes we look for that comfort food or that comfort drink, a glass of wine, and you know, good night's sleep, just some really basic daily tools which helps you
Michael (43:55.508)
Yeah.
Claudio Trimboli (44:11.225)
Perhaps you'll also perform better. It gives you a clear mind and step back and take a deep breath and speak to people, communicate and just reach out. Because if you talk to people, you just kind of work the problem and you get solutions. Better like that?
Michael (44:17.854)
Yeah.
Mm.
Michael (44:25.63)
Yeah, the, yeah. And we both talked about heading the sand and it kind of can sound a little bit, derogatory, but I know we neither has mean that what we mean is get, you know, talk to some others about share the shared and there are the, your trusted advisors, other owners. It's you've got to find some people, some fellow owners or advisors that
that you can share your issues with. that's the, I guess, when we talk about it, it can be very lonely. It is very lonely. It certainly is running a business. above all, we're talking about what you should do, but it's all underpinned by having honest discussions with a few people that you trust.
They're vital. So how do you handle this as clored? You must take its toll and you refer to that then. It must take its toll, but also perhaps steal you to help more owners in your business.
Claudio Trimboli (45:27.905)
or
Claudio Trimboli (45:51.79)
Yeah, as I said, it's been an evolution and a growth and a reframing of the problem. Take it as an opportunity to help that business owner through this challenging time.
Claudio Trimboli (46:15.674)
aim to show them bit of, there is light at the end of the tunnel. Not to diminish the problem, it is a big problem and some business owners have put their whole life into their business. yeah, like I said, we're collaborative. Liquidators can be seen as the big bad wolf, there to take your business and...
But yeah, we aim to be very collaborative in our approach and also the evolution of the industry. I looked back when I first started, it was very aggressive.
approach to insolvency, it's evolution of I think business world and society, you've to be more collaborative in your approach. There is obviously a lot of resources where he goes to that mental health challenge that we all go through when there's financial issues. And to really, you're not alone and you can reach out to people and know, shame is the biggest killer sometimes with people, they're kind of shameful of
going through that situation.
Michael (47:21.732)
Do you see, yeah, and you see that as the biggest, one of the biggest challenges is that, and I think Olga said the same thing. It's pretty hard to admit you might've taken your eyes off the business or focused on the wrong areas and, cause it takes so much.
to build a business, lot of pride, a lot of ego and self-confidence and to say, got this one wrong is hard. when you're, I think there are probably opportunities all along the journey of starting and building a business to reflect and be a bit more.
even handed about about your own performance, when when you're without the dramatic consequences, but when it's when you're facing down insolvency, however, however you can do it, you've to just admit that that's a major challenge and you it is we don't have time we've got 20 working days or 21 days for a DPN I mean, it's it's kind of now and ever.
Isn't it?
Claudio Trimboli (48:47.394)
It is, it is now and ever. Going back to, yeah it is a reframing and hopefully they don't, not let them be defined by this moment. There are, you know, there are other things in life. You you got a son, you got a daughter, you got a brother, you got a sister. There are other things in life as well. Try to...
advise them not to be defined by this point in time and there is light at end of tunnel or they might feel hard in the moment and you have people reaching back to us you know six, twelve months later being grateful after the fact sometimes because when they're going through that it's really really challenging and they lose sight of what's important in life sometimes and then six, twelve months later they've come at the other end
Michael (49:18.133)
Yeah.
Claudio Trimboli (49:43.564)
and realise although it's not the greatest thing to go through, it's not the end of world and there are other...
important aspects of life to focus on and sometimes it's a learning curve, it kind of pushes you towards the right path sometimes and be philosophical about it perhaps as well. So it is a challenge, Mike, but definitely it's the most challenging but sometimes the most rewarding because you're aiming to help someone through that process given the challenging circumstances. We're managing different stakeholders.
Michael (50:05.022)
Yeah.
Claudio Trimboli (50:17.722)
You know, you've got the creditors of course, they're a little bit annoyed because they haven't been paid. So you've to manage that. You've to manage the employees, the business owners, the regulators. So it is a challenging aspect of it.
Michael (50:33.568)
I think that's an understatement, Claude. When you think about all of those stakeholders, employees in a business that's under, I'm sure you've seen many owners that are very attached and defined by their business, but also not always, but often pretty attached to the employees as well and feel like the weight of the world is on them because
they're in this situation and, you know, it's, yeah, I could see why for you. And then it's a pretty incendiary environment where you've got, you know, that emotion and stress and against the backdrop of a pretty short timeframe. So wowza.
Claudio Trimboli (51:28.282)
Thank you, we aim to be as empathetic as possible during those challenging times. So you've to approach it with an empathetic touch in those challenging times because you do get the best out of people.
Michael (51:37.386)
Yeah.
Michael (51:41.982)
It sounds like you've got to play the role of professional objective, but also pointing an owner towards there are other things in life and you're not defined by. It's a tricky but incredibly important conversation.
Claudio Trimboli (52:10.562)
It is, it is important. It So, like I said, it is the most challenging, but also could be the most rewarding from time to time in those circumstances.
Michael (52:16.362)
Yeah.
So yeah, you've had, you've had, had your fair share of, successes where people come back and say to you six, 12 months later, you know, I'm back on track and, you know, maybe I didn't, I didn't like your advice, but I took it in, you know, I'm, know, it's not an hour of liking the advice, but you know, it might've been hard to cop at the time, but it's very satisfying for you to, to hear that.
that business and that owner is back on track.
Claudio Trimboli (52:51.97)
Definitely, sometimes in life we have to take that bit of pill. We all do. And we're better for the experience. So generally speaking, when we do get a compromise of debt, and generally the tax debt, we're getting some really good compromises of that particular tax burden, which weighs down a business. They're very grateful. Definitely very grateful in that regard. that is the dynamic change from...
Michael (52:55.52)
Mm.
Claudio Trimboli (53:20.066)
Traditionally, your bread and butter liquidation exit it to full stop towards the small business restructuring or the informal restructuring where we're compromising some significant debt loads and it gives the business owner a reset moment. A bit lighter in regards to not having that burden on their shoulders, having the tax office constantly.
Michael (53:49.236)
And yeah, like it's not gonna go away. The stress is enormous. So to however you can restructure it and if it is 10, 20, 30 cents in the dollar, whatever it might be, it's gonna be really incredibly difficult to go through. But if you did adopt a head in the sand approach and you completely lose control, then you're.
Claudio Trimboli (53:49.289)
reaching out.
Michael (54:18.546)
Entirely your business is gone, but the debt will still be there. And it's not like you can avoid that either at a personal level.
Claudio Trimboli (54:35.95)
Spot on, especially if you're at risk of receiving a direct penalty notice from the tax office. What generally happens, migrate that debt, which is sitting on the company or business tax portal, they migrate that to the director's personal tax portal, which is significant. it is, yeah, being proactive and taking a bit more control of the situation when you see those...
Michael (54:55.582)
Yeah, okay. Yeah.
Claudio Trimboli (55:05.634)
Yeah, there's red flags from the tax office and business owners will know that, know, they're getting calls from the tax office, emails, etc. correspondence increasing. So that's definitely a tip to be conscious of that, especially in this current dynamic with the ATO being a bit more aggressive in their recovery stance compared to two, three, four years ago.
Michael (55:09.269)
Yeah.
Michael (55:15.444)
Yeah.
Michael (55:30.268)
Yeah. Yeah. Look, it's an, it's a, it's an exit that we don't want any owner to go through. And, and, we're not neither of us, you're it's your bread and butter and, and there's no, there's no guarantees on anything about the potential outcome, but just putting your head in the sand, which we've said a few times is, is not the way. Claude, that's been a, a really, it's a really personal insight to
empathetic insight to the insolvency because, know, it is a, it's a, I don't know if, if many people have, you know, really been close to an insolvency and, know, I've, worked with owners, you know, they're, you know, getting to that point and, and it's, know, it's, takes us toll on, on them, their family, their staff, on the advisors, if that, you know, they're, you know, the advisor is still going to be objective, but
It's hard to watch. But if you were to just summarize.
Michael (56:41.114)
For somebody who is challenged with ATO debt or with other financing that they're not on top of, what are the couple of things that you think they must do to avoid having to call you ultimately?
Claudio Trimboli (57:00.472)
No, absolutely. We are kind of the second or last resort. It goes back to what we touched on previously, Michael. First and foremost, get a really good rate of the numbers. So, invest in a good cloud accounting package. As a business owner, perhaps educate yourself.
Again, it back to resources. We've got resources at our fingertips. I pick up my phone now and I do a Google search and I've recently got onto the Microsoft Copilot, which is the artificial intelligence, and that's eye-opener for myself as well. I ask questions literally on business issues and it spits out some answers, so you can literally learn so quickly these...
Michael (57:36.212)
Yeah.
Michael (57:48.793)
It's transformational.
Claudio Trimboli (57:51.384)
Yeah, it is transformational. You have to go and read 20 textbooks to get an understanding of one concept. You can go your copilot and ask what's the meaning of current asset, which is a ratio which is very important for small business owner to understand, which is your liquidity, how much cash do you have to your current liabilities.
Michael (57:57.822)
Yeah.
Claudio Trimboli (58:13.45)
So getting a really good understanding of cloud accounting and then educating yourself on, as I said, accounting is the business of language. That's one. Two. And then third, once you've got that understanding, if you see numbers deteriorate, act early, be proactive, speak to people. You can call your accountant, your lawyer, your other business owners.
Michael (58:33.278)
Yeah. Yeah.
Michael (58:40.722)
your business coach, you've, you've, you've,
Claudio Trimboli (58:42.424)
Yeah, business coach. You can Google certain things. There's so many resources out there. And then put in a planning place. Probably two or three key things you have to work on and have a really good discipline and focus around that. it's definitely weekly is better than monthly. I have a weekly routine that I just sit down and go through the numbers and my hit list, what are two or three things that I need to do to make sure the business is tracking well. I think that the key insight
It's simple but not easy sometimes. Simple but not easy. But that's probably the three or four key insights. It goes back to the basics. Basics, fundamentals and having a discipline routine around that. And take care of yourself. Mind, body, spirit. Just really take care of yourself, healthy. And then definitely your business will be better as well. You'll feel better, the business will feel better. And just kind of a virtuous cycle.
Michael (59:22.784)
Yeah.
Michael (59:41.342)
Yeah. Yeah. And I think understanding that there are the ego thing or the shame thing, there are all these personal strong feelings somehow to, you know, find it in you to chat to others, as you said, and a range of other people and share the load. So Claude, where does anybody that wanted to get out, sorry, reach out and have a chat to you there?
Claudio Trimboli (59:42.268)
Absolutely.
Michael (01:00:10.324)
How could they get a hold of you? And we'll put it in the show notes, but if you want to just shout out your.
Claudio Trimboli (01:00:13.825)
Good question
Claudio Trimboli (01:00:18.758)
Just go to our website www.charlesandco.com.au You'll see about us, I'm on there as a profile. There's our email address and phone numbers, some of the services we provide. So have a look at that. That will give you some insights into what we do and how we may help you. And realize that you're not alone. A lot of other people are going through the same issues and talk through the issues with other people.
Michael (01:00:34.684)
Yeah. Okay.
Michael (01:00:43.114)
Yeah.
Yeah, I'm not endorsed that and if not you get your accountant or whoever to make the call because if you know you've got this overhanging debt issue, do something about it. Claude, thank you very much for your time and really appreciate you putting yourself into the seat of a business owner and giving that perspective as well. So much.
Much appreciated you take care of yourself.
Claudio Trimboli (01:01:17.828)
Thank you for the great questions Michael and congratulations, well done for giving back to the small business community. Well done. Thank have a good day. All the best,
Michael (01:01:23.082)
Thank you. All the best.