“Data hygiene” sounds painfully boring. But when a business is under pressure, it can make the difference between getting a workable solution on the table and wasting precious time trying to work out what is actually going on.
In this week’s video, Liam Bailey, Managing Partner of O’Brien Palmer, explains why clean, current and reliable electronic accounts are essential for business owners and running your business effectively.
They matter because your accounts now connect to almost everything.
- Your bank accounts
- The ATO
- Single Touch Payroll
- Payday superannuation
- Super clearing houses
- Finance applications
- Business restructure proposals
If your numbers are incomplete, out of date or unreliable, the options available to you may become harder to access.
What is ‘data hygiene’?
Data hygiene simply means keeping your financial information clean, accurate, current and supported by source documents. It is not just about having Xero, MYOB or another accounting package. It is about making sure the information inside that system is reliable.
As Liam explains: “Once the data in your accounts is in question, so are a lot of the solutions that might be available to you.”
That is the key point. If your financial records cannot be trusted, your advisors, financiers, creditors and restructuring practitioners may not be able to rely on them either.
Why clean accounts matter in a restructure
When a business is facing financial stress, time matters. In a Small Business Restructure, there is a finite period available to develop and put a proposal to creditors. Liam notes that, at most, there may be 30 business days to work with.
That time should be spent building the strongest possible proposal. Not reconstructing accounts from scratch.
Liam shared the example of a client seeking a Small Business Restructure where the team needed to provide tax returns and cashflow projections to show that the business could meet its ongoing obligations and contribute to the restructuring fund. But because the management accounts were not in good order, bookkeepers and accountants had to spend around 25 business days reconstructing the accounts.
That was valuable time lost. As Liam put it, that time was “wasted on reconstructing the accounts” instead of being used to give the proposal the best chance of success.
Clean accounts can help unlock finance
Liam also shared a second example with a very different outcome. In that matter, the business had strong management accounts, reliable data, balances that aligned with bank accounts, and source material available.
A mortgage broker reviewing the company’s position was able to rely on the accounts. The result? Finance approval was obtained within 48 hours.
That funding then helped support the Small Business Restructure proposal and made it easier to put a credible offer to creditors, including the ATO.
Messy accounts cost time.
Clean accounts created confidence.
Source documents matter
Business owners should not assume that simply entering numbers into accounting software is enough. Where possible, source material should also be attached or retained.
That may include:
- invoices
- tax returns
- loan documents
- legal documents
- payment records
- supporting materials for key transactions
The more complete the record, the easier it is for advisors, financiers and creditors to understand the true financial position of the business.
Better records mean better options
Good data hygiene helps everyone involved make better decisions. Your accountant can advise more clearly. Your bookkeeper can maintain better records.
A finance broker can assess funding options more confidently. A restructuring practitioner can prepare proposals more efficiently. Creditors can assess a proposal with greater confidence. The ATO can see clearer evidence of the business’s position.
When everyone is working from reliable information, the chances of finding a workable solution improve.
Don’t wait until the business is under pressure
The best time to clean up your accounts is before you urgently need them. When financial stress hits, bookkeeping is often one of the first things to fall off the radar. But that is exactly when accurate records become most important.
As Liam says: “Don’t be lax about maintaining your accounts. The better they are, the better the options you have.”
If your accounts are behind, incomplete or unsupported, speak with your accountant or bookkeeper now. And if your business is already under pressure, seek advice early. Because when it comes to restructuring, finance, creditor negotiations or insolvency advice, clean accounts are not just admin.
They can be the difference between limited options and a real pathway forward.
If you have a matter that you would like to speak to myself or the team at O’Brien Palmer, please reach out and we can speak confidentially and without obligation. We are always here to help.
LIAM BAILEY, MANAGING PARTNER
O’BRIEN PALMER
📞 (61) 2 9232 3322
📧 obp1@obp.com.au
🌐 obp.com.au