What is insolvency and how do you know when your business is in trouble? In this foundational episode, Darren Vardy shares his 30+ year journey in insolvency and breaks down the warning signs every business owner needs to recognise. Learn the difference between corporate and personal insolvency, and discover why acting early gives you the most options for recovery.

Key Topics Covered: • What insolvency actually means in practical terms • Early warning signs of business financial distress • The difference between corporate and personal insolvency • When to seek professional insolvency advice • Why businesses fail and how to recognise the patterns • The importance of acting before it's too late

Key Takeaways: ✓ Insolvency = inability to pay debts when they fall due ✓ Warning signs include tightening cashflow and delayed creditor payments ✓ Early intervention provides the most recovery options ✓ Professional advice should be sought at the first signs of trouble

Who Should Listen: Business owners, company directors, lawyers, accountants, and anyone wanting to understand financial distress warning signs.

About the Host:

Darren Vardy - Managing Director of Insolvency Options and Registered Liquidator with over 30 years of experience in business recovery and debt solutions. Darren has helped thousands of businesses and individuals navigate financial distress and find practical solutions to complex problems.

Connect With Us:

• Website: insolvencyoptions.com.au  • Phone: 1800 463 328 • LinkedIn: https://www.linkedin.com/in/darrenvardy/

Subscribe & Follow:

Don't miss future episodes! Subscribe to i.O. - Insolvency Options

Like this episode? Please leave a review and share with colleagues who might benefit from these insights.

Co-host: Anthony Perl

Produced by: Podcasts Done For You

Hashtags:

#Insolvency #BusinessRecovery #DebtSolutions #SmallBusiness #BusinessAdvice #FinancialDistress #Liquidation #Bankruptcy #CashFlow #DirectorDuties #BusinessTurnaround #ProfessionalServices #LegalAdvice #AccountingProfessional #BusinessOwners #FinancialPlanning #CorporateInsolvency #PersonalBankruptcy #BusinessRestructuring #InsolvencyOptions

Introduction to Insolvency,

understanding the basics.

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Welcome to our first episode of io

Insolvency Options with Darren Vadi,

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the managing Director of Insolvency

Options, and a registered liquidator.

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With over 30 years of experience

helping businesses and individuals

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navigate financial challenges.

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In today's episode, Darren shares

his journey into insolvency explains

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what insolvency actually means.

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And reveals the warning signs every

business owner needs to recognize.

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We'll explore when to seek

help and the difference between

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corporate and personal insolvency.

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You'll understand the

fundamentals of insolvency.

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Know when to seek professional

advice and learn why acting

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early gives you the most options.

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I'm your co-host, Anthony Pearl.

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Let's dive into unlocking

more about insolvency options.

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Well, first of all, Darren,

welcome to your podcast.

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Thank you.

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Thank you very much.

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I think we need to kick things off

really by introducing yourself properly

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to the audience, and why don't you

tell everyone a little bit about

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who you are and where it all began.

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Yeah, sure.

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So it all began a bit over 35 years ago,

having come straight out of high school.

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I.

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Applied for many accounting roles with

various firms throughout Sydney and

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was fortunate enough to be accepted

to a one of the largest firms at

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that time, which was Ferer Hodson.

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And so from there I worked through

the nineties in smaller firms

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and then went out on my own in

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called Business Recovery Solution.

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That was for most of the naughties.

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And then in 2008, I was invited to

become a partner of RNG Partners,

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which was Small four partner firm.

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In 2013, we merged with SV Partners,

which was again another national firm.

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And then in October of 22, I recreated

insolvency options and started

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with my small team in our offices

down in the uh, Sutherland s Shire.

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When you started the new business was

the riding on the wall as as such,

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like, you know, there we were kind

of in the midst of COVID around that

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time and when the landscape kind of

changed, when all of a sudden there

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was an influx of people starting

businesses as well as some artificial,

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I guess, boosts from the government.

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Was it obvious at the time to you

that this was gonna be an opportunity?

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Traditionally we get busy during

a recovery 'cause there are a

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lot of businesses that don't have

the right capital, if they've got

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capital at all to continue and or

survive through a, uh, downturn.

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And COVID wasn't anything

different to an economic downturn.

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So what we've found that with my

history, with my referrers, the people

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that I work with, it just made sense

to pivot and adjust my business.

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To move forward to cater for all the work

that I was getting and continue to get.

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And before we get into all of the details

that we're gonna do in the podcast

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series, but I'm just intrigued about you.

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Tell everyone a little bit about why did

you get into this area, why insolvency?

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I mean, you know, most people start

out wanting to just be accountants.

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Uh, uh, typical kind of accountants

of individuals and small businesses.

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Why get into this specific niche?

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I pretty much fell into it.

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Having come outta school and

applied for many jobs, I received

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two offers in the accounting field.

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Another one was more of an accounts

type, department type role, and this

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one was straight into insolvency.

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So from there I saw the opportunity to

be able to gain knowledge, help people

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in financial distress, and really that's

what sort of drives me, is to try and

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put a bit of calm in a what can be a very

stressful situation for people and help.

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Navigate the, uh, the waters, so to

speak, of the particular financial

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circumstances that businesses

or individuals find themselves.

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Must be a challenge at times to not

take that home with you if you like.

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You know, you're dealing with other

people's stresses and you're trying

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to create opportunities, but at the

end of the day, it is always going to

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be a stressful situation for someone

who finds themselves in that area.

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So how do you kind of separate that?

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Look, it can be very emotional

because you are dealing with

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people's livelihoods that is granted.

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But the beauty about what I think I

bring to the table is just the clear

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thought process and really identifying

the true issues that need to be dealt

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with without, from want of a better

term, the white noise that's going on

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around, around the individuals involved.

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So I suppose we better start off as

well by telling people why we've come

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about doing the podcast together.

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What's the real driver here for you?

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I think the real driver for me is

getting information and education

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to the marketplace, making sure that

business owners who are struggling

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or do have some financial stress are

able to get the right information

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in a timely manner to help them.

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Determine what's best for them

to help fix their situation.

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Yeah, and it's interesting, isn't it?

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Because on one hand

it's about the numbers.

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On the other hand, it's very

much about the human element.

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The human element's a big thing,

particularly where business owners

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have invested in most instances, their

whole adult life into their business.

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So then to have a, an event which

can be a financially crippling

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event in the twilight of their life.

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It can.

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It is a major burden and it

does impact the household.

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So it's all about, in my view,

trying to help these business

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owners through the tough times.

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So let's probably start at the beginning

then, in terms of, for people wanting

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to understand this space a little

bit more, because I guess typically

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they start seeing there's an issue.

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And people throw terms

like insolvency around.

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Why don't we define it for

people as a starting point?

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Sure.

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So insolvency is a situation where

businesses or individuals simply cannot

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pay their debt as and when they fault you.

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That's the technical term for insolvency.

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And you know, practically you'll

see that in your business where

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there isn't enough money coming in.

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To the bank account to enable

you to pay your debts that are

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there, that are due to be paid.

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And what you end up finding is that these

business owners will just start delaying

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the payment of their creditors and then

the whole circular dynamic moves on.

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And it sort of steamrolls, doesn't it?

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Because the problem is, is in

delaying things, you're often then

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paying more on credit cards and other

areas where you might be borrowing.

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So the debt just increases

when you're doing that.

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Yes it does.

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And you know, interest is a big thing.

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We have certain creditors may

be able to apply interest to,

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to their debts outstanding.

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Uh, certainly the tax office

applies a interest charge to

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any monies overdue to them.

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Banks, you know, if you're relying on your

bank or your mortgages working capital,

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there's an interest component there.

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So what comes with a cashflow shortage

also comes with additional cost.

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Yeah.

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I mean, that's a big thing, isn't

it, for people and, and do you find

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that people have got their head

around what this actually means?

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I mean, what is the state of mind

when people are coming to you?

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Generally, when people come to

me quite often, it's too late.

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I often say if business owners have

approached me 6, 9, 12 months earlier,

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there may have been a business to salvage.

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There may have been an opportunity

to turn around the business.

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But unfortunately what we find is that

by the time business owners recognize or

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really admit that they have a problem,

they are really at the 11th hour and

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they've exhausted all resources that they

have that they could have used earlier to

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actually properly address the situation

and affect a, a successful turnaround.

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I mean, it's bringing in the experts at

the right time, which is important for

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business in, in all aspects, isn't it?

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I mean, that's the, that's one of the key

lessons I think for business owners that

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whether your business is thriving or you

know, barely surviving or going backwards,

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it's when to call in the experts

in different areas is so important.

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This is very true.

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You look at, you look at a lot of the

successful businesses, they will have

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advisors, albeit accounting, albeit.

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Legal, albeit specialized technical

advisors to ensure that the business

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continues in a positive, uh, manner.

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Yeah, and, and I think the question

of timing, I mean, it's easy to

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look back in hindsight, right?

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It's easy to go back and say,

well, they should have contacted

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me six or nine months earlier.

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But if you're a business owner,

you're listening into this, how do

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you know when it's the right time?

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Well, the right time in my

view is when you may see that.

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For at minimum, you have gone through two

quarters of trading, IE two BA returns

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have been launched, and you're finding

that your cashflow is becoming tighter

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and tighter, and where you are having

to negotiate repayment arrangements

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with the tax office, for instance, or

your age payables, your creditors have

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moved out from say 30 days to 60 days.

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When you notice a few of those

little telltale sign, that's when

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business owners really need to put

their hand up and seek some advice.

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And you know, the ability to pay

your creditors comes from the

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receipt of funds from your debtors.

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So, you know, if you find that

your debtors are outside terms and

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they're in turn starting to drag and

pay 60 days as opposed to 30 days.

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There's a few little signs that can prompt

you to say, Hey, do I have a real issue?

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Is it an industry issue, or

is it just a customer specific

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issue that I need to address?

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Yeah.

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And I guess, is it scary for people to

recognize, firstly, that there are some

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issues there, but secondly, to go to

someone in the insolvency space, is that

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a mental barrier for a lot of people?

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Oh, look, I don't doubt that

that is a mental barrier because.

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The term insolvency is not

endearing to many people, right?

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Everybody would like to think that they

trading well and business is going well,

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but ultimately an insolvency professional

that you've probably best equipped to look

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at your financial position and actually

provide you with some ideas on what needs

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to be done and what needs to be looked at

instead of being there as the last resort.

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Insolvency professional can

actually assist you even if as a

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second set of ears, so to speak,

to just review and, uh, provide an

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opinion on how you were trading.

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I think to your point earlier about

leaving things too late and not

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being able to rescue them, and we

see it all the time, the headlines

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of major brands that we are familiar

with, and we see that no buyers.

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For them and that they are

just gonna shut the doors.

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And that happens quite

regularly at a big brand level.

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So I imagine it doesn't get any

easier in the smaller size business.

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Certainly doesn't.

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No.

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No.

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And what you often find is that the

smallest size business, because they

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are so key person dependent, dependent

upon the owners key director and the

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like, the ability to sell those types

of businesses are going in concern.

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Far more reduced than a larger business,

which operates autonomously that with

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a few small changes, the profitability

can be returned to that business.

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So let's just establish a bit of a

framework from the beginning then,

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and say, okay, I'm in a situation

where maybe I need some assistance.

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What happens when they come

and knock on your door?

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What are the kinds of things, what are the

levers that you can pull at the early sta?

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Those sort of early stages?

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I think the early stage for me is

having an updated set of financial

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accounts to enable us to sit down

and just review the historical trade.

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Because at the end of the day,

it all does come down to what the

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cost of doing business is and are

you achieving sufficient income?

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To cover that cost.

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That's the first thing you know.

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There may be some businesses where they've

had a significant bad debt, which is

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an isolated event that has adversely

and financially impacted the business.

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Then that's a really simple

solutions to then address that

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short term cashflow issue.

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However, if there are some systemic issues

within the business where profitability

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has not been there over a period of time.

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It is certainly then harder to find a

solution to help fix the underlying issue.

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So it's coming back to it.

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It's all about having the financials

available to identify what the issues are.

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Then once we've identified what the issues

are, we can then look at the solutions

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available to address those issues.

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I think the important thing here as

well is that I imagine someone who's

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got the expertise that you do, there

are things that you can see in the

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financials that other people may not see.

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Well, having done this for 35

years and most in soy practitioners

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would not be dissimilar to myself.

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You see a lot having investigated

the reasons for failure.

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So having identified the reasons

for failure in businesses that have.

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Previously gone into liquidation, we sort

of have the, an idea of what we should

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be looking for to identify what the rule

issues are, and that's effectively what

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an insolvency practitioner can bring to

the table is to, you know, readily and

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expediently identify what the issues

are, to then work out and determine

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what solutions, uh, are available.

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So just to wrap up this part of the

discussion, talk to me about the

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difference between the types of insolvency

that there are, 'cause there personal

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and there's corporate, so, and there's an

important differentiation between those.

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Yes, there are, you know,

personal insolvency relates to

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individuals, an individual who

is unable to pay their debts.

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The real generally, the only

option for a person who's unable

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to pay their debts is bankruptcy.

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There are.

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Two alternatives to bankruptcy, one

being a personal insolvency agreement,

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the other being a debt agreement,

and they are alternatives which

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can enable an individual to avoid

bankruptcy and based on their asset

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and liability position, it provides

for the repayment of their creditors.

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Not in full, but certainly provides

for a better return than what a

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bankruptcy scenario would provide for.

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Corporate insolvency.

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The liquidation is the main

type of insolvency where the

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business is ultimately wound up.

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The appointment can be either voluntary

or via a one a company's creditor

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pursuing a debt and appointing

a liquidator through the court.

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Alternatives to liquidation again.

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To provide a better return to

creditors, uh, either a small business

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restructure, which is limited by the

size of the liability owing, and a few

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other criteria, such as total debts

being less than a million dollars,

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superannuation being paid up to date,

and all the statutory lodgements

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tax, lodgements bas, income tax, and

the like are all up to date as well.

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The other alternative to liquidation

is a voluntary administration.

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One of the outcomes of a voluntary

administration is a deed of company

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arrangement where an offer is made

to the creditors, which provides

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for a greater return to creditors.

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Thus allowing the business to

continue to trade into the future.

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So they're the really, the two differences

between corporate and personal insolvency.

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Well, that's it for this episode of

the IO Insolvency Options Podcast.

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I hope you've got plenty of valuable

knowledge and practical steps for whatever

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your situation is from Darren today.

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And if you need guidance

on insolvency matters.

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Contact Darren Vadi

directly@insolvencyoptions.com

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au or call 1804 6 3 3 2 8.

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Or of course, you could connect

with Darren on LinkedIn details

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in the show notes below.

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With over 30 years of experience,

Darren and his team provide personalized

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solutions for both personal and

corporate insolvency challenges.

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This episode was produced by my

team at podcast done for you.com

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au helping professionals

share their expertise.

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Through powerful podcast content.

272

If you found value in today's episode,

please like, comment and subscribe

273

to the IO Insolvency Options podcast.

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Wherever you are listening to this, your

engagement helps us reach more business

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owners who need these crucial insights.

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Until next time, remember, there's always

a way forward when you know your options.