-
- Published: June 19, 2026
- Category: Latest News
Most of us have ignored a car dashboard warning light. The reaction is rarely enthusiasm. Instead, denial kicks in: Maybe it’s just a faulty sensor. Maybe it’ll magically disappear. Besides, the car still drives fine.
Financial distress often follows the same script.
The warning signs are almost always there long before the breakdown – and accountants are the mechanics best positioned to spot them. Not because the client tells you. Because the numbers do.
A BAS payment gets pushed back. Super falls behind (and with Payday Super arriving on July 1, that traditional cash-flow safety valve disappears). A payment plan appears. The director starts tipping personal funds into the business.
The clues are often there long before anyone uses the word “insolvency”.
That’s why EOFY is about more than tax planning and compliance. It’s one of the best opportunities advisers have to identify emerging financial stress and help clients take action while they still have options.
Why it feels like a recession on the ground
My colleague Chris Baskerville recently described the current environment as a “shadow recession”. The economy may not technically be in recession, but for many households and businesses it increasingly feels like one.
Business and consumer confidence remain subdued. Elevated borrowing costs, softer demand and rising operating expenses continue to weigh on businesses, while households are becoming increasingly selective about where they spend their money.
The insolvency data reflects that pressure.
ASIC recorded 14,722 companies entering external administration during FY2024-25, up 33.2 per cent on the previous year. While the pace has moderated slightly, insolvency levels remain stubbornly high. ASIC data shows 11,715 companies entered external administration in the first 10 months of FY2025-26 (to April 2026).
At the same time, personal insolvencies rose 6.2 per cent in the March 2026 quarter, with business-related cases accounting for almost one-third of the total.
Late payments have also climbed to their highest level in six years.
Combined, these metrics reveal a level of entrenched financial pressure that’s catching many business owners off guard.
Where the pressure is showing up first
Not every sector is feeling the squeeze equally.
Construction continues to account for the largest share of corporate insolvencies, followed by accommodation and food services and other services. Hospitality is also feeling the impact as consumers pull back discretionary spending.
We’re seeing similar pressure emerge across:
- Retail
- Transport and logistics
- Trades and subcontracting businesses
- Personal services businesses
The current pressure is showing up first in what we call “date-night economics” – the small, discretionary sacrifices households quietly make long before facing severe hardship.
One less dinner out. One less weekend away. Putting off a haircut or delaying the replacement of a household appliance.
Each decision seems minor. But when thousands of households make those decisions at the same time, entire sectors start to feel the effect.
Looking at insolvency statistics is a bit like seeing smoke in the distance. The smoke isn’t the fire itself, but it tells you where to start looking.
The domino effect
A common myth about financial distress is that it arrives suddenly. In reality, it builds gradually through a distinct domino effect:
- A household cuts discretionary spending
- A café sees foot traffic drop and delays paying a supplier.
- The supplier misses a BAS payment and faces tighter lender terms.
- The director injects personal savings to prop up trading.
The pressure spreads. That’s why rising personal insolvencies, elevated corporate administrations, and late payments cannot be viewed in isolation. They are simply different symptoms of the same underlying crisis.
At the same time, many of the traditional safety nets that business owners once relied upon are becoming thinner. Refinancing is harder. Borrowing remains expensive. Creditors are becoming less patient.
We’re increasingly seeing:
- Shorter payment terms
- Greater scrutiny from lenders
- Reduced tolerance for arrears
- More demands for personal guarantees
- Increased pressure from trade creditors
When everyone in the supply chain is feeling pressure, patience becomes a luxury.
The value of early conversations
The best restructuring outcomes rarely happen when a business has run out of options.
They happen when advisers identify the warning signs early and encourage clients to act before the situation becomes critical.
That’s why EOFY shouldn’t simply be viewed as a compliance exercise. It’s an opportunity to look beyond the numbers, identify emerging risks and have the conversations many business owners would rather avoid.
If those conversations raise concerns, don’t wait until the situation becomes urgent. An early discussion with an experienced restructuring and insolvency adviser can help clarify the available options and, in many cases, preserve far more choices than would otherwise be available later.
Andrew Spring
Partner
Jirsch Sutherland