How business debt leads to mental health issues in business owners
Debt is a reality for small businesses and, in itself, is not necessarily a negative. Businesses routinely rely on loans in order to purchase inventory or to finance overheads and other expenses, and provided debt obligations are met, a business can run smoothly and grow, even when it is operating with a certain level of debt.
The difficulty is in carefully balancing business debt with sufficient cash flow to fulfil repayment obligations, and being able to ensure the business is sheltered from potential economic fluctuations that can see interest rates rise and debt become unmanageable.
However, when a small business suffers from cash flow problems caused by slow paying customers or unpaid accounts, accumulated debt can snowball. This can drastically impact the business’s growth and even its survival. And when a small business owner has invested everything into their business, only to be confronted by possible business failure, it’s no wonder that they can become highly vulnerable to suffering from mental health issues such as depression and anxiety.
Debt has been linked to mental health issues across the community, and small business owners are far from immune. The weight of the burden of business debt can cause owners high levels of stress, panic attacks, insomnia and other symptoms of poor mental health. Small business owners with mental health issues struggle to make good business decisions, find it difficult to look forward to the future, and generally find it increasingly difficult to cope with the running of their business, let alone growing it and achieving the success they had dreamed of.
The Small Business Ombudsman Kate Carnell has pointed out the significance of mental health for small businesses and has urged small business owners to understand the warning signs and the importance of seeking help. She has noted that small business owners are often susceptible due to the general mental strain of running a business, anxiety caused by business debt issues and a lack of self-care. Business owners often feel that taking vital time off is not possible and warning signs of impending mental health issues can be written off as poor performance. Yet the impact of mental health issues are greatly felt, whether on the everyday running of the business and the ability to stay on top of compliance and bookwork, or in the way owners interacts with employees.
When debt spirals out of control and starts to mentally affect a small business owner, there can be a ripple effect on staff, family and friends, all of whom can be impacted by the negative effects of debt on the small business and its owner.
When a small business writes off too much bad debt it causes difficulty in meeting its own debt repayment obligations, as well as paying staff, suppliers or other bills. Small businesses hampered by bad debt can struggle to obtain credit from lenders leading to both difficulty in the everyday running of a business, and limiting growth when funds are not available to invest in new product lines or for marketing purposes.
The Australian Taxation Office recognises the impact of tax debt burdens on small business owners and that the fulfillment of tax and super obligations and the ancillary paperwork can be especially difficult for those suffering from mental health conditions. Given its interest in the viability of small businesses, the ATO has launched an awareness campaign specifically designed to support small business owners who are suffering from mental health problems, and has also trained its staff to be more empathetic. It encourages small business owners to approach the ATO if suffering from mental health issues, as they may not be aware of the hardship provisions which exist, whereby small business owners are able to defer their BAS for medical or mental health reasons. The ATO urges small business owners to contact them at an early stage rather than leaving things to the point where payments are missed and debt is accumulating.
Ultimately, small business owners suffering from mental health issues need support and advice, and strategies for dealing with the common causes of cash flow problems, such as unpaid invoices or slow paying clients.
Staying on top of business debt can go a long way towards alleviating the feelings of extreme stress and anxiety caused by shouldering a business debt burden and struggling to keep a business afloat. If your business is suffering due to high levels of unpaid accounts or slow paying customers, taking action is important. Enlisting the help of a professional debt collection agency can provide a not just debt relief, but more importantly, reduce stress and strain caused by outstanding payments.