Financial Difficulties Made Easier
I was going to follow on from last month's article on competition but having recently met several business owners in difficulty, I think that some comments on what to do if things are not going well are appropriate. You'll note I haven't said "easy" in the title.
- Face facts. It's no good ignoring your situation - seek advice. It won't necessarily cost.
- It's never been more important to have good financial systems to be able to determine your financial position. It is a temporary cash flow blip or are you haemorrhaging cash like AIG? What are your results for the year to date? What are your overall liabilities?
- If you're quiet use the time to get some low-cost but effective accounting software so you can produce monthly figures on an accruals basis. It's no good waiting for your accountant.
- Your financial systems also need to identify poor performing product or service lines, departments, customers, jobs or processes. Customised properly, accounting software for under $500 can produce this information as by-product of day-to-day bookkeeping.
- Still paying Provisional Tax? If you're not doing well, the chances are you're making a loss. Get this estimated down to nil. Similarly, don't draw a salary attracting PAYE if you have an advance account.
- If you're in arrears with the IRD or your suppliers it most likely means you're making significant losses. Is it really practical to expect to cover current outgoings as well making up the arrears? Do you know your break-even turnover? Have your margins slipped? Be realistic in your planning. A couple of extra customers here or there probably won't be enough. Extra business normally means more working capital is required.
- If you're thinking of getting out by selling the business, don't expect the price you need to clear all your debts. Any prospective purchaser will be expecting a bargain and certainly won't pay top $ if he can see you struggling.
Whether it's you, your other half, a friend or a relative, seek help now from someone impartial from outside the business. Options include Business Mentors NZ, The Chamber of Commerce, or an experienced accountant who is not just a bookkeeper or focuses on Tax Returns - you owe it to yourself and your family.
If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail email@example.com or use "Contact Us" on www.abac.co.nz. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.