Recessions Made Easy

Nick Roberts
 

Apologies for the title of this article but I thought I had better keep the “Made Easy” theme going! The effects of the current economic conditions seem to be mixed but whether you are thriving or finding business tricky it is always prudent to prepare for tough times:

• Get your systems in order and produce regular financial management reports. There is a very strong correlation between the frequency of financial reporting and business survival.
• Prepare budgets and cash flow forecasts and compare actual results with budgeted.
• Concentrate on generating cash flow - get your invoices out promptly, keep the cash tied up in your working capital to a minimum and stay on top of your aged receivables.
• Keep your drawings from the business to a sustainable level.
• By all means look at your reducing your outgoings but you will gain far more by concentrating on the income side of your Profit & Loss account.
• Submit all your IRD returns and pay the IRD on time. Not only are the IRD an expensive source of finance but you may need their goodwill if things get tough.
• Look at your financial advisers critically. If your accountant just does your year end financials and offers no pro-active business find one that does.

Set half a day aside next week to have a think about your position. Planning ahead to minimise risk will always pay dividends - if you’re not sure how to proceed seek advice.

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail nick@abac.co.nz 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.