How confident are you of your business's financial health? More importantly, what is the data that you've used to arrive at this conclusion? If the answer to these questions is that you 'think' your business is in trouble because your gut tells you it is, then you're probably right. A gut feeling however, may not tell you how much trouble your business is in, which is important. Measuring financial distress is helpful as the potential solutions available for companies in distress can change depending on the severity of the problems, and it is beneficial for all parties that problems are dealt with before the impact on creditors is made worse. Instead, what you should be using is a tried and…

Key Performance Indicators (KPIs) are quantifiable measurements you can make that help you understand how your company is performing. An effective KPI has to be: - measurable and well-defined.- crucial to achieving your goals.- applicable to your particular business. When you think about the main reasons for company failure, they often come back to not being able to track how the company is performing. Without a defined method for measuring success and spotting issues, you might not see problems until they are critical. These financial performance indicators can help you monitor your results and gain a better overview of your company. There are literally thousands of KPIs you could track and monitor. There are scientific calculators that are proven to…

Picture yourself at the beach. It’s a beautiful day, and you decide to go for a swim. You’re so busy enjoying the sunshine and the refreshing water, you don’t realise you’re drifting further and further from the shore. Little do you know you’re heading right into shark-infested waters. Being in business can be the same. Sometimes, you are focused on the day-to-day tasks and you miss the bigger picture. It can be difficult to see when you’re heading for trouble. But it’s important to know there are five huge warning signs pointing you to change before it’s too late. SIGN 1: YOUR BUSINESS CANNOT PAY YOU A WAGE If your business is not generating a return to you, why are…

Statutory demands (or Section 289 notices) pose a big threat to New Zealand businesses. These are written requests from a creditor for a debtor to pay overdue debt, with a payment term of 15 working days. A creditor can serve a statutory demand on a company if formal demands for payment or debt collection services have not proven effective and the debt is not disputed. It will contain details such as: How much is owed.The repayment time frame.Contact details for the creditor.Potential consequences.Details for a right of dispute within 10 working days. When a debtor is properly served with a statutory demand, the risk of winding up proceedings or even legal action becomes very real. There are six main courses…

When it comes to due dates and business tax debt, the IRD don’t mess around. Business owners who shirk their tax obligations can quickly find themselves in trouble. If you know your tax bill is going to be bigger than you can handle, it’s important to deal with that as soon as possible – ideally long before it’s due. If you can’t pay your tax bill, you should look at the following steps: CONTACT THE IRD AS SOON AS POSSIBLE The IRD want to help you meet your tax obligations, so if you contact them as soon as you know there’s a problem, they can help you find a solution. It’s best to contact the IRD before the due date,…

Company strike off or dissolution is the process where a Limited Company is removed from the Companies Office register. Following removal, the company ceases to exist. There are essentially three options to end a New Zealand company. These are:• A short-form removal from the companies register (solvent companies)• long-form removal – a solvent liquidation or insolvent liquidation, or• doing nothing, failing to file an annual return with the Companies Office (“the short cut method”). The third option is not recommended. The short and long form methods minimise risk. Failure to file an annual return does not put an end to debt in an insolvent company. It also does not provide any certainty that the company is at an end. Many…

Economic recap Businesses continue to be affected by overseas economic factors, from supply line shortages to rising costs. Rather than focus on factors covered in earlier articles we will look at what’s coming up in this month’s article. Discussions without GRIP partners in Australia and the UK suggest that NZ may be 1 year away from seeing a notable shift in insolvency appointments. As a comparison we appear to be six months behind Australia who have seen the Inland Revenue ramp up collections and pressure and have begun to see insolvency workflow. Australia confirm they are roughly 6 months behind the UK who have seen themselves get a lot busier in recent months. The NZ borders are set to fully…

Debt collection actions are gaining momentum. Winding up proceedings are on the rise. There is a climb in IRD initiated winding up proceedings. Many NZ companies have been impacted by Covid-19 and are facing insolvency. To be insolvent means one of two things: Debts can’t be paid when they’re due. Total debt is more than the value of all assets. The Commissioner of Inland Revenue has increased debt recovery actions. The CIR is able to issue a statutory demand as a step necessary to advance a proceeding against a company. Ignorance Isn't Bliss It is recommended for any business struggling to meet tax arrears that negotiations are entered into promptly to avoid a potential winding up proceeding. Taxpayers are required…

Problems in a business generally arise slowly. Problems can become disasters if not recognised and managed. Directors have some latitude in choosing to trade out of a temporary liquidity problem or to advance an insolvency procedure. Directors must carefully consider the responsibility they have to creditors and their duties under the Companies Act 1993 and if they can turn the business around. Steps towards Solvency for a Viable Business Insolvency is the inability to pay debts when they become due. Steps can be taken to avoid insolvency. The following are steps that can be considered for a viable business: Start with a review of overheads. When considering cutting expenditure take steps to analyse the costs involved. The restructure and reduction…

COVID-19’s impact on the business world is unprecedented, presenting a challenge to all companies and businesses. Some companies have evolved quickly and some have or are falling behind. Managing a business is a delicate balance anyway. The deadlines, the finances, cashflow, controlling costs, the need to generate income and improve margins, the human emotions, staff needs, skill shortages and with Covid-19 in the mix, it is simply hard to navigate. Many businesses will rise to the challenge and get through it. Some businesses are no longer viable. Many have closed the doors or considering it. Struggling NZ Business in First Quarter 2022 – the Why NZ business owners have struggled in the last while with lockdowns, inflation, increased oil prices,…

Business Advice to Auckland based businesses The Business Advice & Implementation Grants are now available for application. Auckland businesses can apply for up to $3000 + GST through Business Advice support. An Implementation Grant will pay for specific services to put your business advice or plan into action. If you’re looking for expert advice and support in areas such as Continuity, Financial Planning, Business Hibernation, Compromises or Exit, we can help get you there. You can access advice if you are considering hibernating or closing your business, or are looking to restructure. The advice should lead to a plan to overcome challenges and/or identify opportunities and map out the scope of the work required to achieve the plan. Implementation Grant…

The Impact of Covid-19 Delta Outbreak on Companies under Level 3 restrictions Many small and medium businesses are in serious strife, some hanging on by a thread. Businesses are seeking certainty about how and when they can get back to business. A recent MYOB survey has revealed confidence among small and medium businesses is plummeting and states SME revenue has taken its biggest hit since the 2008 global financial crisis. The drop in revenue and profits smashed from the current Covid-19 lockdowns, staff retention and skill shortages, the supply chain crisis, surging house prices, rising interest rates, closed borders, climbing inflation and general consumer confidence are all impacting business and will continue to have an impact for the foreseeable future.…