Don’t lose hope, just be prepared


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“There is no bad weather, just bad choice of clothing” – a Norwegian saying which I think applies to the situation we currently find ourselves in as a business community.

The financial landscape is a bit scary at the moment, let’s be fair. We have people living in $800k houses with $900k mortgages, emergency housing is heaving at the seams and there are homeless encampments all over the Bay.

People are hurting and it’s evident. Being in the credit management, fraud investigation and repossession industries I see firsthand the real-world effects of the confusing and needlessly complicated economic data that spews from our devices daily.

The number of commercial evictions, liquidations, collections and large commercial dispute cases that IPI, NZ REPOS and Debt Free NZ are being asked to become involved in are increasing, both in frequency and size. People that I know well as successful business owners are downsizing their businesses with an aim to mothballing them for the next few years. There is real fear in the business community, but all hope is not lost.

Just like the GFC in 2008, there will be businesses that make it and there will be businesses that don’t. From my experience and research, the ones that survived back then were more systemised and process driven, with a better understanding of backcosting and an ability to respond to supply cost and quantity. Of course, a large part of surviving a credit crisis is credit control. Here are some tips that I recommend to get through the storm – a credit umbrella if you will.

Meet with your accountant and financial advisor and do a full analysis of your business financial data, make sure charged rates are adjusted with cost rises including indirect costs like fuel, etc.

Do an analysis of your client / customer list and make sure that all clients that pay on credit (20th of the month following, seven days etc) have agreed terms of trade and that these have been reviewed or updated within the last three years.

Ensure all major accounts (any accounts that would seriously affect your business should they become unpaid or liquidated) are secured on the PPSR and have a credit monitor on them to alert you to any financial gremlins that pop out of the woodwork.

Only give credit when you need to. If a client /customer is a one-off or private individual, then payment on completion or delivery is often more appropriate than offering credit.

If you are in the construction industry, become very familiar with the Construction Contracts Act 2002 and the new Construction Contracts (Retention Money) Amendment Act 2023 – in this industry how you charge is very, very important. If you are reading this and do not know how important a payment claim vs an invoice is, please look into it asap.

If money gets tight and you are considering debtor finance, factoring or otherwise borrowing against invoices, investigate it in depth with a trusted advisor. Like every tool, it has its uses but also has its risks. A solid collection campaign can sometimes be what you need to stitch the wound rather than applying a Band Aid.

COMMUNICATE! If things get bad and you can’t pay, tell your suppliers what is going on. Make a payment plan and stick to it. If they call, answer the phone. People can deal with what they can understand.

Keeping people in the dark can inflame an already stressful situation.

The above is simply a guide based on my own experience of nearly two decades working with small businesses through some very tough times – this is not legal advice, just Nick’s advice.

Keep safe everyone. If it’s raining, wear a jacket.

Just a thought

Related: Bad timing is bad business

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Nick Kerr
Nick Kerr
Nick Kerr is the director of IPI Group Limited. He can be reached on 021 876 527 and nick@nzipi.com.

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