Between shortage of working capital, available credit and the IRD getting ever tougher, it is no surprise that business failures have increased (as predicted) during the year just gone. With 2013 drawing near, our wishes are for more clement climates upon the business world, so those who have been hanging in there until now may continue on their way and prosper.
Having written and meant every word of it, I wouldn’t be doing my job as a proactive accountant if I didn’t encourage my clients to plan for the worst. The bad news is that for most of us business owners out there, escape is but a dream, because:
- If the business has premises, most of the time the lease will be personally guaranteed, so if even if the rent has been paid up to date this alone could be a financial nightmare
- If supplier bills remain outstanding and personal guarantees have been signed on the suppliers terms of trade they won’t go away either
- There are still one or two lucky business borrowers with unsecured bank borrowings but not many, so the bank will soon be sending out a plethora of demands in all shapes and sizes, as I’ve been receiving regularly for a client (where my office is the registered office) recently who is in difficulty!
- If there is outstanding finance on vehicles or plant or there are lease rental deals on equipment like photocopiers with unexpired terms they need to be sorted too
- The IRD doesn’t like to lose out either, and in fact are at the head of the queue, and so even if the business trades via a limited company the business owners may still be pursued for unpaid Income tax, not counting all those sole traders and partnerships who will remain fully liable for GST, PAYE, and Income Tax.
So how do you plan for escape in case the worst came to happen? Well, start by getting in touch with your accountant and asking them some pointed questions (the list above is a good start). Then considering items one by one, you may be able to disentangle yourself from potentially tricky situations.
And if your accountant is not able (or willing) to answer, then maybe it’s time to change.