If you feel like your finances are getting out of control, it’s a good idea to pause and take stock of your situation.
If you feel like your finances are getting out of control, it’s a good idea to pause and take stock of your situation. The best solution for avoiding insolvency and preventing personal bankruptcy depends entirely on your situation and how soon you take action.Following these five key business due diligence points could help you stay in business.
An Independent Assessment
Too often business owners are so involved in their company they can’t see the wood for the trees. Your accountant or business advisor can provide an independent assessment of your company and suggest options. You may need to consider downsizing, restructuring, asset sales, or improving systems and processes. Seeking outside help might prevent you from going down the road to bankruptcy altogether.
Establish a Figure
Totalling all your financial documents so you know exactly how much debt you owe is essential. Establishing a total figure can determine which courses of action you can take.
- - If your personal debts are less than $40,000 you could apply for a Summary Installment Order instead of bankruptcy.
- - Creditors might dispute how much you owe. If you don’t have accurate, verified figures the Official Assignee might be relying on your creditors to determine how much you owe.
Build a Budget
Where is your money going? Are your lack of funds caused by bad decisions or bad luck? Seeking financial advice can help you gain an overview of your cash flow, and possibly rein in your spending. A financial advisor can help you spend within your means and cut down unnecessary costs which might make repayments more achievable.
Contact Your Creditors
Debt can be a very touchy subject, and your first instinct may be to avoid the people you owe money to at all costs. Avoidance reduces your options and makes insolvency more likely.
Be up front and attempt a Creditor’s Compromise for your company and for a personal proposal personally. These are informal agreements which may allow you to reduce the amount you owe, or alter your repayments to make the more affordable which could possibly allow you to keep running your business.
Despite being an informal agreement, a Creditors Compromise is best drafted with legal help so contact the team at MVP for more information.
Know Your Options
Simply declaring personal bankruptcy, or liquidating your business, might seem like a good option at the time, and a quick way to solve your financial worries, but there are longer lasting consequences. There are other formal ways to hold your creditors at bay while remaining in business. Depending on your circumstance, a financial advisor can recommend Voluntary Administration, Business Turnaround, Restructuring, Outsourcing, or temporarily ceasing trading. For you personally they may recommend a No Asset Procedure, a Summary Instalment Order, or a Part 5 Proposal.
Every situation is different, so it’s important you seek professional financial advice and know all your options before taking action. If you recognize the symptoms early, take action and do your business due diligence, you may never have to consider declaring bankruptcy or insolvency.
The experienced team at McDonald Vague can help you realise the best course of action for your business, and walk you through every step along the way.
For a free consultation, contact MVP today on 09 303 0506, or download the free Guide for NZ Companies in Financial Difficulty to learn about your options for avoiding insolvency.