The start of the year can be a challenging time for many business owners, especially after the extended break over the Christmas and New Year period. The pressure is compounded by the need to settle various financial obligations, from employee holiday pay to tax payments.
Many businesses are facing the strain from having paid employees holiday pay entitlements, a period where income has not been generated due to closure and then obligations such as November GST due 15 January, Paye due on 22 January, Oct to Dec FBT due on 22 January, provisional tax due on 15 January and for the larger employers more PAYE due on 5th of February. Some are now struggling with the reality that these obligations are overdue.
Managing cash flow during this period is critical, and proactive steps can make a significant difference. We explore strategies to handle the cash crunch, options for arranging instalment plans with Inland Revenue, and the point at which seeking professional advice from a Licensed Insolvency Practitioner becomes necessary.
1. Assess Your Cash Flow: Begin by conducting a thorough assessment of your cash flow. Understand your current financial position, taking into account outstanding invoices, upcoming expenses, and the various tax obligations due in January and February. This knowledge forms the basis for creating a realistic plan to navigate through the financial challenges.
2. Prioritize Expenses: Identify and prioritize essential expenses. This may involve distinguishing between critical operational costs and discretionary spending. By focusing on what's necessary for day-to-day operations, you can allocate funds strategically and ensure that vital aspects of your business are not compromised.
3. Communicate with Creditors: Open and honest communication with creditors is key. If you foresee difficulties meeting payment deadlines, approach your creditors early to discuss your situation. Some may be willing to negotiate payment terms or provide temporary relief. Establishing transparent communication builds trust and can lead to more favourable arrangements.
4. Explore Inland Revenue Instalment Plans: Inland Revenue understands the challenges businesses face, especially during the post-holiday period. If you're struggling to meet your tax obligations, consider reaching out to them to discuss instalment plans. Inland Revenue is often open to working with businesses to find a manageable repayment schedule.
5. Seek Professional Financial Advice: For some businesses, the financial strain may become overwhelming, and navigating complex tax obligations may seem daunting. In such cases, seeking professional financial advice is crucial. Engage with a financial advisor who can provide personalized guidance tailored to your business's unique circumstances.
6. When to Contact a Licensed Insolvency Practitioner: If your financial situation continues to worsen, and you find it impossible to meet your obligations, it may be time to consult a Licensed Insolvency Practitioner. Insolvency specialists can assess your business's viability, explore restructuring options, or guide you through the insolvency process if necessary. Early intervention increases the likelihood of finding a viable solution and reduces the prospects of being held liable for trading insolvently.
Starting the year on a financially sound note is essential for the success of any business. By proactively managing cash flow, communicating with creditors, and exploring available options with Inland Revenue, business owners can navigate the post-holiday cash crunch successfully. When faced with insurmountable challenges, seeking professional advice from a Licensed Insolvency Practitioner is a responsible and strategic decision to protect the long-term interests of your business. Remember, there are resources and professionals available to help you weather the storm and emerge stronger on the other side. Contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.