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Most businesses carry some form of debt, be that in the form of loans, mortgages, or overdrafts. Debt can be an excellent tool to help you grow your company, by allowing you to purchase new asset-producing machinery or expand your locations into new markets. However, debt can also land your company in trouble. If you’re unable to service your debts, you can find yourself in trouble, or worse, risking insolvency. Not all debts are created equal, and understanding whether you’re taking on good or bad debt can help you to manage business risk. In this article we look at good debt vs bad debt – which one does your business have? Good debt Debt owing on assets that earn income…
If you're thinking about starting your own business, buying into a franchise can seem like a good option. Being part of a franchise means you will be part of an established brand with name recognition, group marketing strategies, and business plans. The advantages that come with buying into a franchise come at a cost. In addition to the purchase price, you will have business set up costs, marketing fees, and training fees to pay. You will also have obligations to the franchisor to run your business in line with the franchisor’s brand, its image, and its processes. Things to consider when buying into a franchise When deciding whether to buy into a franchise, you will need to look at whether…
No one is immune to being targeted by scammers. People from all walks of life, backgrounds and ages are vulnerable, and everyone must be constantly alert for fraudulent contact, says Auckland business advisory firm McDonald Vague. “With this week (13-19 November) being Fraud Awareness Week, we want to remind Aucklanders of the dangers of scams and the need to be vigilant. We all receive junk emails, enticing online advertisements, letters offering a private purchase of shares for a low price, phone calls from people purporting to be people who they are not, and so on,” explains Peri Finnigan, director of McDonald Vague. Ms Finnigan says that her firm is focussing on telling its clients about the need to be careful…
On your business card, it says you’re the director of your company. But what does that actually mean? Not all business owners understand that being a director comes with specific duties under the law. It’s important you understand these duties and expectations, because if your company gets into trouble, your personal finances could be put at risk.  In this article we look at the director duties and responsibilities in NZ, and how you might be have some personal liability if your company becomes insolvent.  Directors Responsibilities in NZ The Companies Act 1993 lays out the responsibilities of directors, which are called “Director’s Duties.” We wrote an extensive article about director’s duties, which you can look to for more information. But…
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, if…
Barring a major disaster, a business doesn’t go from being perfectly fine to insolvent overnight. There is usually a whole list of precipitating events that go overlooked or aren’t managed correctly in order to get to the point of no return. Sometimes, you can be so involved in the day-to-day running of the business that signs of financial trouble can pass you by. Usually, your accountant should pick up on these signs, as we discussed in a previous article, but sometimes these signs slip through the cracks. In this article we look at three different risk stages for business owners. What are the signs you need to look out for to recognise financial trouble? What can you do right now…
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…
You and your staff have worked hard to produce goods.  If you sell your goods on credit, no doubt, you eagerly await payment for those goods each month.  Did you know that you can take a positive, cheap, and effective step to protect your business and your goods while you’re waiting to receive payment? The Personal Property Register (“PPSR”) is a publicly accessible, searchable database that allows secured creditors to notify the world that they have an interest in goods that are in the possession of someone else.  This interest is called a security interest.  Registering your security interest can be done online.  The document you register on the PPSR is called a financing statement.  Your financing statement notifies other…
If you know your company is heading for trouble, you need a turnaround strategy. We’ve created a free checklist you can use for your business risk management. This list will assess if your company needs to employ a turnaround strategy, and what areas you should be focusing on. Place a tick beside any sentence that applies to you:  Management structure - Are there governance and management standards in place? - Is the management structure appropriate for the size, type and complexity of the business? - Do the members of the management team understand their roles? - Is there a balance in participation, and balance of power? Expertise - Is the management team aware of the forces affecting their industry/market? -…
It’s important to address disputed debt as soon as possible. This will more likely lead to a positive outcome and enable you to rescue your business relationship. You cannot recover a debt via a statutory demand if the debt is disputed. And, of course, you need cash to continue to operate, so it’s important to find a solution quickly. Below, we outline the three steps to settling disputed debt: First: Preventing debt disputes with strong in-house credit control and terms of trade Of course, the best way to minimise disputed debt is to avoid the situation where disputes can arise in the first place. Many disputes can be avoided by good record keeping. Clear terms of trade and customer credit…
As a small business owner, pursuing outstanding debts can be a painful process. You don’t want to be seen as the “bad guy”, but at the same time, you rely on debtors paying on time in order to service your own cash flow, and if a debtor defaults, your business suffers. Unfortunately, the creditor who protests the loudest is likely to be paid first. This means if you want to see your money soon, you’ll need to get vocal with your debtor. In this article, we have a look at the small business debt recovery process and suggest ways you can make the debt collection process a little easier for all parties involved. If you have a debt owing, and…
Growing your company is an extremely exciting time. However, you shouldn’t be jumping into a heavy growth phase without careful planning and consideration. Growth involves risk, and if your business isn’t built on a solid foundation, it can crumble under the pressure of expansion. Learn how to grow your business safely and with as little risk as possible: Gathering Capital Like everything else in the world, growing a company requires one essential resource – money. You need funds in order to execute your growth strategy. The most common way of obtaining the required capital is to take out a loan or line-of-credit, but before you do this, it’s important to carefully consider all options and financial ramifications. There are many…
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