2020: complications, resilience and moving forward
Emma Murphy delivers some timely words of advice to SME owners, including how to manage finances in order to navigate the choppy economic waters ahead. While COVID-19 has created multiple obstacles for our SMEs […]
Emma Murphy delivers some timely words of advice to SME owners, including how to manage finances in order to navigate the choppy economic waters ahead.
While COVID-19 has created multiple obstacles for our SMEs to jump over, we know that New Zealanders are battlers and COVID-19 has shown some of our clients that they are more resilient than they thought. Learned experience has not only revealed the sustainability of their business, but the reasons why they started their business to begin with, has been reinforced.
We’ve seen clients that have used the opportunity to step back from their day to day operations to reflect on their business, with many of those that did coming out of lockdown with a solid growth plan. If we can build on this momentum moving forward, a lot of businesses will thrive and if lockdown were to happen again, as a community we will be more prepared.
There is, however, no denying that with restricted ability to operate and low consumer confidence many businesses have had to reconsider their operations. Recently, we have worked with businesses who at the start of 2020 were looking at growth plans and now, just months later, they’re looking at rescue plans to keep their business afloat.
Fortunately, we live in a country that has backed local businesses with a variety of support packages. While there is no doubt that this has helped, particularly in the way of paying wages in the short term, the financial support from the government is winding down. It is more important than ever for businesses to ensure that they have a detailed view of their business health and are engaging the right people to advise them along the way.
For businesses that are in the midst of a cashflow struggle, first and foremost I recommend that you reach out to your accountant. Never be afraid to ask for help early on, their expertise can give a clear indication of the health of your business with a break-even analysis.
Together, you can reevaluate your processes such as your debtor and creditor policies, make required adjustments, and set a new profit road map. Your accountant will also be able to recalculate your ACC levies and tax obligations to see whether the amount that you set aside should be altered to reflect changes in revenue.
As always, businesses that utilise business management software, such as MYOB, have the advantage of real-time visibility to give oversight over their business’s cashflow.
Funding opportunity
For those businesses that are not currently using an accountant or would benefit from advisory services, the Regional Business Partner funding is available, provided you have less than 100 employees. This funding has the potential to provide lasting value to New Zealand businesses by allowing businesses to access advice around how to make their money stretch further, with support provided to look at bill and debt payment, as well as helping them to re-strategise to ensure survival and future business growth.
In the current environment, we are seeing an increased number of people who have lost jobs wanting to go out on their own. For this to work there needs to be a realistic understanding of the true costs of starting the business, keeping the doors open and the lights on, and of course, paying salaries.
Unfortunately, many new startups do not survive much longer than their first year. More than one in ten new startups won’t survive past their first year and the overall business survival rate continues to decline with each year.
This could be avoided if businesses were able to start with access to sound financial planning advice from the outset, there is an immediate need for targeted support for new business ventures. At a minimum, every business should be supported to start with a functional business, cashflow management and compliance plan.
Business ideas are often formed from thoughts and dreams but in order to determine viability, these must be put into a format where we, the advisors, can see the numbers and relay back in a practical sense what is needed to make the business workable.
Looking forward to 2021, there is a general feeling that people will continue to support each other and buy New Zealand made which is good for the economy and will strengthen our businesses over time. In fact, I believe that eventually, the impact of COVID-19 will create more businesses that are started and owned in New Zealand.
Ultimately, for our businesses to succeed beyond the pandemic, they need to have robust processes in place and a good company culture that includes a skilled and aligned workforce as well as a steady flow of work coming in and cashflow.
Emma Murphy is a tax associate and business advisor at Kiwitax.