If you’re having trouble paying your bills, don’t avoid your creditors – whether it’s your suppliers, your bank, the IRD or others. Be proactive; be upfront with them and work with them to figure out a solution that both parties can live with. In most cases they’ll do what they can to help you, just as you would with one of your customers.
Lower costs by finding efficiencies
Technology can be a great way to reduce your overheads. For example, can you reduce your travel costs by holding meetings via Skype or FaceTime? Can you move some or all of your business online rather than paying rent for premises? Can you reduce IT costs through storing data in the cloud rather than on physical servers?
Put aside reserves
This is particularly important if seasonality is an issue for your business. In good periods, put aside reserves so you can pay wages, business overheads and running expenses in leaner periods.
Manage your debtors
Offering credit can be convenient and help retain your best customers – but it does come with risks. Here are some ways to minimise the potential hassles and risks:
- Run credit checks on new customers. Don’t be tempted to skip this – you risk exposing your business to bad debtors. You can do it without making customers feel as if they’re under the microscope:
- Ask them for details of other businesses they’ve received credit from, and call those businesses for references.
- Check they’re legitimate at the Companies Office.
- If in doubt, get help from agencies that specialise in credit checking.
- Use credit limits – set limits for each customer according to their merits. Once they prove trustworthy, you can consider raising their limit.
- Always have a contract which clearly sets out your terms and conditions (including credit terms).
- Put good systems in place – for example, set up a debt management calendar, and keep on top of debtors with reminders and repeat meetings.
- Be consistent – stick to your systems and processes, and follow through when necessary. After all, it’s your business at stake. If you’re considering showing leniency, make very sure the customer is worth the risk.
Other useful resources from ANZ
Book a free workshop on How to make a profit and maintain your cash flow or How to do a financial health check on your business.
ANZ business workshops