Does your small business have trouble with Debtors Control ?

Is your Cashflow suffering because you cannot get paid by your customers ?

Is your Office Administration more about chasing Debtors than it is about running an efficient business ?

Does your Debtors Clerk (often yourself or your partner, as the small business owner) dread the monthly (sometimes weekly)grind of ringing Debtors and trying to get them to pay their account ?

There is a better way:

Outsource your Debtors Ledger

By outsourcing your Debtors control to a Professional Debtors Service, you not only take away a huge source of time wasting and frustration in your business, but you will save money, have better cashflow and can concentrate on running a more efficient business.

Debtors Control is not always about Debt Collections.

Efficient Debtors control is about a relationship with the Debtor to find the cause of the debt being outstanding.

Hardline Debt collection, while sometimes necessary, in general alienates the Debtor from the Creditor, making it unlikely that they do future business, so now the Creditor (you) not only has a bad debt, but also has less future business.

By working with the Debtor to identify causes and possible remedies, a Professional Debtors Ledger service can maintain ongoing business between the two businesses.

When the Debtors Ledger service is also part of a Business Consultancy and Assistance company such as the Inca Group then a win-win situation can be developed, whereby the Creditor gets improved Cashflow from better Debtor control, and the Debtor gets the same, through understanding the financial implications to their supplier, assistance with running their business and with their own Debtors Ledger. The Ripple effect is obvious.

This Win Win situation is good for immediate Cashflow and long term sustainable business.

Business Relationships

Whether you have realised it yet or not, Small Business is about relationships, not about the products.
Understanding the requirements of each other and working together so that you both get what you want is what makes a good and sustainable  business relationship.

As businesses get bigger, those personal relationships are given less weight and it can become a situation of Big business trampling on Small business.
However this model is not sustainable, and the big businesses soon find they cannot get any small business suppliers, which can become a significant issue in New Zealand, bearing in mind that the large majority of businesses are small (less than 50 employees).

So if your Debtor Ledger is causing your business major problems then pass it over to a service that is made to do specifically that, so you can get on with running your own business well.

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Auckland Small Business Help

“As prescribed under the Companies Act”

The primary rationale’ is that under a (VA) an administrator is appointed by the Directors or Creditor to give life to the business by allowing the Administrator to review the financial position of the company and determine if it can trade out of it’s present position.

• The Administrator takes full control of the business under the Act.
• The Administrator takes control of secured assets and negotiates with the secured creditors to move the Company forward.
• The Administrator ascertains the unsecured creditors and has meetings to determine if there is opportunities to move forward.
• The Administrator provides reports on the business to all parties and the Companies Office on it’s investigations.
• This process does not guarantee survival but it has the ability to give the Company a chance of survival.

Voluntary Administration can be an alternative to Receivership or Liquidation of a business in financial difficulties.

More about Voluntary Administration on the NZ Companies site

What is Turnaround Management ?

Turnaround Management Involves the formulation and implementation of a strategic plan and a set of actions for business renewal and restructuring.

It involves the identification of the major issues causing the problems and a structured plan for overcoming or mitigating the issues.

Then it becomes a role of the management of the implementation of the plan until such time as the issues no longer exist or the business is so profitable that they become insignificant.

Causes of Stress

• Acts of God
• Poor Vision and understanding of the Market
• Poor Strategies
• Poor business Model and Execution
• Lack of expertise, experience or education, weak management
• Market circumstances, weak economy
• Business economical reasons, earning crisis
• Management level arguments
• Fraud, insufficient financial controls
• Overly optimistic sales projections
• Financing problems, liquidity crisis, excessive debt burden, under capitalisation
• Operating cost levels too high
• Very strong, successful competitor
• Insufficient Resources, underinvestment

The solutions to these issues will depend upon the individual business and business owners.

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Auckland Small Business Help

With any Small Business that is finding times hard in this economic environment, there are some fundamentals that make up the starting blocks of recovery.

Cashflow

Preservation of Assets

Reduction of Liabilities

Develop a plan

Cashflow

“Cash is King” and is particularly so when a business is struggling.

Take a close look at the cashflow:

Where is the money coming in from and where is it being spent.
The old 80/20 rule is useful in these examinations,

Income
80% of your income is probably coming from 20% of your customers- so concentrate your efforts on them.

Can you increase your sales by presenting a particularly attractive offer to your existing customers ?

Can you get referrals from your existing customers by offering them an incentive to bring in new customers ?

Instead of spending your advertising on blanket adds, can you spend money directly on existing customers to get more sales,

If you use advertising to bring in customers, look closely at how effective it is – can it be measured, can you reliably say $1 spent on this medium will give me $x worth of sales ?

If your cost of goods /production has gone up, have you increased your sale prices to reflect it ?
If the market can’t take a price increase, can you package something else with it as a cross sell or up sell, that will give you better margin (the classic “Would you like Fries with that ?”, “Would you like to upsize that drink ?” )

Expenses

80% of your expenditure is probably coming from 20 % of your creditors, & the chances are that the Banks or finance companies  are one of the biggest.

Can you reduce your borrowings by using the income to pay off debt rather than your own wages or “luxuries”.

Cut back on anything that is not involved in the money making process (except insurance)
ie make sure every dollar spent is moving towards getting another dollar back from a sale.

If you rely on advertising, don’t cut back on the dollar value, but take a close look at how or where you are spending it. Target your advertising dollar.

Can you do a joint venture with your suppliers where they put up some money or resources for a promotion or supply their product at a discount, ie reduce your input costs and increase your sales at the same time.

Preservation of Assets

Do what you can to ensure existing assets are protected from being lost to a firesale or creditor action.

Talk to your Accountant or Lawyer.

Reduction of Liabilities

Do what you can to reduce your Liabilities, either by selling assets that are saleable, or finding other sources of funds such as investors rather than Bank or Finance company borrowings.

Carefully assess what the income is currently servicing.
Is there lots of high credit card debt or penalty overdraft debt that could be reduced by restructuring  loans or consolidation, ie increase loan on house at 8% to pay off credit card debt at 22%

Look at the Business Holistically and Develop a Plan

Decide on how the Business is going to move forward from the current situation and write at least an overview plan.

Can you make more in the end by spending a little more in one area, rather than insisting that every area cuts back to the bare minimum?

Will  you trade at break even levels for a while – turnover at breakeven is better than no turnover at all.

Most importantly- make sure the staff are with you and that they understand what you are trying to achieve.
If all they see is cutbacks, they will begin worrying about their jobs and productivity will fall.
If they see there is a plan and that they have an input into the viability of the Company (with possibility of reward also) the plan is more likely to succeed.

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Small Business Help

When dealing with any Business in trouble, firstly, the correct Diagnosis must be made. Without a proper diagnosis, treatment cannot begin. As Business constantly changes, reliance on strategies that worked in the past may no longer be appropriate for today’s world or business environment.

First steps for a Business Turnaround situation  are as follows:

• Diagnose the situation. Is the company really in need of a Turnaround, or is it actually still a Startup ??  Are there issues brought about by a rapidly expanding business or is a Realignment of a failing company needed?
• Determine the appropriate strategies. eg, A Turnaround requires quick and sometimes risky changes, while a Realignment normally requires new Strategies, Markets, or possibly Technologies. Realignments also generally require understanding of the culture within the business and of the people and personalities involved in order to get them to adopt and implement change.
• Use the appropriate leadership style. eg, in a Turnaround, both Stakeholders and Employees are looking for some hope, a vision, and for direction. The expectation is that the White Knight has arrived to save them.  However Realignments require guidance, the gaining of  co-operation and agreement by all parties to the need for change.

The Business Turnaround In Practice

Diagnostics of the Situation

Determine what kind of transition is required.
There are generally two transition types — Turnarounds and Realignments .

In a Turnaround, a business in crisis needs rescuing . Some of the Challenges may include:

• Rekindling enthusiasm in demoralized stakeholders
• Hard Business Decisions, need to be effective decisions and are often made under pressure
• Making Effective rather than Superficial change deep into the Company

In a Realignment, a previously successful organization needs to be Revitalised. Challenges may include:

• Convincing relevant stakeholders that change is really needed
• Restructuring management and changing the focus of the organization

Applying the Right Leadership Style

Turnarounds require strong leadership. Stakeholders and Employees require a sense of hope, a believable vision, and clear direction. In most cases the Leader will need to immediately take charge and make some hard decisions. Generally, if prospects look poor, those affected will implement difficult directives (orders)without opposition, even if begrudgingly.

Realignments require strong Guidance rather than Leadership. Consensus for the requirement to change must be developed, and the participants guided towards the right direction. This may involve providing information or data rather than issuing orders, and enabling those affected to come to their own conclusions. Those involved must take ownership of the problems and be an integral part of the solution.

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Source: Business Turnarounds

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