Is closing down your business the right choice?
There are several reasons to contemplate closing down your business. However, it’s worth exploring alternatives such as selling your business or devising a plan to improve your financial situation.
Before making the final decision to shut your business, it’s recommended that you speak with an advisor to discuss:
- Your financial status, including outstanding debts
- Alternatives to closing down your business.
The initial step is to collect all your financial records. This will assist you, as well as an advisor, in understanding the complete situation. In case you owe money to someone, a thorough breakdown will also prevent any disagreements.
If this is why you’re considering closing down, the best course of action is to take steps to address the issue. Ignoring problems won’t solve them. Here are some actions you can take:
- Review your budget: Gather all your financial documents and assess your debts and cash flow. This will help you figure out how to repay your debts.
- Create a repayment plan: Use your budget to create a plan to pay off your debts, and use this as a starting point when talking to your creditors (such as suppliers, lenders, or the Inland Revenue).
- Consolidate your debts: Managing multiple debts can be challenging and expensive, especially if you’re also accumulating credit card debt. Consider consolidating all your debts into one loan from a bank or finance company, which would charge one interest rate and simplify your payments.
Business debt — New Zealand Insolvency and Trustee Service
Your next move should be seeking advice from a financial expert, such as an accountant, bank manager, business mentor, or business turnaround advisor.
Collect all the information about your finances and the challenges you are experiencing. The more information your advisor has, the better they can assist you.
If you are ready to move on from your business, they can suggest alternatives to closing down and guide you through the process, such as selling your business.
If you are experiencing financial difficulties, they can assist you in identifying where things went wrong and developing a plan to get back on track.
Creditors are individuals or organisations to whom you owe money, such as suppliers, lenders, and Inland Revenue. When you have more money going out than coming in, repaying debts may appear to be difficult. However, if you communicate your problem, your creditors may agree to a longer-term repayment plan.
It is advisable to talk to them as soon as possible since creditors may be less understanding if you wait until you are contemplating closing your business.
If you’re planning to shut down your business, it’s crucial to file your final returns and settle your taxes by the deadline. If you’re unable to pay your taxes in full and on time, it’s advisable to contact Inland Revenue as soon as possible.
Discuss your circumstances and explore the potential assistance that may be available. If you choose to ignore your tax obligations, you may incur interest charges and penalties.
This advice also applies to ACC levies. Reach out to ACC to consider your alternatives, such as making payments in instalments.
Contact IRD — Inland Revenue
Contact ACC — ACC
Take your time to consider the options available and seek professional advice before making any major decisions. Ask yourself the following questions:
- Do I still have the passion for my business to keep it going?
- How much risk am I willing to take?
- Will my creditors and investors support me in turning the business around?
- Can the business be turned around?
Consider all your options carefully. These may include:
- Selling your business: When determining a sale price, ensure you take into account all your assets, including intellectual property. If you’re facing financial difficulties, a sale may provide enough funds to pay off your debts and even have some money left over.
- Changing your business model: Evaluate what’s working and what’s not. A new approach or a renewed focus on something you do well could make a difference.
- Seeking funding: Only pursue this option if you have a solid plan for your business. Investors and banks won’t want to bail you out without a clear path to success. Remember that it takes time and effort to secure funding.
- Closing down: For some, this may be the best course of action. Seek advice on how to do it correctly to avoid any loose ends.
Are you struggling with accounting and business management for your business? We are here to help! Get in touch with us to discuss how our expert services can support your business’s success. Contact us today to schedule a free consultation and see how we can add value to your operations.
