As a business owner, it is important to be a financially proactive business post pandemic, especially from a financial and legal standpoint. Sometimes we find ourselves in a situation that is not looking too good. Do you know what red flags to look out for? We dive into what business owners should be keeping an eye out for and what they should be doing to ensure they are staying proactive when it comes to their business.
Where to start
Being financially proactive starts with having a good understanding of where you are at across all areas of your business and how covered you are for anything that may arise. For example, if your business was heading into financial distress, there are things that you should look at doing from a legal point of view to better protect your position. So, what types of red flags should you be watching out for in this instance? Let’s break it down.
If you’ve got debts that are accruing, they’re not getting paid; one of the things that you can look at is security. Always consider what other options you have available to you in case the business can’t pay for them. There are many things that you can do if this were to happen.
What steps to take
Firstly, there are personal guarantees. This involves registering your interest on the personal property securities register, possibly lodging a caveat. If it’s appropriate in the circumstances, get cash into your trust account before you undertake the work. There are ways that you can secure yourself to make sure that if the company goes into liquidation, you’ve got other options available to you.
Another thing to consider is to make sure that you have a good credit policy. To do so, you have got to be firm with your customers and clients, as a lot of businesses allow things to get too far out of control. Especially when we’re looking at the margin of say one hundred thousand dollars, bad debt could spell insolvency for most small businesses. Businesses should be comfortable talking to customers and clients, when they can recognise they’re starting to lag, perhaps in paying debts or phone calls aren’t getting returned, etc. When you are proactive about it and put things into place earlier on, it makes everybody more comfortable.
It is also a good idea to be looking at your credit terms. You should be looking at what security arrangements you’ve got in place. Don’t put off undertaking that debt recovery process because the longer you leave it, the more likely it is that you’re not going to get paid. Businesses need to understand exactly where they stand going forward, and whether or not they’re going to be able to meet those debts, as the market starts to tighten.
Making sure you know what options are available to you and ensuring you are being financially proactive in how you are running your business is paramount in trying to eliminate any nasty surprises or difficult circumstances. This includes making sure you’re proactively seeking advice when needed by a trusted professional such as a lawyer, accountant, or other financial expert. Of course, things can still happen as a business, but as a business owner, you want to make sure you are as prepared as possible to lessen the affect of any issues that may arise so that you can give your business the best chance of success in the long run!
This blog is based predominantly on the information given in our Law in Life Series, Episode Four: Doing business in the post-COVID world. See the full Law In Life playlist here
Related blog: The post pandemic business impact