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Welcome to our Autumn 09 issue of news from Paul Gallagher Legal. After a bit of a slow start to the New Year, we have noticed a large volume of work from those of you wanting to make sure their businesses and private affairs are firmly in order. Our clients are carefully ‘dotting their i’s and crossing their t’s’.
Our aim with this edition is to highlight issues being experienced in the current financial climate – whether it be business related or to do with a personal situation. We have outlined some tools and strategies you may find helpful to navigate your way through the short-medium term.
What is the focus for local business for 2009?
As a relatively geographically isolated country, New Zealand business on a whole faces risks that are specific to our country, as well as those that are felt globally. Are you keeping up to speed with what factors could impact upon your business? Sometimes in tougher times we become quite internally focussed, concentrating on what immediately affects the stability of our business. However, keeping an eye on the external landscape is just as important - the current financial situation is not going to pass us by – local and overseas government initiatives may be of assistance, but ultimately your business is your responsibility.
By breaking down and identifying the potential external focus your business needs to have, you can monitor each area accordingly, for example:
- Customers: profile your current customers, look at what their spend is and how it is changing – look after your current customers and keep abreast of what issues they are facing. Your current customers are like gold and will be the target of your competitors, so increase those visits and make sure your delivery is spot on. In order to attract new customers, profile against your existing customer, establishing where they are, how best to communicate with them, when to communicate with them and how best to make your offer/product/service compelling.
- Competitors: identify your key competitors and find out what they are doing. Measure your key competencies against theirs and keep ahead of the game.
- Resources: Ensure your suppliers are going to be in a position to continue to support your business with continuity of supply. As things tighten globally, the issue of scarcity has the potential to be a major business challenge - getting resources to market quickly and efficiently. How will this affect your supply chain and ability to get products to market?
From an internal perspective there are simple ways to keep things on track:
- Scope out a few likely business scenarios that could develop over the next six months so that you have a plan ready to implement quickly, responding to changing market conditions.
- Be clear about how you are different from your competitors and what you can provide to your clients that your competitors cannot. Communicate this clearly through your brand.
- Look at your terms of trade and tighten it where possible, making cash flow more manageable.
- Check to make sure you have your bank account details at the bottom of your invoices, and if they are not there, add them so you are not always waiting for that ‘cheque in the mail’.
- Do some housekeeping with standard items, for example, make sure all mobiles are on the most efficient plan etc.
- Before looking at redundancies, talk with people concerned and see if there is a possibility of job sharing or working reduced hours.
- ‘Staple yourself to an order’ – follow your process from the moment you first have contact with a customer until the purchase is completed. Make sure that you have efficient and effective processes and communications - with your customer at the centre of the experience.
The external influence generated from the global financial situation is placing a lot of pressure on our business community. That said, there are also many opportunities that will present themselves as a result of this unique turn of events. Keep the external radar out and try to be pro-active as well as reactive.
As reported on the Trade and Enterprise website “The global financial crisis is creating some rough sailing for businesses but the Kiwi can-do attitude is seeing many taking positive action to ensure they are positioned to ride out the slowdown and are poised for growth when economic conditions improve. Businesses with a proactive strategy should be in a better position to negotiate the global slowdown and reduced liquidity.”
They suggest a general business health check and businesses can now do this online at www.bizhealth.co.nz or through www.business.govt.nz where a raft of additional business advice and information for small and medium sized companies is available.
State of play with 90 day employment probation.
As we mentioned in our previous newsletter, the new ‘employment 90 day trial’ period is now in effect. This means that a written, mutually agreed upon contract can be entered into between an employee and employer (with fewer than 20 employees) for a trial period of not more than 90 calendar days. Both parties can bargain in a fair way when agreeing to the terms of the contract, including how the employer will respond to any issues raised by the new employee.
There are some conditions that will be standard across all agreements, for example, the employee cannot raise a personal grievance on grounds of unjustified dismissal. However, this doesn’t mean that the employee gives up their standard rights:
- The employee can raise a personal grievance on other grounds such as harassment, discrimination or unjustified action by the employer
- The employer cannot enter into a trial with someone whom they have previously employed
- An employer and employee may agree to the trial period only once
- All the usual protective conditions remain such sick leave, holidays and safety provisions.
Whether you are an employee for whom the 90 day trial offers the potential to prove them- selves, or an employer who is keen to give a prospective new employee a chance, we can help ensure that the rights of both parties are protected as much as possible.
Remember to have an employment contract!
Getting what’s owed to you
As we are faced with more challenging business conditions, there may be a need for companies to be more formal about the way they recover monies owed to them. Business owners can prepare for the potential need for this by putting steps in place to increase the likelihood of being paid should a client have trouble paying their debts.
If you consider how your own business is structured and how you manage debt in your own unique situation, you will gain an insight as to how you could protect yourself. A key area is to distinguish what is defined as a ‘secured debt’ and what is not.
A secured debt:
'Secured’ debt is where a formal agreement is put in place to protect an investment by a lender. This can include a Mortgage (e.g. house or property), a Lien, or a Guarantee. The formal agreement is a document that is the 'security', it gives the lender the right to ‘go after’ a named asset if a debt is not settled. If the conditions of the contract are not met then the lender has the right to assume control of the named asset and sell it to pay any outstanding debt, plus the costs doing all this. The lender has no obligation to get ‘top dollar’ – they only need to get enough to cover the debt – anything left over goes to the original owner. And, if the sale of the asset does not cover the full outstanding debt, the original owner may still be liable for any shortfall, dependent upon the conditions of the agreement.
Unsecured debtor:
So, what happens then if you are not a secured debtor? The simple answer is that all the secured debtors are paid first and the unsecured debtors get in line and fight for the scraps. If it all sounds a bit rough there is a way to ensue that you at least ‘hedge your bets’ with those with whom you have the most risk.
- Revisit your terms and conditions and make sure you have a formal security agreement detailed and signed by your clients. A charge registered under the Personal Properties Security Act should provide priority over banks and other financial organizations that hold a general security agreement.
- Form a General Security Agreement. This is a contract that can be entered into with other companies, such as major clients to ensure that the debt is secured against an asset(s) of the debtor business. It can also be applied to personal funds that are injected into the business by owners/Directors/Shareholders to ensure their debts are secured.
- Gain a personal guarantee from owner(s) of a significant other business so that if the company defaults, you can pursue the guarantor personally for money if necessary.
These three things can assist in formalising any arrangement you may have with your debtors. However, nothing can take the place of communication – talk with your debtors and deal with any likely situation quickly. Bear in mind that if the financial situation of an organisation deteriorates to the point of liquidation, any legal claims against the company or its property are suspended.
Seek advice early to ensure that you know your position (whether you are a creditor or a debtor) in order to minimise your exposure to debt risk. If you would like to talk further about ways to make the obligations of your debtors more secure, please give Paul a call Ph: 415 9321.
Keeping your family together in tough times
It’s fairly likely that most of us are feeling the impact of money being substantially tighter and are therefore more likely to have to make decisions about what our spending priorities are. We could argue that the current financial situation may not have been experienced by many people during their working life. Up until around 12-18 months ago, and for quite a number of years, employment was relatively stable, the housing market fairly buoyant (with increasing value) and plans could be made with relative certainty of a rosy future. However, for what ever reason, at some stage in a person’s lifetime, it is reasonable to assume that there may not be a lot of money around for some reason or another. This is likely to add stress to your life and put a strain on your family.
We suggest one of the first things to be done when faced with such a situation is to take some time to sit down and identify what really is important in your life. Perhaps you may realise that family members, good friends and simple pleasures are the foundation of a happy life. We do not suggest for a minute that potential or existing financial problems be trivialised but, perhaps with a clear head and a good plan, there is a way through although it may seem scary at first.
As reported by credit.com there are some questions you can ask of yourself to establish what your current situation is so you can make some smart decisions:
What is your situation?
- Exactly how much do you owe right now?
- Who do you owe it to?
- When do you have to pay?
- Does the lender or creditor offer a payment plan?
- Have you talked to the creditor or lender about options?
- What are the consequences of not paying?
- How soon will this crisis be over?
What are your options at this stage?
Once you’ve got your ‘head around’ exactly what your current financial situation is you can then make some progress in developing a plan. You’ll be amazed at how much peace of mind you gain from sorting things out.
- Small bills – If you are having difficulty paying small bills such as utilities (power, phone etc.), contact the business directly to see if you can work out an agreement.
- Large bills – In our opinion, your Mortgage or loan needs to be your first priority - if you are having difficulty paying your mortgage or loan payment, contact the lender immediately. Interestingly, as reported in April on stuff.co.nz, “banks in New Zealand could come under pressure to match a deal done across the Tasman offering homeowners who lose their jobs up to 12 months' mortgage relief. Under an agreement with Australia's four big banks, borrowers would be supported through times of temporary hardship by banks postponing mortgage repayments for up to 12 months, at the banks' discretion. But the sting in the tail was that accrued interest would be rolled back into the loan to be repaid once borrowers were back on their feet.”
- Credit card debt – As in the example of credit card debt, if you have a steady income but are facing a large amount of credit card debt, develop a way to pay off the minimum monthly amount as well as a bit extra to get the debt down over a period of time. Also, do not use your credit card for additional purchases while you are trying to decrease the debt.
Take action!
There are several options available to help you manage a financial crisis – for example it may be a better option to access your savings during a financial emergency. Although this may be a challenging thought for some people, at least you don’t need to pay interest or fees. Or perhaps a viable option is to investigate the possibility of a personal loan – talk with your bank about this option.
We have contacts in the banking and accounting sectors – so if you need some advice please give us a call.
What’s in the stars?
In the Chinese calendar this year is the year of the Ox. As reported on some websites about the general theme of this year, there is no room for anyone looking for a free ride during an Ox year. Apparently hard work pays and laziness does not. It’s a year to get papers in order and your life back on track, and to do whatever it takes to budget and plan for your financial future, lessening the stress and securing your position. Tradition will be important and keeping order and making sure that everyone plays by the rules a must. As a rule, people are tending to ‘nest’ – staying at home more. So, stay patient and keep your nose to the grindstone
From a business perspective, those that work to keep their clients, present materials in a timely manner and provide excellent customer service will survive, while companies that take an indifferent approach to their clientele may have a tough time. There's no room for slackers in an Ox year, especially as far as commerce is concerned.
On the bright side..
Although things can look a bit tough - we simply don’t know what tomorrow will bring. This said, we encourage you to take some time link onto the following and take a trip down memory lane with Monty Python:
http://www.metacafe.com/watch/yt-dL_1ic9SHBI/always_look_on_the_bright_side_of_life_lyrics_life_of_brian/
Cheers from the team at Paul Gallagher Legal
P.S. We invite you to forward this newsletter on to others who you think may find the information valuable.
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