As the new year kicks off again, many small business owners are aware of the need to focus their efforts to hit the ground running and get their cash flow going again. As the director of an SME, I get that. Bills to pay and mouths to feed is always a top priority.
However, the New Year can also be a really good time to get a few of those admin things sorted out, especially while the business world returns in a sleepy trickle from dreamy summer holidays over the month of January.
Getting those lower priority business admin tasks sorted is good not only for peace of mind, but also rather important in ensuring that wheels don’t come off later in the year.
As a kick-starter for 2022, have a think about the below.
If you are self-employed, or run a small business, you have some options around how much ACC you pay. The default setting is not necessarily the best option for you, and you may be paying too much. A quick chat with one of our advisers will confirm if you have options, and if it is worthwhile to take the time to further explore these.
It is very much a ‘Goldilocks’ situation when it comes to your insurances. For example, you can be over-insured and pay too much (e.g. the porridge is too hot), or you can be underinsured, and at significant risk, (e.g. the porridge is too cold).
What Goldilocks really needs, of course, is to have it just right! (mmm… warm porridge.)
Your insurance team should be able to provide a quick and painless review to make sure you are in the sweet spot, and that the porridge is just the right temperature.
And where Goldilocks is more preoccupied with the porridge, your insurance team can take care of the “how” – including Liability cover, Professional indemnity, business interruption, cyber cover, material damage and much, much more.
Once you have the above established, the next question is, could you be paying less for the same amount of cover?
In particular, I am thinking about your shareholder agreement that outlines possible exit strategies. This will cover what happens when one party wants to leave, or if one party gets sick, or even dies.
The first part of this is the paperwork, and the second piece are the assets, namely the monetary assets. Your company's lawyer will assist you with your shareholder agreement, and your financial adviser will make sure the money is there to enable you to execute the agreement, if and when you need to.
In the first scenario mentioned, (i.e. one party is bought out), those funds may be acquired in the form of bank lending. Your financial adviser will support you in this.
In the second scenario, when the change is forced by sickness or death, it is mostly efficient for the required funds to arrive in the form of an insurance pay out, which enables the company to be solely owned by the remaining parties. The company will have been paying the insurance premiums and the retiring owner (or their estate) will be paid out to the value of their share of the company from the insurance proceeds
There are a bunch of ways small business can get, and use, funding. Funding can be secured from unsecured overdrafts to credit cards, to business loans secured against property, to the owners securing mortgages and lending to the business, to asset funding, etc, etc, etc.
There are numerous loan options are structured in different ways, and some are cheaper to service than others. Some will require greater security, such as your home, and others don't. Some loans are long-term, and some are short-term.
All can impact on your bottom line, and some more negatively than others. Make sure that your debt structure is the best for your business by reviewing the options and understanding the costs to service them. Your financial adviser will be able to help you nut out these options and select what is fit for purpose for your business.
If you would like to take the time to review your options, come and see us for a chat. A review of your business will not only give you peace of mind, but can save you money, time and a whole heap of drama if things go pear-shaped.
Hi, I'm Brendon, one of the Directors and Advisers at Velocity Financial. I have been giving advice on mortgages and insurances at Velocity for over 15 years, and it is great to be able to work with people to achieve their financial goals. Prior to giving money advice, I worked as a youth worker and managed teams for a not-for-profit organisation. I live with my wife and one of my sons (the other one only stays when he needs food) in Berhampore, and if I'm not talking revolving credit accounts, I can be found running the trails of Wellington.
Disclaimer: Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should betaken based on the information in this blog alone. Please see Brendon’s disclosure statement on our website.