Cash Flow – a business best friend

One of the biggest areas of concern for most businesses I speak to, is being paid.  They have completed the work, paid their staff yet they are still waiting for the account to be settled, sometimes for months.  In the meantime, what happens if the company owing you money goes into receivership? ...Chances are your money goes with them.

And if the bill is paid and the money is in the bank, it's safe right?  Not always!

Companies collapse more often than we think

There have been a number of high profile businesses falling over in recent years

– GEON Print

- Mainzeal

- Media Works... and a number construction companies.

The collapse of these companies has sent out ripples which have adversly affected many other businesses.

Liquidators claw back money paid

One trend we are seeing is the liquidators appointed to these companies 'clawing back' money paid to contractors, sometimes up to two years before the insolvency. This stuff.co.nz article talks about a specific case where NZ company Hiway Stabilisers were ordered to repay money to the liquidators of a developer it had completed work for two years previously. In most cases creditors would have had no way of knowing a company was trading insolvent at the time the payment was made.

This should be very concerning for any company.  The dollar values here can be quite large, especially on large projects, and in times when cash flow is at best, patchy, most companies simply don't have the ability to come up with payment.

Bad debt protection

Trade Credit insurance has been around for many years and is in place to protect a business in the case of bad debts.  The good news is that this also covers these voidable transactions or voidable preference payments which liquidators are claiming back.  Policies can be set up to cover individual projects or the whole turnover, with different levels of cover and excesses, dependant on a company's needs.  Assistance is available to improve management of outstandings and having this cover in place provides certainty to banks, thus potentionally allowing a restructure of borrowings.

In times when being paid is crucial for the viability of a business, Trade Credit insurance could be the difference to the survival of your business.


Kim Matthews

About the Author

Name: Kim Matthews        

I’m the Leader Business Development & Sales for Rothbury’s Hawke’s Bay branch. I commenced my insurance career in 1980, have an insight in to how underwriters and assessors work and I’m a business owner myself - all great…
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I’m the Leader Business Development & Sales for Rothbury’s Hawke’s Bay branch. I commenced my insurance career in 1980, have an insight in to how underwriters and assessors work and I’m a business owner myself - all great skills and experience that make me the broker I am.

I love dealing with people and I’m passionate about insurance! 

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Disclaimer: The articles published on this blog are designed to provide general information and do not take into account any individual’s particular circumstances. We recommend that you obtain professional advice on your requirements before making any decision about a financial product.

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