Managing our debts

I was recently listening to the audio book ‘Game of Thrones’ and the saying “A Lannister always pays his debts.” struck me and reminded me of the incidents of two entities: both were from overseas, both engaged New Zealand professional services and both neglected to manage their debts. It was so easy walking into an office having a lengthy talk with a lawyer, accountant, or architect. It was all so easy to miss the email containing the invoices. One recently received a statutory demand and I hope they deal with it properly. The other one neglected the statutory demand and was put into liquidation by court; with more than half million cash in their bank account!

The Covid-19 situation also highlighted the importance of businesses standing their ground, looking after their suppliers, and keeping their cashflow running smoothly. It only takes a rumour and a bunch of irrational depositors to start a bank run; and the similarly, it only takes a panicked group of businesses to stop paying their suppliers to cause the disruption and collapse of the whole cashflow chain. Luckily, New Zealand business society seems mature enough to still run okay presently. Let us hope we can avoid collapse or at least, delay one. 

Managing debt starts with engaging a service or purchasing a product. Fully understand what you will get and what you need to pay. Pay attention to payment terms, like when payment is due. If the service or product does not meet expectations, immediately lay a complaint before making payment. Once the complaint is resolved, make your payment on time. If you cannot pay on time due to cashflow or cross border complications, let the other party know and arrange an instalment plan or negotiate a new deadline. Being a good communicator in this kind of situation is essential in creating a good reputation amongst your suppliers. New Zealand business society is small, it only takes one or two bad experiences for a supplier to rate you badly. In the professional services industry, badly rated clients will not get prompt service by the best, or their choice of service provider.  

Using the right tools to manage accounts can help family and SMEs (small to medium enterprises) greatly. Accounting systems plus the right payment process and capable people to deal with your payables, can make sure all your payments are well looked after. Outsourcing the payments function to a trustworthy bookkeeping service is also a good option. GS has recently started our bookkeeping service to help our SME clients and high net worth families to manage their debts better and keep their books cleaner.  

Being a Lannister may not be a good idea, but with a good reputation of keeping on top of your debts in a small business society such as New Zealand, has merit.