So you’re in trouble financially: what do you do?

Here are 5 steps to help you

You can easily get into financial trouble if your finances are not managed effectively. Here are 5 steps that you can take to help you through.

Money is the life blood of any economy. It can create its own problems as well, particularly the rural sector. The rural economy is subject to ups and downs, high pay-outs, low pay-outs, good lamb prices and poor. The costs just keep on rising and it is difficult to reduce these costs. Once you build a cost of running the business into your business it is very hard to eradicate it.

If you are in trouble financially, consider these five action points; they may just help.

Step one

Accept that you have a problem. Talk about it with your partner, accountant, family or a trusted friend.

When you have accepted that you have a problem, and not before, you also need to accept it is going to be tough, so don't procrastinate. Take some action immediately.

Remember action cures fear. Nothing cures fear better than beating your fear, stepping over it and taking action.

Step two

Make up a schedule of Assets and Liabilities. That means all assets and particularly all liabilities. There is no use pretending, you are only denying yourself.

Take a look at this example, it may help:


Farm at Valuation$2,000,000
60,000 dairy shares @ $6.70/head$400,000
200 Sound Cows @ $1,000/head$200,000
50 R1's @ $500/head$25,000
2 Bulls @ $500/head$1,000
Tractor and all Plant$100,000
Deposit in Bank$2,000
4 Wheel Drive Bike$10,000
New Kitchen$11,000

Less Liabilities

Bank mortgage$1,100,000
Overdraft (limit $200,000)$193,000
Tractor HP$70,000
Car HP$20,000
Balance to pay on kitchen$3,000
GST Arrears$2,000
Unpaid bills$11,000
Accountant's bill$2,000

Debt per kg/ms = $23.35

So what can I read from this:
    You are at your maximum overdraft with no further liquidity
    Your debt per kg is high
    You may not have good economy scale
    Winter is coming, so how are you going to get through
    GST arrears are of serious concern
    Your hire purchase is costing you a lot every month
    You are behind with your accounts
It's not a pretty situation.

Your bank may amalgamate all your debts into one. They may ask you to refinance elsewhere.

Step three

Find somebody suitably qualified to talk to.

That could be your accountant, stock firm manager, consultant, or budget advisor. Show them your position and bare your financial soul, accept that you've got yourself in a jam. Take time to discuss in detail every item, particularly the liabilities.

Step four

Draw up a plan to resolve your problems. Make it realistic and achievable, and then take ownership of that plan. Pin it to your notice board and look at it every time you pass by.

The plan should include a follow up on the follow up. Most plans fail if they aren't followed up. Remember, if you don't have a plan you are planning to fail.

The plan should be attainable and realistic, this is very important. It may include a refinance package from another financial sector or consolidating all your debts into one. You need to ensure you and your partner are on the same page and both accept the plan as your reality. You need to take a team approach - it will be a team problem and it will take a team effort to fix it.

Step five

Take action.

Sustained action will give you progress and make you feel more in control. Too many people fall to the ground when things go wrong. I know. I see it in my business dealings all the time. Some of my business revolves around helping people resolve their problems.

It will be tough, but you can handle it. Toughen up and make the decisions you need to. It's about being committed to resolve your own problem. They are your problems, not anybody else's. No blaming or shaming.

In summary, financial trouble can be a nightmare but setting up a 5 point plan and taking action should see you improve your position. You need support and you need to feel in control of your business to make progress. Make it your full focus. It is possible for you to turn your business around with correct management and support. Take a team approach with your partner to resolve your problems, and remember action cures fear.


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