Weathering Business Interruption in the face of COVID-19

12 March 2020

The unfortunate reality of being an export country is that New Zealand businesses can be suddenly and severely impacted by events outside of their control. Nothing embodies this more than the current COVID-19 outbreak, which has resulted in widescale restriction on the mobility of people and goods all around the world.

As a result, the New Zealand economy is facing its first significant test since the global financial crisis, with many New Zealand businesses already suffering a significant decrease in revenue. For some, this is another interruption to their usual operations, with the COVID-19 outbreak now compounding damage caused from flooding and storms earlier in the summer.

The impact of these disruptions on cashflow is stark and swift. When tourists can no longer come to you or when you can no longer send your products overseas, there is an inevitable strain on cashflow which can quickly become critical for businesses. Serious decisions may be required to ensure a business can weather these events.

To illustrate, we have heard of workforces who are twiddling their thumbs while they wait clearance from the Chinese border; entire tour groups cancelling their accommodation; and food products that can’t be sold because they were only grown or caught for the Chinese market.

So, when cash isn’t coming in and there are mouths to feed, what does a business do?

With this cashflow pressure, many businesses will start to ask questions like:

  • How will this impact my budget?
  • Will I need to borrow to see me through?
  • Can I continue to pay my employees?
  • Am I going to be able to meet my upcoming tax payments?
  • Do I have adequate insurance to cover me for such events?

Getting the right advice to help you answer these questions is a critical first step in being able to traverse business interruptions of this nature. Here’s some other steps we recommend you take.

Review your budget

In the first instance, we strongly recommend a review of your budget, including an updated forecast for the rest of the year to assess your options. This will help to identify any unnecessary costs and whether you need additional borrowings to provide cashflow relief. You can then implement an updated plan that works for you and your bank.

Employment considerations

For many businesses, a significant cost consideration will be their workforce. Unfortunately, the impact of these interruptions on a business will sometimes require serious decisions to be made about your employees. We strongly recommend engaging an employment expert to assist with this, as it is imperative any HR decisions follow correct process.

Review your tax obligations

There are also options when it comes to meeting your tax obligations and the IRD have indicated they are willing to work with affected businesses. We have successfully assisted clients to setup payment plans, or in extreme cases, seek financial relief.

You also have options to align your provisional tax obligations better with your cashflow. For instance, it is possible to finance your tax obligations via tax pooling intermediaries, such as Tax Management New Zealand. They have recently released a special rate of 3.95% for those affected who need to finance their tax.

Review your insurance coverage

Events like this often expose gaps in your insurance. Now is a good time to have a professional take a look over your insurance coverage to make sure it provides adequate cover now and into the future.

If you require assistance or advice navigating business interruption, please get in touch with the Tax Advisory team, who can work through the best way to assist you.

Findex has developed a Government Stimulus Health Check and free Business Wellbeing Toolkit to help businesses manage potential risks and take full advantage of eligible stimulus assistance. Book your Health Check here.


Findex NZ Limited trading as Findex.

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex NZ Limited.

The information contained is of a general nature only and does not take into account your objectives, financial situation or needs. You should consider whether the information is suitable for you and your personal circumstances. You should seek personal financial advice before acting on any material.

March 2020