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Case Studies - Mentoring

The issue

Tight cashflow & unhappy bank manager.

"The recession had reduced my cash flow and I was under pressure from my bank. I had cut costs as much as I could but I still needed, so I thought at least, to take wages from the business of $8,000 per month to cover my large mortgage and outgoings which meant I was paying the IRD over $2,000 per month in PAYE just on my wages. I couldn't face going back to personal Provisional Tax and taking my money gross as I never had the cash to pay the tax in lump sums anyhow. I spoke to my accountant who, as usual, couldn't suggest anything practical and was more interested in getting hold of my books so she could charge me to churn out my Tax Returns.

In desperation, I approached the Chamber of Commerce who referred me to Nick. I explained the problem to Nick who asked to see my annual financial statements and asked a few questions, including what my personal mortgage had been used for.

I told Nick that $100,000 of the mortgage had been injected into the business as that seemed to be the cheapest way at the time. Nick also pointed out that the business owed me $130,000 which was sitting in my advance account, which I never really understood anyway.

 

Just imagine! Nick came up with an immediate solution, firstly to stop taking wages and draw upon my advance account (which no one had ever told me I could!) and secondly to rearrange my borrowings so that $100,000 was borrowed in the name of the business (at the same interest rate as it was secured on the house) which meant I didn't have to draw net wages equivalent to the loan repayments on the $100,000.

So simple but what a result! My cash flow suddenly improved by over $3,500 per month, my bank manager was happy and needless to say, I appointed Nick as my accountant there and then!"

The result

Outgoings slashed by $3,500 per month!