I recently met with a client who is looking to set up a new retail business. They are quite well down the track with planning but needed some fine tuning with the accounting side of things. The main issues were around GST registration and the best method. As they were going to import it was important that they get the GST back as quickly as possible. So we worked out the best type of registration for their situation.
This raises an important issue around cashflow for new businesses.
When someone decides to go into retail the issues around how long they may have to hold stock before they get any sales are important.
- How long can you cover this lack of cashflow for?
- If you didn’t sell the goods what would the effect be?
- If you are borrowing to pay for goods – can you manage these repayments even if you don’t sell the product?
- Do you have the cash to cover the lease for a length of time if you don’t have any sales?
It is important not to sign up to too long a lease just in case things don’t work. I have had clients who have closed their businesses and still having to pay the lease or a portion of lease for years afterwards. If the landlord can’t replace you for the same rent and your lease doesn’t allow you to sublet it can be very difficult. Ensuring any lease is sighted and checked by a proficient lawyer is essential.
For advice on setting up your business call Karen on 09 273 3682.