Business insolvencies on the increase, says expert

The number of New Zealand businesses heading into insolvency is on the rise, according to a specialist business recovery firm.

McDonald Vague business principal John Whittfield said the weeks leading up to Christmas were extremely busy, with insolvencies seeming to track up significantly.

"December saw a significant increase in the numbers of businesses seeking advice regarding their financial plight," he said, adding the trend was continuing in the New Year.

Mr Whittfield said liquidations and receiverships were happening across the board, in every sector. "Equity might be high but cash positions are tight," he said.

He said this year businesses needed to look at their cash positions.

"Cash in 2006 is going to be king, so look now to see whether your business has cash flow problems," he said.

Mr Whittfield said people who were in business for the first time and hadn't experienced an economic downturn before might not be prepared for a slowdown.

"They don't understand the dynamics of a slowing economy and if they've simply been parking problems, they will be affected," he said.

He said debt was a problem as many businesses were highly geared. But high levels of growth had also had a negative impact on many businesses' cash flow levels.

Mr Whittfield said if people thought their businesses were in trouble, they should seek expert advice before it was too late.

- NZPA