It is official, New Zealand is in a technical recession. But what does that even mean and why should you care?

Well technically, a recession means that the New Zealand economy is contracting (based on GDP data). That is, the total value of goods and services purchased by consumers and produced by businesses has reduced in successive financial quarters.

What that means in real terms is that less money is moving around the New Zealand economy and that will mean more prioritisation is made for whether money is spent on essentials or is paid back on debts owed.

Money spent by consumers flows through businesses and reduced spending is felt right through the economy as suppliers upstream feel the ripple effects. 

Some indicators suggest things are very tight right now for consumers. One such indicator highlighted by Equifax is that arrears are growing in the telco and utilities sector. This sector is considered essential (think lights and internet) so growing arrears in this sector suggests the money go round is running dry.

What does this mean for you? 

Well, rather than wait to see if your business is eventually affected by the incoming cash crunch, there are a few things you can do to protect your businesses cashflow right now:

1. Have robust terms of trade – Set-out your expectations with new customers, making sure your terms of trade are appropriate for your business. Our business solution specialists can help. 
2. Credit check your new customers – Make sure you know who you are doing business with and ensure they are likely to meet their obligations. For just a few dollars we can give you a report that takes away the guess work.
3. Don’t ignore unpaid invoices– Load your overdue debts and let us take care of it. Sometimes a single phone call or letter from EC Credit Control is all that is needed to make you the number 1 priority for payment from your customers.