Article:

Financial management and recovery from Coronavirus and natural events for the tourism sector

18 March 2020

Those operating in the tourism sector should be considering government relief along with turnaround strategies to minimise exposure to recent natural events and coronavirus – events which will negatively impact cash flows for a number of operators.

The flooding experienced in the South had already hindered the tourist season in New Zealand. Unfortunately, this was quickly followed by the outbreak of Novel Coronavirus COVID-19. The resulting travel restrictions have seen unprecedented booking cancellations and will unfortunately, will continue to impact cash flows for some time.

On Tuesday the 17th of March the Government announced its economic response which includes $12.1bn funding to support the economy. Read a summary of this response.

While the government has indicated the support package may be expanded as the situation unfolds, tourism operator participants should be taking stock of the various options available to them now, including:

  • The economic support packages and the implications of using this support;
  • Talking to existing funders early;
  • Potential use of money interest relief for those significantly adversely affected by COVID 19;
  • Reviewing your debtor list to identify whether any invoiced amounts that remain outstanding are likely to be collected in part or in full;
  • Exploring instalment arrangements with the IRD;
  • Exploring late filing extensions with the IRD; and
  • Consider working with a business recovery and turnaround specialist who can assist in financial reconstruction. They support businesses to proactively manage their position and protect their interests, by minimising loss and exposure.

 The turnaround process is designed to:

  • Investigate a business’ viability and working capital requirements;
  • Evaluate the options available to reverse under-performance and repair working capital;
  • Create and implement an agreed turnaround and growth strategy;
  • Monitor business’ future performance;
  • Deliver interim and crisis management; and
  • Provide interim CEO/CFO support.

With any business recovery, timing is everything. Paying attention to early warning signs could mean the difference between business rescue and business failure.

Our specialists can assist with forecast modelling to aid conversations with funders, providing support to creditors on your behalf, identifying and introducing new methods to maximise returns, producing client communications, undertaking business and corporate restructuring, debt agreements and general turnaround management.

Contact your local BDO adviser to discuss your situation further or if you have specific questions on the following:

  • IRD and tax related advice
  • Business turnaround
  • Business modelling requirements  

Information included in this insight was last updated on 18.03.2020

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