Liquidations surge as pressures mount

2025 is shaping up to be a year with a large number of liquidations, with current figures indicating a strong rise from 2024, according to recovery and insolvency practitioners.

McDonald Vague says New Zealand winding up applications for the year to date remain above previous years and could continue rising for the rest of the year.

“When compared to previous recessions, this one has a wider feel across the whole economy and appears to be dragging out over a longer timeline rather than a short, sharp peak. We continue to expect winding-up applications for 2025 to exceed those seen in 2024.”

McDonald Vague reports that year-to-date insolvency figures remain just behind 2011 levels and appear similar to those seen from 2012 to 2013, when the economy suffered the lingering effects of the global financial crisis, Christchurch earthquakes and a strong New Zealand dollar.

BWA Insolvency’s Quarterly Market Report for the first quarter of 2025 confirms a surge in business failures since the start of 2025.

It found that total insolvencies jumped 31% from 569 in the first quarter of 2024 to 748 for the same period in 2025.

Most cases were voluntary liquidations, which rose by 40%. In contrast, receiverships (initiated involuntarily by secured creditors) remain in line with 2024 – only dropping by one and voluntary administrations fell from 25 in the first quarter of 2024 to just four in the first quarter of 2025.

Global instability adds to uncertainty

BWA Insolvency believes it’s inevitable that New Zealand will be affected by instability in the United States. “Tariffs will make our exports more expensive, causing buying habits to change and reducing orders for exporters. The daily news presents a tale of woe for many business owners,” it says.

“Even if the US and China become more conciliatory, the confrontational posturing will be recessionary for both, and demand for New Zealand’s goods and services will go down.

“Investment capital always steers clear of uncertainty and has dampened enthusiasm for new projects. Even if projects are ready, it is more likely they will be put on hold until stable and more reliable economic policies are in place.”

BWA Insolvency notes that New Zealand is a small economy with its well-being dependent on its ability to trade internationally. If New Zealand’s trading partners are suffering, so too will New Zealand.

“The flow-on effect will be reduced demand locally, which will cause further challenges for businesses that are already suffering from the lingering overhang effects of COVID-19,” it says.

The consultancy believes headwinds will rise in the coming months as the geopolitical landscape shifts.

“Increased costs and decreased demand will be on the minds of many business owners in the coming months,” says BWA Insolvency.

“The Inland Revenue Department’s forthright approach to taxpayer non-compliance will add pressure and become an issue for defaulting companies.

“What influences whether a company will survive, or fail is the state of its balance sheet. Companies with a weakened balance sheet will be vulnerable as the events of this year unfold.”

Building resilience

To build a strong balance sheet, you will need to make certain that your business’s assets exceed its liabilities and that you have sufficient working capital for short-term obligations.

Effective cash flow management will be crucial. That requires comprehensive planning and forecasting to ensure that funds are available for daily operations, payroll and unexpected expenses. You may also need funding to buy inventory for the fast-approaching Black Friday, Cyber Monday and the Christmas sales.

Regular monitoring of your cash flow is also essential. This involves tracking all money flowing in and out of your business, understanding payment cycles and ensuring invoices are issued and followed up on promptly.

Key strategies include managing your inventory by reducing obsolete stock and reducing inventory levels to free up cash and decrease holding costs.

Pursuing a more proactive collection strategy for accounts receivables should get customers to pay faster and improve your working capital. Negotiating favourable payment terms with suppliers may also pay off.

To bring in cash, you could consider reviewing your pricing, embarking on targeted marketing campaigns and exploring additional revenue streams to reduce dependence on primary income sources.

Funding options to ease the pressure

Some of the tailored funding solutions available can also help. For example, invoice finance provides a business with fast access to funds based on expected future cash flows. It allows you access up to 95% of the value of your outstanding invoice upfront as a cash advance. Instead of waiting for 30+ days for your customers to pay, you can receive the money owed to your business today.

In addition, business loans help fund the plant, equipment and vehicles your business needs to grow, while trade finance helps you close the cash flow gap between sales and the purchase of materials or stock you need, domestically or internationally.

To find out more about ScotPac’s funding solutions for cash flow management, get in touch with our lending specialists today.