This week the government announced a number of administrative measures for businesses experiencing financial difficulty in addition to the economic stimulus package announced last week.
Today The Australian Banking Association announced a small business relief package which will allow small businesses to defer any business loans by 6 months.
You can read here for more information. However as we get more information on what this means to you we will let you know directly.
It’s important for all businesses to start assessing their financial situation. The next few months will be very challenging for businesses of any size, yet alone small or medium sized businesses. The All That Counts team are here during these difficult times to support you and your business.
As a business owner, there’s once key thing you need to totally focus on now – keeping your business alive during these difficult times. Planning and action now will be so important for the survival of your business.
As the business owner you need to fully understand your cashflow. While cashflow is under control then so is your business.
It’s now time for all of humanity to come together and our part in doing this is to give you the additional help and support you require from us.
We are a phone call or zoom video away – please click on our booking link to arrange a time.
Stay safe! We are in this together :)
KEY AREAS YOU NEED TO CONSIDER:
1. Prepare a Cash Flow Forecast for 12 Months
Meet with your accountant or bookkeeper to create or update your business cash flow plan over the coming months. You need to understand your daily and weekly planned cash position to make informed decisions.
2. Consider Delaying Tax Payments to the ATO
Keeping your business alive means paying your employees, your key suppliers and your rent. Nothing else matters over the short term.
You may need to delay making payments of GST, PAYG Withholding to the ATO or arrange a payment plan that is manageable.
Important: It’s vital that you keep lodging your Business Activity Statements (BAS’s) and Instalment Activity Statements (IAS’s) by their due dates and negotiate a delayed payment with the ATO, otherwise the ATO may view the PAYG withholding portion as non-compliant and you will then lose you tax deduction for these amounts.
3. Arrange Additional Bank Funding
Contact your Bank Manager ASAP and arrange for additional bank funding / lines of credit that can be approved NOW for use in an emergency. Making these arrangements early before things have gone bad is the key. Bank approvals may take up to one month or longer, so start the process today.
4. Consider Alternative Funding Arrangements
Consider using alternative funders such as Moula or Prospa to set up a short-term line of credit now to pay for inventory and operating costs. These funders lend based on the cash flow of your business and don’t need property security. You should consider doing this as a backup now to any other bank lending arrangements you may have.
5. Protect Your Personal Assets
Now is the time to upgrade / update your asset protection. Consider if you need to protect the equity in your Family Home or other assets in personal names with a “Gift and Loan Back arrangement” – with no stamp duty or Capital Gains Tax consequences.
6. Employee Policies
While all your employees want to keep receiving their full salaries and wages, if your business runs out of cash then they no longer have their jobs. Everyone is suffering and tightening up in the short term, so we all have to work together.
- Do you have to reduce working hours of some employees?
- Decide if you should offer unpaid leave to your employees. Some businesses are suggesting that employees take unpaid leave on a roster basis.
- Decide on how to inform employees of you need to stand them down for the short term.
Review your general insurance policies for any Business Interruption Insurance inclusions. Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
8. Review ATO Tax Relief Options
The Australia Taxation Office (ATO) is implementing a series of relief options to assist those impacted by the coronavirus. The relief will not be automatically applied.
You or your Accountant/Bookkeeper will need to contact the ATO to make any of the following requests for assistance.
- Businesses can call the ATO’s Emergency Support Infoline (1800 806 218) to discuss relief options based on their needs and circumstances.
- Individuals and businesses can request deferral of some payments (by up to 4 months) and vary instalments.
- Businesses (under $20 million turnover) can elect to report and pay their GST monthly instead of quarterly to accelerate access to GST refunds, but only from 1 April 2020, and must remain monthly for 12 months.
- Quarterly payers can vary their PAYG instalments for the March 2020 quarter, and claim a refund of instalments paid for the Sep and Dec 2019 quarters.
- Businesses can request remittance of interest and penalties applied to tax liabilities incurred after 23 January 2020.
- Businesses can request a low interest payment plan.
- Employers still need to meet their SG obligations. The ATO has no discretion under the SGC rules to vary the due date or waive the SGC where contributions are late/unpaid.
TIPS TO IMPROVE YOUR CASH INFLOWS
Outstanding Accounts Receivable
Double down on verifying outstanding invoices with customers, so you know there is no realistic reason for a customer to dispute or delay payment when the time comes.
Confirm Expected Receipt Dates
Confirm the date that your customer has in their payable schedule for paying your invoices. You can then send reminders to see if the payment arrives on time, and if not you have an alarm bell to be proactive in following up your cash flow.
Chase Up Late Payments FAST
Don’t be complacent in chasing late payments. You need to set a standard with your customers of what is expected. It’s proven that setting the expectation means you will be paid quicker than the other suppliers who are not chasing up on this.
Sell Unused Equipment
Be realistic about what equipment you need in your business. Decide if you can sell any underutilised or obsolete equipment so as to create your cash “war chest”.
TIPS TO IMPROVE YOUR CASH OUTFLOWS
Fixed Term Contracts
Discuss these with Suppliers and ask if they can be reduced or cancelled. Don’t assume that suppliers won’t work with you. You paying a supplier a smaller payment will be better for them than receiving no payment if your business closes.
Discuss terms with your suppliers to see if you can extend your terms, have a cash reserve request or get a discount from your suppliers if you pay early.
Reduce costs where possible. Many businesses have extras that in the good times seem to be needed (eg. lunches, training courses). Be critical and if there is an expense that will not put you at risk or reduce productivity at this time, then think seriously about cutting it.
Loan & Lease Repayments
Most banks have hardship teams offering a range of services that may be of support. For more information, or to find the number for your bank’s hardship team go to https://www.ausbanking.org.au/campaigns/financial-hardship/