To expand on the immediate actions list in our COVID-19 Business Hub we have compiled a more expansive list of considerations to help.
Comprehensive Cash Flow and Operational Considerations
- Leverage the many government stimulus initiatives available where applicable. New initiatives keep being added, so watch out for relief packages.
- Establish a 13 week cash flow forecast, ideally longer, and review daily or as regularly as possible.
- With your reforecast you can determine what cash buffer is required to get through this next 6 months.
- It is in these times that Customers will remember pragmatic & empathetic Bankers/Funders well after COVID is in our rear vision mirror.
- Prepare sensitivity analysis on revenue (V shape – quick fall, quick recovery; U shape – medium fall, longer recovery; L shape – sharp fall, uncertain recovery).
- You may be uncertain about your revenue, but you can take steps now to control your costs. Halt or reduce your cost base, including cutting discretionary spend.
- Appoint one person in your business to approve all expenditure; this will help you keep track of what you are spending and why.
- Model worst-case situations for the short to medium term. It’s okay to hope for the best as long as you’re prepared for the worst.
- Look to early payment programs and discounting opportunities. Cash flow is the urgent priority, not profitability.
- Remain agile as situation is highly dynamic – adapt or fall.
- Make time for regular updates with your team. Your employees will be able to focus more on their important roles if they know what is happening around them.
- Talk to all your key stakeholders regularly; clients and suppliers are your key partners through this time. People are more willing to help if they understand what you need. It is ok to be vulnerable and ask for help.
- Review funding solutions to see what’s available to you, what’s appropriate for you and whether your current solutions best suit you.
- Take stock of your assets and understand where your hidden value is. Contracts, invoices, inventory, equipment etc.
- Manage your stress and keep calm. The captain needs to be in control of themselves before they steer the ship
- Seek advice and counsel where possible. Talk to your advisors and gain their expertise. You are the expert in your industry, they are the experts during these uncertain times.
Three things to keep in the back of your mind through all this:
- This economic shake up will pass.
- As tough as it is, you need to look past the doom & gloom and look for any opportunity to adapt and get through this period. Alcoholic beverage producers turning to hand sanitiser development, restaurants pivoting to take away options, clothing producers moving to create face masks and medical scrubs.
- Businesses need to get on the front foot with their Bank/Funder and reforecast earnings. Above we mention a 13 week forecast
There are many resources readily available to help you navigate these troublesome times, be sure to lean on them where possible and seek advice from experts where available.
Useful Links and Resources
- The Treasury response to coronavirus
- Support for large businesses impacted by COVID-19
- Government’s response to coronavirus
- “My Business Health” tool from ASBFEO
- ScotPac’s Cash Flow Forecasting Tool
- COVIDSafe Business Plan Guide
More tips and advice
- A one pager on immediate actions and considerations for the coming weeks
- Practical workforce strategies that put your people first
- 7 ways to minimise the impact of coronavirus on your business
- How an accountant can be your buoy in the storm
- Detailed report on government stimulus packages
- Overview of government stimulus packages for SMEs
- Survival tips for private and family businesses
- Kate Carnell speaks on the government stimulus package and how it will help businesses
- Tips for working remotely
- The culture of social distancing
- Recorded webinar by KPMG on the ATO’s approach to managing tax obligations
- PwC & ScotPac COVID19 Roadmap webinar
What are the eligibility criteria for the JobKeeper incentives?
Businesses with turnover of less than $1 billion experiencing a 30% decrease in turnover are eligible to claim the Job Keeper payment per eligible employee. For business with turnover in excess of $1 billion the threshold is a 50% decrease in turnover. For not for profit companies there is only a 15% threshold.
Turnover is defined in accordance with the GST legislation and therefore should only include Australian based sales (i.e. foreign business operations are not included in the analysis).
Turnover reduction is based on a comparable period (i.e. YoY)
For entities which are part of tax consolidated groups, it is anticipated that the annual turnover calc (i.e. $1 billion or more) will be based on group turnover, however the 30% or 50% reduction in turnover may be applied at the individual entity level within the group.
Are the stimulus packages open to all industries?
This depends on what stimulus package you are referring to. There are some State and Territory packages which are applicable to specific industries. Best to review on a case by case basis depending on which stimulus you are looking to access. Find out more here.
Does the JobKeeper package apply to company directors as well?
To the extent the director is not also an employee of the company, the director may or may not fall within the definition of eligible employee and thus may or may not be eligible. Speak to your tax expert to understand how this may apply to your business.
Are the stimulus packages tax free?
Depends on what stimulus package you are referring to.
For instance on the Job Keeper payment, it is anticipated that this will be income in the hands of the employer but that the employer would also be entitled to a deduction equal to the amount received when the amount is paid to the employee. To this effect no tax should be payable by the employer on the receipt of the Job Keeper payment.
The Job Keeper payment itself is considered taxable in the hands of the employee and should therefore be subject to PAYG withholding.
The cash flow boost payments administered through the BAS are a tax-free stimulus payment.
Is the JobKeeper stimulus inclusive of superannuation?
There is no requirement to pay superannuation on the Job Keeper payment. However where the employees pay is in excess of the Job Keeper payment superannuation would still be required.
An important matter to note is that other employee on-costs such as payroll tax may also still need to be paid on the Job Keeper payment. Currently South Australia is the only State government to announce that payroll tax will not be payable on the payment.
Other Stimulus FAQs
If I take up the 6 month loan repayment deferral, will that impact my credit rating?
Your credit rating should not be impacted to the extent you have taken up the deferral. If you however miss repayments without having taken up the deferral options available, your credit rating will be impacted.
As a business owner/director, what do I need to do to access the benefits from PAYG Tax Withholding stimulus and defer my tax payments?
Engage with the ATO as early as possible. The ATO does not have a one size fits all approach due to the vast number of business impacted and the varying ways in which business need assistance at this time. Review you cash forecasts for the next 6 months to gauge where you might have deficiencies and the quantum of the deficiency. You can then engage with the ATO to defer relevant tax debts accordingly.
In terms of taking advantage of the cash flow boost on offer from the ATO, this is being automatically by the ATO through your BAS. No further action should be required by you as the business owner.
What kind of assets can I fund or accelerate the depreciation of with the updated instant asset write off scheme?
New and second-hand assets installed and ready for use pre 30 June 2020 and costing less than $150,000 may be immediately written off.
Accelerated depreciation (so expenditure on assets costing more than $150,000 or installed and ready for use post 30 June 2020) is only available for new depreciating assets. It will also not apply to the following asset categories:
- Expenditure on buildings or other capital works expenditure as defined in Division 43 of the income tax assessment act 1997.
- Assets which are not principally used within Australia.
Financing Solutions FAQs
Are banks and other financial institutions still lending money to businesses without an existing arrangement?
Some banks have differing lending appetites to others in this climate. Best to check with the banks directly, starting with the bank you hold your transactional and / or personal banking with.
What are my best options to look to for maintaining cash flow?
It is again a case by case basis but it’s recommended that you seek advice and guidance from your business advisors, plan around your critical payments, speak to your debtors around when they can pay and discuss with lenders such as ScotPac around how varied funding solutions can help.