It’s tough being a small business with what we’re currently facing in both Australia and across the globe. COVID-19 has had a huge impact on many industries, causing a large number of businesses to close down either temporarily or permanently. In a bid to keep our economy alive and support small businesses across Australia, our Government have announced multiple measures to help ease the impact the Coronavirus is having on us, including the stimulus package. Whilst there are many things currently out of our hands, there are several things you can do to put yourself and your business in a stronger position during these times.
Leverage all the Stimulus you are eligible for
If you have listened to updates on the Stimulus and tried to navigate through the bits you’re eligible for, you wouldn’t be alone if you have put it into the “too hard” basket. It’s tricky to understand so there’s no wonder many small business owners have been left confused and no further along with any applications for support they may be eligible for. We’ve highlighted recent Stimulus updates in a recent blog.
The PAYGW boost (up to $100k) and the JobKeeper payments for business’s who have sustained (or will) a greater than 30% drop in revenue are a couple of the most commonly sought-after aids for small businesses. Registration for the JobKeeper scheme are now open, and you can apply via the ATO website.
Another popular option is the 6-month deferral of loan repayments alongside the potential $250k government backed overdraft. The deferral of loan payments (typically the biggest weekly/monthly commitment of any family group) can be put on hold creating significant cashflow straight away. Whilst this means that your loan balance is not reducing (it will actually increase by the amount equal to the unpaid interest), if you are strict with your money, this will still be sitting in your everyday bank account. With current interest rates as sitting as low as 3% (variable) and fixed rates as low as 2%, the impact of interest compounding for 6 months is often negligible to the upside of having a small war chest of cash available to you.
On top of these popular options, the Government has announced many more ways they are supporting small businesses. We’ve put a summary of the Government Stimulus package together to make it easier to navigate on a state-by-state level of what you’re eligible for.
Personally, I believe the JobKeeper will have the greatest impact on the speed of recovery for the SME market, but the deferral of home loans and 2% fixed rates will give our economy the cashflow to bounce back quicker than it would otherwise.
Reduce costs ASAP
There are two types of cost reductions; deferred costs vs actual savings, both of which are crucial to keep a strong balance sheet. Reviewing both of these should form part of your annual business plan, but it’s even more crucial to action this now. We’re in an era of subscriptions and SaaS, which makes it easy to fall into the trap of paying thousands in subscriptions for products you no longer use. Even if it’s a temporary pause of subscriptions whilst we’re in the current situation, your cashflow will appreciate the savings.
Cash is king, always
Cash is king in every situation, but even more so when we’re experiencing an unstable environment. Take the steps needed to ensure you have maximum amount of cash in your business, and delay any money going out. This could include speaking with your suppliers and ask to extend your payment days. Pushing payment terms from 30 days to 60 days can have a fantastic impact on your cash flow. Alternatively, negotiate discounts with your suppliers if you pay sooner than agreed dates. Although the cash is leaving your business sooner, it’s going out at a discounted rate.
Now more than ever, it’s crucial to be surrounded by proactive support from a range of professional advisors, including an accountant, financial planner and mortgage broker. If you don’t have a support team around you, or simply need a second opinion on what you may be eligible for including assistance with application, please reach out and we’d be happy to help. Contact us on (08) 6381 2404.