When running your own business, the saying “Cash Is King” is one that can be often overlooked, in the pursuit of business growth, personal need, or trying to gain a tax advantage (amongst other reasons).
In times of crisis, this saying brings on a new meaning. All about survival. With nobody really sure how long this is going to last, with periods been offered of anywhere from 1 month to 6 months, the survival of your business, and your livelihoods needs to be a priority.
Below are some ideas that can help improve your cash position. While I don’t normally advocate getting into or deferring debt – in this situation it can be one of the many tools to get you through this period, and then once out the other side, work through repaying it.
- If you are owed any money – now is a good time to make a call to see if you can collect any of it. Potentially offering a discount if necessary, or part payment could be options you utilise, as every dollar in your account will help
- Stimulus packages – the wage subsidy (as part of Stimulus 3) can potentially be a cash-inflow for your business. See wage subsidy article for further information.
- Look at sources of funding you may have available. Speak to your bank manager, and see if you can get a business loan, or overdraft or extension of facility where needed. New bank loans with 50% government banking are now on the market. Banks are reducing their lending so there is no harm in asking. Banks want to see clients survive this as well.
- Payroll Tax (I include this as an inflow): if you have paid it during this financial year, then you may be eligible for a refund (depending on your state rules). If you are in Victoria if you pay less than $3m a year in wages – the SRO will give you a refund of what you have paid to date, and stop the need to pay anything for the rest of the year. Other states please check your relevant government website (or ask I can find it for you).
- Insurance – if you have in any of your business insurance policies – business interruption or continuity clauses, then review and see if you are eligible to make a claim.
- Sell any unused assets in the business to get in extra money.
- Stimulus packages – the business cash-flow boost (as part of Stimulus 2). While it needs to be made clear – that this is not a cash-inflow, if you are eligible – it can be a significant reduction on your outflows (see Business Cash-Flow Boost article for further information)
- ATO/BAS Debt – if your business is affected by the virus, the ATO can allow deferral of payments from the March Quarter onwards by up to 6 months. This will need to be discussed with them. Link here: https://www.ato.gov.au/Individuals/Dealing-with-disasters/In-detail/Specific-disasters/COVID-19/. Your accountant can help with this if needed.
- Asset Finance: Give them a call and request a halt to repayments for as long as you are able to. From what I’ve been hearing most of them are understanding, and will halt the repayments for at least 3 months.
- Bank & Other Loans: Now is the time to give your bank manager a call, or speak to your financiers. Seek to get a temporary halt on repayments (and interest if they will allow it) for that 3-6 month period. Again most of them will be open to this under the present circumstances
- Credit cards: Similar to the banks now is the time to ask the credit card companies for a halt to repayments and interest (note you’ll want the interest to be halted too – otherwise the debt will continue to increase). I’m not sure how supportive the credit card companies will be in this situation – but like everything else it is worth asking the question.
- Rent: It is a good time to have a discussion with your landlord about if they can give you some relief. Most will be happy to retain a tenant through this period, rather than have no income coming in, or having it untenanted for a long period of time. It is certainly worth asking the question. There is legislation coming out about this, or may already be out depending on when you read this.
- Business expenses: Now is the time to go through everything you spend money on, and figure out ways of reducing it (or delaying expenditure). Every dollar saved is another in your war-chest to survive this.
- Employees – this is going to be a hard one, and certainly in the event of a total shutdown/lockdown, there will potentially be no work from them. This will need to be discussed and handled carefully for their sake, the future of the business when things return to normal, and also legally. Here is a fairwork link for some initial information https://coronavirus.fairwork.gov.au/coronavirus-and-australian-workplace-laws/business-closures-during-coronavirus. Please note this isn’t advice on what you should do, but additional information to digest as part of the overall decision making.
These are some of the ways you can improve your cash-flow. If you have any questions feel free to reach out.