We hope that you and your family are staying safe and well during this difficult time. As business mentors, we know the importance of having a plan for your business. Because of this, we have compiled a list of things you should be considering:
1. Maximise what benefits you receive from the Updated Government Stimulus Package:
By now, you are probably aware of various Government stimulus packages that your business might be able to utilise.
- JobKeeper Payment - This is a subsidy paid to eligible businesses of $1,500 per fortnight for eligible employees and some categories of business owners. Eligibility is a complex matter, and we strongly recommend you discuss this with your accountants. Alternatively, our team is only a phone call away if you need assistance. Generally speaking, eligibility is based upon if your business turnover has decreased by more than 30% to the same period last year. If you have had substantial growth prior to COVID-19 but your business turnover has decreased by more than 30% to earlier periods, you may still eligible. Registrations are open now and you should register as soon as possible if you are eligible.
- Boosting Cash Flow for Employers - This being a credit or cash payment calculated using your Business Activity Statements. This amount is generally calculated as 100% of PAYG withheld from employees from March 2020 to September 2020, with a minimum credit of $10,000 for the March quarter. Employer registration conditions apply to this credit.
- Supporting Apprentices and Trainees – Wage subsidy of 50% of wages paid up to a maximum of $21,000 per apprentice for the 9 months from 1 January 2020 to 30 September 2020. Please note that your employee must have a Training Contract that is formally approved by the STA and meet other conditions for this subsidy to apply. If you are receiving JobKeeper payments for this employee, they will not be eligible for this apprenticeship subsidy.
- Instant Asset Write-off – Up to $150,000 per asset can be instantly written off for assets purchased by 30 June 2020. Applies to businesses with turnover up to $500 million.
- Accelerated Depreciation Deductions – Deduction of up to 50% of the cost of an asset in addition to existing depreciation rules.
2. NSW Small Business Support Grant:
On 3 April, the NSW Government announced a $10,000 grant for eligible small business affected by COVID-19. Your business may be eligible if it:
- Operates in an industry highly impacted by the Public Health Order 2020 issued 30 March and has suffered a decline in turnover of 75%;
- Has between 1 and 19 employees, and an annual payroll below $900,000;
- Has an annual turnover of more than $75,000;
- Was registered with an ABN at 1 March 2020;
- Has an Australian Business Number and employs staff in NSW at 1 March 2020; and
- Has unavoidable fixed costs not otherwise the subject of other NSW and Commonwealth Government financial assistance measures.
Eligible industries would include retail, accommodation, food services, rental, administrative and support services, and arts and recreational services (such as fitness centres).
Applications can be made via the Service NSW website from 17 April.
3. Understand your cash flow:
Now is a great time to get on top of your cash flow. For your inflows, you should be:
- Chasing up late payments fast;
- Confirming payment plans are sustainable; and
- Considering whether selling unused equipment to boost your cash flow is in your best interest.
In terms of outflow, you might be able to request your landlord reduces your rent for a period. You could also consider your options in:
- Reducing or cancelling fixed supplier contracts;
- Extending your supplier terms;
- Reducing costs where possible; and
- Talking to your bank about hardship support.
Planning into the future requires you to consider the 'what ifs'. To feel confident in making informed decisions in these quickly changing times, we recommend discussing with us a cash flow forecast that deals with the following scenarios:
- Income reduced by 50%;
- Income reduced by 70%;
- Expenses cut to a minimum, including reduced wages, rent reduced by 50%, no payments to the ATO and where due, Superannuation payments.
This should give you an idea of when you need to be considering alternative options to sustain the business.
It is also worthwhile considering what other financial funding or relief might be available to you. This includes rent reductions organised through your landlord, bank funding, ATO tax deferrals (discussed below) or alternative funders.
4. Consider ATO tax relief options:
Keeping your business alive means paying your employees, suppliers, rent and support team (including accountants and lawyers, for example). You should consider setting up a second bank account separate from your main trading account and each week transfer cash for these payments across into it. If needed, you can then dip into this cash reserve to keep your business alive.
To help you keep your business afloat, the ATO has implemented a series of relief options to assist those impacted by COVID-19. These are not automatically applied, and you (or your accounting team on your behalf) 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 a deferral of some payments (by up to 4 months) and vary PAYG 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 September and December 2019 quarters.
5. Transparency with your team:
In times of uncertainty, it is important to be calm and open with your employees. They will possibly be scared and unsure about their job, and so letting them know you are in control and, while there is a tough outlook in the short term, the business is prepared to sustain things as best as it can. Being honest but positive, while rallying your team is a great action plan.
To maintain employee wellbeing, you need to be clear about policies. These might include no physical meetings or contact with clients (think online Zoom or Skype meetings), setting them up to work remotely with a focus on business confidentiality, letting them know your health policies and how they can limit the risk of infection.
Mental health is a huge component of business sustainability. It can be helpful to set productivity goals for employees individually and for you all as a team to work towards, and catch up with them often via video conferencing.
When working remotely, you should be looking at implementing the following:
- Policy agreement for employees regarding their responsibilities and what is required of them
- Hardware and software requirements
- Regular video conferencing, or at the very least, phone calls
- How to manage data security risks
If your team is still working in the office but are capable of working from home, a test day might be worthwhile. This way systems can be improved and refined for when you have to work remotely.
As hard as it is, be sure to be open about the possibility of reduced hours if you think that is what your business needs to stay afloat. Letting staff know early and helping them plan will benefit their mental health. Don't forget the JobKeeper payments which may help.
6. Manage your relationship with clients, customers and suppliers:
Just like with your employees, regular communication with your clients, customers and suppliers is crucial. By staying in touch via email, websites, social media, video conferencing or phone calls, you can build your rapport even further. This also lets them know you are open for business, or if you aren't, what your plans are. Be sure to keep them informed on how you are managing risks on-site, any changes to your services such as opening times, delays in deliveries or deadlines.
The unfortunate situation is that everyone is struggling. If you are in a position to do so, it can be beneficial to offer your key customers or clients alternative payment arrangements to encourage (or even allow) them to continue to buy from you.
Now more than ever, you need to have clear marketing strategies in place. You can use these to give clients reasons to increase their purchases of your goods and services before the full impacts hit their lives, and can increase your potential to win back customers after this passes.
You should also be touching base with your suppliers to work out a contingency plan. This might include extended terms, changes to fixed-term contracts etc. It may be beneficial to seek out alternative suppliers in case travel and export restrictions weaken your supply chain.
7. Most importantly, take care of your mental health:
It takes a lot to lead a business through times like these. While you might be tempted to shut your eyes and just keep on going, we promise you this is not viable long term. Instead, take time out of your day (every day!) to listen to yourself and make sure your mental health is okay. We love this fact sheet, but in general, we personally like to keep a routine that includes exercise (even just going for a quick walk outside or playing with the dogs), embracing your creative flare and giving a friend or family member a call.
In times like these it is really important to talk to a professional when you feel overwhelmed. This might be a counsellor, social worker or another trusted person in your community, but if you are having trouble getting out of the house, LifeLine (13 11 14), BeyondBlue (1300 22 4636) and Kids Help Line (1800 55 1800) are available to you 24/7. Some even have a text line, such as LifeLine Text (0477 13 11 14) available 6pm to Midnight every day.
We know this is a lot of information to take in, but we hope it helps you and your business confidently move forward.
From our families to yours, we hope you are all safe and able to appreciate this extra time together.
The team at Palfreyman Chartered Accountants.