Getting your clients ready for the next phase of recovery
Small business owners can take these key steps to avoid a bumpy landing when COVID-19 supports end. Brought to you by Intuit QuickBooks.
It’s been a year no one really expected: a pandemic shut the economy and the Australian government opened a tap of stimulus worth A$259 billion so far.
That government support has helped many small businesses hit hard by restrictions imposed to limit the spread of COVID-19.
It’s helped businesses pay employees, access capital via one-off payments, provided a loan guarantee scheme and allowed instant asset write-offs. Tax payment deferrals and temporary relief from insolvent trading regulations have also been useful.
The key now is how to ensure you stay on a firm financial footing after these benefits wind down.
To gain insight on how to do this, we spoke to Melbourne-based Accountancy Online director Kane Munro and Fusion Accountants’ Emma Fabbro in Adelaide.
Both have been busy supporting small business clients through this pandemic and highlight key steps small business owners can take to avoid a bumpy landing when government stimulus and tax deferrals end.
Have up-to-date financials
There has never been a more relevant time to have accurate and up-to-date financial information about your business.
“Keep an eagle eye on your balance sheet,” says Munro. “Look at your liabilities and when they are going to fall due and start to plan now. Give yourself time to prepare – there’s no guarantee business will snap back to normal as things re-open.”
“Give yourself time to prepare – there’s no guarantee business will snap back to normal as things re-open.”
“Understand your profitability and cash-flow position,” add Fabbro. “This will ensure you have an accurate view of where your business stands today and also if you need to look to approach a lender for short-term finance, when accurate financial reports will be necessary.”
Check your outgoings
Now is the time to cut back on all but essential spending – take time to dig into what’s going out of your business on a monthly basis. You might be surprised.
Says Fabbro: “Cash has always been king, but especially now. Small businesses need to have cash reserves to enable them to continue to pay business expenses after the stimulus measures stop.
“Cash has always been king, but especially now.”
“Ideally, anything from three to 12 months’ cash reserves will allow businesses to trade at lower income levels while still meeting outgoings.
“Check your outgoings. Only spend money on what is absolutely necessary,” she adds.
“As a subscription-based society, it’s amazing how many small businesses are being charged monthly subscriptions they do not know about and no longer need.
“Review stock levels: can you hold less inventory or lower the cost of goods while still delivering the same service?”
Set money aside (if possible)
Munro is particularly concerned about those small businesses that have deferred payment of tax debts, rent or loan repayments. Each of these debts is still going to have to be paid once the deferral period ends and “that’s when it’s going to hurt,” he says.
Fabbro says the best way to ensure you don’t get into trouble after the stimulus ends is to try to run your business as if you never received these funds or had costs deferred. If it’s possible, put the money aside.
Payments are still going to have to be paid once the deferral ends. The slate won’t be wiped clean.
Look ahead and prepare for recovery
A recent Roy Morgan poll found that business confidence in Australia took a record plunge in mid-April but has been improving since then. Those in business have been feeling more positive about their ability to bounce back by next year.
Making sure your small business is fit to capitalise on the forecast uptick in consumer confidence and business activity means getting prepared.
It may also be helpful to take a step back and reassess your opportunities – how you can reposition your business to serve new markets with new services, or how you can offer existing services in new ways.
Find out more:
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