Cashflow is the lifeblood of a business, yet during a pandemic such as Coronavirus (COVID-19), we can see our cash reserves run dry pretty quickly and this can cause irrevocable damage to your business. So how can you create some certainty around your Cashflow while operating in such turbulent time?
Here are our top Cashflow tips:
1. Review and adjust Cashflow budgets
In these challenging times, you need to know well in advance what impact a slowdown will have on the Cashflow of the business. You should be reviewing and regularly adjusting your Cashflow forecasts to determine what affect a reduction in revenue will have on your ability to pay suppliers and repay debt.
2. Forecasting and Modelling
We recommend that the best way to project your future Cashflow is using the three-way forecasting and modelling system for integrity in your data. This looks to consolidate three key reports in your accounting and use the combination of these to project future forecasts. This is the profit and loss, balance sheet and Cashflow forecast.
Depending on your business and in the current environment, this might be hard to predict even with this data as your industry may have been disrupted with government mandated restrictions on trade or temporary closure. In these cases, you may need to use more current data, even if it is a smaller sample size to help predict what will occur over the next few months.
3. Timely Financial Reporting
Ensure that your financials are kept up-to-date so that you monitor profitability, debtors and creditors balances on a daily basis.
4. Long Term vs Short Term
For some businesses, there will be long term financial impact on their business, but for others, it will be short term. For instance, with restaurant closures for a few weeks or months, this is a short term impact. Many of these are now providing takeaway food to help cover their costs and then in a few weeks or months they will open again and will continue to trade. For other industries, there will be a lasting long term effects that may go on for much longer. Can you consider some of the different scenarios and determine whether yours will have a short- or long-term impact?
5. Cutting unnecessary costs
Look at all of your current and future business expenses. What are essential and what money can be saved? In this environment cash is king, so ensuring that you can maintain Cashflow is imperative. Look for any opportunities to cut costs to help your business through this period. Get rid of all non-essential spending.
Business owners should review their Profit & Loss statement and look for savings that can be generated by cutting discretionary overheads.
6. Tax Planning - staying on top of your tax obligations
It’s important that your tax obligations are lodged on time. The ATO has announced support measures for businesses impacted by COVID-19, which includes payment deferrals, changing quarterly GST reporting cycle to monthly reporting to get quicker access to GST refunds, and varying PAYG quarterly tax instalments.
Tax planning is always an important focus area but more so during this time. The important thing to remember is to be on the front foot and get tax planning advice before the end of the financial year. Once the year is over, there is little that you can do to minimise your tax obligations, so make sure you get advice well before the end of the financial year to enable you to put plans in place that will help reduce or defer tax liabilities to keep cash in your reserves.
7. Debtors Management
Contact your clients and customers to encourage them to pay early. You can incentivise them by offering discounts. Where clients themselves are experiencing Cashflow difficulties, you might consider negotiating periodic payments.
8. Creditors Management
If you’re being impacted by the knock-on effects of Coronavirus, you should take whatever steps you can to negotiate with creditors, as they may be in a position to help in some way.
If you have a strong relationship with your suppliers, consider asking for longer payment terms from them. You can also consider:
- Reviewing supply contracts and check if you could cancel orders, where possible
- Getting in touch with your landlord and ask for a rent reduction.
9. Loans and funding for businesses affected by Coronavirus
If your business has been affected by Coronavirus, you may be eligible for a payment of between $20,000 and $100,000 or a government-guaranteed loan of up to $250,000. The Government is partnering with the banks and other lenders by guaranteeing 50% of loans of up to $250,000 for 3 years to businesses with an annual turnover of less than $50 million.
These are unsecured loans and won’t require any repayments in the first 6 months. The purpose is to help small to medium businesses rebuild and recover on the other side of the CoVID-19 crisis. To find our more on Grants, Loans and Financial assistance for Small Business visit Service NSW >
10. Taking advantage of Government support
We understand that this is a challenging and confusing time for business. Get in touch if you want to discuss how to navigate your business through these uncharted waters. Azure Group team are committed to working smarter and faster in helping you take advantage of the Stimulus and financial assistance you need to keep operating as best you can. If you have any specific questions about these measures please contact our centres of excellence via email: firstname.lastname@example.org
Have you noticed our #FridayExpertTips... here's one that relates to #CoVID-19: Cashflow Forecasting
“There is no denying that COVID-19 will have short and long-term effects on the economy and your business. It’s imperative by now that you have a long view Cashflow forecast in place that deals with both good and worst case scenarios so you are ready to react swiftly. Speak to us today if you need help."
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This information is accurate on the day it’s published and is subject to change as the situation around Coronavirus (COVID-19) evolves. Our conclusions may not be valid if there is any change in those facts, circumstances and assumptions. Accordingly, neither Azure Group Pty Ltd nor any member or employee of Azure Group, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused.