1. Tap into government support schemes
Start by looking into whether you’re eligible for any government schemes, such as the JobKeeper payment – which pays employers a $1,500 wage subsidy fortnightly per eligible employee they keep. The government also passed legislation to provide temporary cash flow support to eligible small to medium businesses, and not for profits, who lodge activity statements up to the month or quarter of September 2020. Don’t forget to check other schemes and tax breaks being offered in the COVID-19 stimulus that may apply to you, too.
2. Map out your crisis cash flow
Any business owner will know how essential a cash flow forecast or budget is for ensuring you have the funds handy to pay suppliers, manage your debts and meet your tax obligations.
It’s even more critical to stay on top of things during a crisis, which means regularly reviewing and fine-tuning your forecast so you’re prepared for how a reduction in revenue could affect business. Accounting software can help or speak to your accountant or financial advisor to plot the most accurate financial forecast for your business going forward.
3. Stay on top of your debtors and what they owe
It’s challenging having to chase clients and customers for money, especially if you know they’re struggling too. Try to maintain firm, regular communication with debtors, specify pay dates on your invoices and issue invoices promptly, as soon as the goods or services are provided.
It’s also important to follow up on outstanding customer payments as soon as possible. If you can, offering discounts to customers who pay their invoices early is a good incentive to getting paid on time. If your customers are experiencing cash flow issues, suggest a payment plan and make sure they stick to it.
4. Open up negotiations with suppliers and landlords
Paying debts can be tricky if you’re experiencing a cash flow shortage. If that’s your situation, start negotiations early – whether you’re asking suppliers for a payment extension or talking to your landlord about rent reductions.
The government’s new measures to help commercial tenants may provide some relief to eligible businesses. The mandatory code of conduct for commercial tenancies requires landlords not to terminate leases for non-payment of rent during the pandemic and offer a reduction in rent based on the tenant’s reduction in trade.
5. Review your assets, inventory and overheads
For quick cash flow assistance, you might look at liquidating some assets you no longer need. Or, if you have goods that don’t sell as fast as other products, selling them off at a discounted price could be a way to free up some cash.
Similarly, look at your profit and loss statement for ways to make cutbacks. Reviewing your utilities and asking for a better deal, shopping around for cheaper insurance and outsourcing certain tasks to freelancers could result in significant savings.
6. Tweak your business model
Necessity is the mother of invention – a sentiment Aussie businesses have taken to during COVID-19. Pubs and cafes are reinventing themselves into grocers and convenience stores, gin makers have started producing hand sanitisers, and bricks-and-mortar stores are quickly innovating to take their business online.
Consider ways your business could pivot to generate new income, or steer resources into other areas – such as digital or social marketing – to attract new customers.
While a crisis can be overwhelming, use the time wisely to look for savings, innovate and increase earnings to mitigate the impact on cash flows. Get it right and you’ll emerge stronger and far more resilient on the other side.
Disclaimer: This article does not constitute financial advice and we recommend you speak to your financial advisor before making any decisions.