Business Action Plan Checklist

Get Your Records Up To Date

This is priority one. Up to date, accurate financial records allow us to work together to make informed business decisions. By preparing interim financial statements to March 31, 2020 we can:

1. Look at where you stand from a year-end tax point of view
2. Finalise your March BAS and look at any potential variations to minimise your cash outflows
3. The interim statements will help us calculate salaries to pay in the June quarter. The PAYG component will impact on your entitlement to government stimulus payments
4. Know your accounts receivable, accounts payable and current bank balances

Build a Cash Flow Forecast for the next 12 months and keep updating it at least every month as you get more information about revenue and costs.

Cash flow is the lifeblood of any business and it just became critical. The main reason most business owners prepare a cash flow forecast is to raise finance but right now it needs to identify how much money you will need and when. The forecast will project your bank balance at the end of every month.

Whenever you prepare a cash flow budget you have to make a number of key assumptions. These assumptions should be realistic and supported by research, available data plus known facts such as fixed costs (rent, and forward contracts).  The uncertainty around the duration of the crisis makes it hard to project revenue and costs but you need to do your best. For many businesses, revenue may be zero for months to come so identifying your Government entitlements under the stimulus packages is a key item on this checklist. 

The information in your cash flow budget is designed to:

• forecast your likely cash position at the end of each month,
• identify the timing of potential cash shortages,
• plan your tax payments; and
• plan for any major capital expenditure (instant asset write-off incentive).

To produce your cash flow statement, the starting point is to extract last year’s cash flow report from your accounting software. Project your likely receipts including any government stimulus payments. This won’t be easy but depending on your industry, you might need to work on a decrease of between 25% and 60% or possibly more, of sales.

Work through your fixed costs (rent, insurances, subscriptions, loan and lease repayments etc.) and then consider your staff requirements and calculate your anticipated wages. Next, plug in your variable costs like direct materials, stock, commissions, freight etc. 

A cash flow budget template is available to download from the resources tab of our website.

Government Stimulus Entitlements - Cash Boost

The Government is providing up to $100,000 to eligible small and medium-sized businesses and not-for-profits (including charities) that employ people, with a minimum payment of $20,000. Employers with aggregated annual turnover of less than $50m will receive a payment equal to 100 per cent of the PAYG tax withheld on salary and wages in the March and June quarters with the maximum payment being $50,000. The minimum payment is $10,000.

An additional payment will also be paid in respect of the July to September 2020 quarter. This means that eligible entities will receive between $20,000 and $100,000 when you combine both payments. The cash boost is a tax free payment to employers and is automatically calculated by the Australian Taxation Office (ATO) based on Business Activity Statements lodged. There are no new forms required. Eligibility will generally be based on prior year turnover.

• The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
• Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
• Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
• The payments will only be available to active eligible employers established prior to 12 March 2020. However, charities which are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognises that new charities may be established in response to the Coronavirus pandemic.

To qualify for the additional payment, the entity must continue to be active.

Government Stimulus Entitlements – Loans

The government has offered the banks $20 billion to help them lend $40 billion to struggling businesses. The maximum loan amount is $250k and these funds could provide a lifeline to eligible businesses (SME’s with a turnover of up to $50 million). Under the Scheme, the Government will provide a 50% guarantee to SME lenders for new unsecured loans to be used for working capital. Some conditions apply:

• Maximum loan size is $250,000 per borrower.
• The loans will be up to 3 years, with an initial 6 month repayment holiday
• The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan. Loans will be subject to lenders’ credit assessment processes
• The Government will encourage lenders to provide facilities to SMEs that only have to be drawn down if needed by the SME. 
• The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

Job Keeper Assistance

The Government’s ‘Job Keeper’ Program provides wage subsidy payments to Australian businesses (with a turnover of less than $1 billion) whose turnover will reduce by more than 30 per cent due to COVID 19. The decline is relative to a comparable period a year ago (of at least a month). Businesses will be able to claim a fortnightly flat payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months. Payments will begin being paid in the first week of May.

Eligible employees are employees who are currently employed by the eligible employer (including those stood down or re-hired) and were employed by the employer at 1 March 2020. They include full-time, part-time or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020). They must be at least 16 years of age.

The subsidy is specifically intended to keep employees in work, not to boost the bank balances of businesses themselves, and the ATO will enforce this. Self-employed individuals (businesses without employees) that meet the turnover decline test are also eligible to apply for Job Keeper Payments.

Consider ATO Payment Deferral Concessions  

The ATO assistance in this area is not automatic, so you will need to approach them for assistance. If eligible, the ATO will ‘tailor’ the assistance package for you. Please contact us if you need guidance in this area.

The ATO payment deferral concessions include:

• Deferring payment date of amounts due by up to 4 months for Business Activity Statements (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise duty.
• Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get faster access to GST refunds they may be entitled to.
• Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
• Remitting any interest and penalties, incurred on or after January 23, 2020, that have been applied to tax liabilities.
• Allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.

State Government Grants

State Governments are also providing various incentives.

The Western Australian State Government announced a $17,500 one-off grant for payroll tax paying businesses (with a payroll between $1 million and $4 million) to assist with managing the impact of Covid-19. Additionally the payroll tax threshold will increase to $1 million from July 1^st 2020, instead of January 1^st 2021. SMEs can also apply to defer their 2019-20 payroll tax until July 21, 2020 if their taxable wages are below $7.5 million and have been directly or indirectly impacted by Covid-19 compared to normal operating conditions.

The Victorian Government is offering a $10,000 grant to qualifying businesses who must meet the following criteria:

• Been subject to closure or highly impacted by Non-Essential Activity Directions issued by the Deputy Chief Health Officer and
• Employ people and have a payroll of less than $650,000
• Have a turnover of more than $75,000
• Hold an Australian Business Number (ABN) and held that ABN at 16 March 2020 (when the State of Emergency was declared); and
• Have been engaged in carrying out the operation of the business in the Australian State of Victoria on 16 March 2020.

Applicants must submit an application online via the 'Apply now' button on this page: https://www.business.vic.gov.au/disputes-disasters-and-succession-planning/illness-and-business-management-plan/coronavirus-business-support

Applicants are required to provide a copy of their most recent Business Activity Statement (BAS). Other supporting materials can also be provided.

The NSW State Government is offering relief on Payroll Tax. 

• Eligibility
  Employers whose total grouped Australian wages for the 2019-20 financial year are no more than $10 million.

• Payroll Tax Reduction
  Eligible employers will have their 2019/20 financial year payroll tax liability reduced by 25%.  The reduction in the liability will be received when the annual reconciliation for the year is lodged, which is due on 28 July 2020.

• Payroll Tax Payment Waiver
  Eligible employers will not be required to make payroll tax payments in NSW for the months of March, April and May 2020.  It is currently unclear whether the monthly returns will still need to be lodged. In this manner, the measures provide almost immediate effect by relieving eligible employers from the March 2020 payroll tax payment which would have been due on 7 April 2020. Eligible employers will still be required to report wages paid during those months in their annual reconciliation.  

• Payroll Tax Threshold Increased From 1 July 2020
  The NSW Government has also announced the payroll tax free threshold will increase from $900,000 to $1,000,000 with effect from 1 July 2020. This increase is a general increase and will apply to all employers. This replaces the previously scheduled increase in the threshold to $950,000.

Marketing  

At the moment it’s probably not high on your agenda, however, marketing remains important. Your competitors are probably rattled so this is an opportunity. The most important thing right now is communicate with your customers and clients. Remember, they are in the same boat as you and sailing in turbulent unchartered waters.

Anything you do to help them might be rewarded with some loyalty down the track. Digital marketing is cheap so send an email, produce a short video, write some blogs or produce an e-Book or newsletter. The shut down and lock down period can be used to develop your marketing plan for the next few months. It could be as simple as forwarding them this checklist or our Recession Proofing e-Book.