The expression “Cash is King” has never been more relevant than right now. It is relevant for individuals, households and business. It is relevant across the board.
The focus of most businesses right now is on protecting employees and mitigating the risks to their business during these unprecedented times so that they can continue to grow and thrive once the time comes to return to normal business operations. Having a great understanding of your cash flow position will ensure you can make informed decisions.
The best time to predict cashflow is now
With stimulus and support measures in place, it is good to understand what impact they will have on your business. A reminder of some of the recently announced stimulus and support measures:
Federal Government Stimulus Package
- Cash flow boost to employers
- Temporary relief for financially distressed businesses
- Supporting the flow of credit
- Earlier access to superannuation
- Income support for individuals
ATO Support Measures
- 6-month deferral of BAS, income tax, FBT and excise payment dates
- Provision to vary March PAYG instalments and claim credits for Sept and December 19
- Remitting of penalties and interest incurred post 23 January 2020
- Provision of low-interest payment plans for business’ existing and ongoing tax liabilities
Understanding your cashflow position means you have the appropriate information to make decisions in this critical time. Be aware of your potential cashflow shortfalls so you can be ready to adapt – this may be in the form of price changes, reducing expenses or even arranging additional finance.
This can be achieved by preparing three-way budgets which incorporate Profit & Loss, Balance Sheet and Cashflow and monitoring these budgets against actual results.
How can Nexia Edwards Marshall NT help you?
Nexia Edwards Marshall NT has the skills and capabilities to assist with the development and building of these three-way budgets. If you would like our assistance, please do not hesitate to contact your Nexia Edwards Marshall NT advisor.
We’ve summarised some short-term ideas which are critical in this climate to ensure you have adequate cash flow:
- Implement good debtor management. Discuss with your customers/clients and arrange payment plans suitable for all. Follow up your customers quickly, get confirmation of when they will pay and follow up any outstanding actions.
- Send out your invoices as soon as the work is done. The longer you hold off sending, the longer it is to collect the money.
- Is it easy for your clients to pay your bills? Have multiple avenues to allow ease of payment.
- If there is a lag in payment time, send out timely reminder to your clients.
- Call in a debt collector to assist following up older outstanding debtors.
- Your terms and conditions should be clearly stated with penalties for not following them.
- Look at what can be reduced, renegotiated or modified in terms of business expenses. Review discretionary spending. Renegotiate with suppliers, landlords &/or banks. Can you modify the way payments are made by paying upfront and receiving discounts?