We are getting inundated with clients looking for help as the COVID-19 pandemic tracks towards being the greatest social upheaval the world
has seen since World War II. The updates and announcements are coming at a breakneck speed.
It’s not easy to stay calm at this time but we are here to help you and we will continue to post regular updates.
It’s become clear that some industries will be more severely impacted than others and the most common question we are getting from clients
is, “What do we do next?” In response, we have put together an action plan checklist.
It is vital that you act quickly and decisively and work your way through this action plan. There are cash incentives, loans and tax payment
deferral strategies to consider. Of course, feel free to contact us by phone or email as face to face meetings are no longer available.
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:
Look at where you stand from a year-end tax point of view
Finalise your March BAS and look at any potential variations to minimise your cash outflows
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
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 requi
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