Many small business owners are finding it hard to know how to proactively manage their business afloat in uncertain times. We’ve put together this checklist to help guide you and help you prosper once the economy recovers.
1. Know where you stand financially
To make informed decisions about your business, you need to understand your current financial position. This accounts for pending government restrictions, your ability to trade under current restrictions, pay outstanding debts, keep employees and meet existing leasing or loan repayments. Your accountant can explain to you where you stand and help you plan effectively to minimize the impact on your business.
It’s important to distinguish which costs are fixed and which are variable. Variable costs will change as the business generates more or less of its product or service, whereas fixed costs will remain constant regardless of the output. An example of variable cost is stock whilst a fixed cost could be utilities. This is essential to understand and maintain cash flow for your business even if your existing income and trade has been significantly disrupted by COVID-19.
2. Reduce your fixed costs by looking at your insurance
Business insurance is a fixed cost that all businesses must have to operate. Your business insurance may be costing you more than it needs to if you don’t regularly review the level of cover you need for your business. You can reduce this fixed cost by finding the best balance of cost and cover. With BizCover you can compare and generate quotes from multiple insurers online, with your chosen policy sent straight to your inbox in minutes.
3. Are you eligible for government assistance?
By now you should already be receiving the stimulus packages for which you are eligible. For sole traders, this includes access to the JobSeeker Payment, which now includes a coronavirus supplement payment and an increase in the income test for partners to $79,762 to provide greater access to support.
Your state government may have its own separate relief initiatives.
4. Talk to your bank
Small businesses can defer their bank loans. You will need to contact your bank or financial lender to discuss this arrangement. You should also chat with your bank’s financial hardship team. They may be able to help you explore further options. Visit the Australian Banking Association website for a list of hardship contacts for each bank.
5. Talk to your stakeholders
Stay in communication with your stakeholders at all times. Regardless of what is going on, it’s always best that they are up to date.
Your staff need to understand what your plans are and the likely impact on them. Communicate clearly and calmly with your staff, and be as open as possible.
You will also want to follow up all your debtors to try and get any overdue payments in. Renegotiating the terms of payment might be necessary based on what your debtors are able to pay in the current circumstances. You should also communicate with your creditors to see what payments you may be able to defer. Review your trading terms to ensure that you obtain upfront payments (where possible) or a deposit for any new orders.
Most importantly, make sure to keep your customers updated about your services. You should also check the latest Australian Competition and Consumer Commission (ACCC) advice on how to manage cancellations, delays or suspension of products and services in relation to your consumer obligations.
6. Seek advice on deferring tax payments
Businesses affected by COVID-19 can have some of their tax obligations deferred. Call the ATO on 1800 806 218 or speak to your accountant to discuss your options. Just be aware that deferring payments may impact your eligibility for other stimulus package options, so seek professional advice before you do anything.
7. Determine how your business will be able to operate
As restrictions are rolled back, your business may be able to operate in a way more similar to how it operated before COVID-19. Keep checking the latest restrictions for your state to see if there are any changes you need to make to fit in with these mandatory requirements.