Novel Covid-19 is well and truly on our doorstep and as a business owner I’m concerned. Like every other business owner my mind is filled with all the “what-if” scenarios I can imagine; what’s likely to be the worst-case scenario; will my business be impacted; when and how will it all end? It’s tempting to let panic take over, but having been through the GFC back in 2007, it won’t help – take my word for it.
It’s better to prepare rather than panic. In any sort of economic downturn, it’s the businesses that are able to diversify and pivot that survive. Here are some strategies that might just help your business go the distance in 2020.
Know your numbers
Now’s the time to look at your P&L and examine the numbers.
- Where is your business vulnerable? Look at your income and your costs.
- Can you reduce or cut back on some of your expenses?
- Ask your suppliers for longer terms, payment plans or better deals.
- Talk to your landlord about a reduction in rent for a short period.
- Look at your leasing payments, is there any flexibility on the terms?
- Review your subscriptions and cancel or suspend the ones you can live without.
- Assess your inventory; can you cut back or cancel back orders?
- Consider liquidating some of your existing stock – if you’re in retail and don’t have an online presence consider selling on Gumtree, eBay or Amazon.
- Shorten your terms to 7 days and follow-up customers who don’t pay you on time.
- Contact your Insurance broker and ask them to review your business insurance – are you covered for loss of trade for example?
Change the way you work
Grab your team and start to strategize – two heads are better than one. Think about the worst-case scenario(s) for your business and how best to deal with each one.
Can your business operate from home and do you have the tech in place to do that? Do you need to purchase equipment or subscriptions to Teams or Zoom, for example, that would allow your staff to continue to work and communicate easily, enabling your business to continue operating?
Now is the time to consider what the new ‘normal’ might look like. If you decide to go down the ‘work from home’ track, prepare guidelines for your staff to ensure that they remain accountable and efficient.
Consider diversifying your services
In an economic downturn of any kind, being able to diversify your business can be the difference between surviving, thriving or failing. So, with that in mind, what can you do in your business to make that difference?
Is there a product or service that you can add to your business? An online course perhaps or a new product? Is selling your product online now an option? Is there an opportunity to home-deliver your goods or product?
Talk to your existing customers and let them know that its business as usual. Engage them with a special offer, add a gift with purchase, or consider free postage for online sales over the weekend for example; make your current tribe feel special.
Look for growth opportunities that might compliment your existing business. Now’s the time to strategize not react. You don’t need to implement all of your strategies at once; rather take your time and ensure that each new idea you have is considered and strategically implemented when the time is right.
Talk to your staff
During the last GFC countless people lost their jobs. The last thing you want to do as a business owner is lose the valuable assets you have in your staff. Before you decide to retrench staff consider flexible working arrangements that will help both your business and your staff.
Full time staff may be prepared to reduce their hours, say from 5 days to 4 per week, for example, over a short period; take holidays or a reduction in pay.
Of course, whatever arrangement you come up with needs to be by mutual agreement between you and your staff, I can’t stress that enough. Now is not the time to go rogue. If in doubt speak to Fair Work about your options.
Know your obligations – government assistance on offer
The ATO has just announced a range of initiatives that will help small business owners manage through the inevitable economic downturn over the next few months.
The Commissioner of Taxation Chris Jordan said that the ATO will “work shoulder-to-shoulder with businesses to assist them through this difficult period”. Some of the ways that the ATO** intends to help include:
- Deferring, by up to four months, the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, FBT assessments and excise;
- Allowing business 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 and December 2019 quarters; and
- Remitting any interest and penalties incurred on or after 23 January 2020, that have been applied to tax liabilities.
Government assistance on offer
The Federal and State governments are also putting together a variety of stimulus packages that directly assist SME. On March 22 the Federal government announced measures that include*:
- Enhancing the instant asset write-off threshold from $30,000 to $150,000 for businesses with an aggregated annual turnover of less than $500 million. Valid from 12 March to 30 June 2020;
- SME with an aggregated annual turnover under $50 million (based on prior year turnover) and that employ workers will be eligible for the “Boosting cash flow for employers” measure. This will provide a tax-free payment (minimum of $20,000 and up to $100,000) back to employers that withhold tax to the ATO on their employees’ salary and wages. It will be delivered as a credit in the activity statement system from 28 April 2020. Businesses that withhold tax to the ATO will receive this payment back as a credit automatically when the March 2020 BAS is lodged. This initiative will apply from March to June 2020.
- Government backed loans up to $250,000 for SME. The loans are unsecured and no repayments are required for the first 6 months. Of course you’ll need to be able to start paying back this loan after the 6 month repayment amnesty.
- Insolvency rules will no longer apply for the next 4 to 6 months. Refer to Treasury for more information.
Keep your eye out for the details in full once legislated. Talk to your tax professional to determine how they will benefit your business.
Sole traders and casuals
In addition to the above measures, the Government has announced the following for Sole Traders and casual staff:
- Access granted to personal superannuation for sole traders or casuals who can show a drop in income by 20% or more as a result of Covid-19. If you’re a sole trader whose income has taken a hit, a casual, or if you’ve accessed the Coronavirus supplement from Centrelink, you’ll be able to access $10,000 of your personal superannuation this financial year and $10,000 next financial year. This money will be tax free. To apply, you will need to contact your super fund after 1 April 2020.
- There is no asset test now to access unemployment benefits.
An economic downturn and its negative impact on business is not unusual, but the first time you experience it as business owner can be stressful. It’s important to stay calm and remember this – get advice and talk to the pros if needed, but it’s your business, you decide what happens, what strategies you implement and how you react to the changing landscape. The time to act is now!
Updated 22 March 20 4:45pm
*As advised by the ATO. For more information on these initiatives refer to the ATO.
** As advised by the ATO. Read further information here.