This morning the JobKeeper extension bill was introduced to parliament – which basically outlines the changes to the JobKeeper scheme that were announced by the Government extending the reimbursement subsidy to March 28th, 2021. I will provide some more detailed information once it is available however, we do know that JobKeeper is likely to come to an end for some current JobKeeper employers at the end of September (final payment in October.)
Since the Government introduced JobKeeper, many small – medium business owners have relied on this stimulus measure and despite it being a “reimbursement” scheme, it has really assisted with keeping employees in a job and helping with cashflow from month to month. When the extension was announced, “new eligibility criteria” were flagged meaning that to continue to be eligible from September 28th (or to become eligible) the employer needed to meet the 30% decline test in July – September 2020 quarter and then retest in October – December 2020.
The current JobKeeper system does not require retesting for eligibility and many business owners have been in receipt of the JobKeeper payments for the entirety of the scheme (up to 6 months.) Some business owners will have found themselves financially better off under this system as they may have recovered from the initial decline in income and these owners will need to ensure that have not absorbed or become used to the additional JobKeeper funding. Other business owners may find that they are still suffering from COVID related sales decline and as they don’t meet the 30% decline test, the JobKeeper payment will cease. Other business owners may be somewhere in between, there are many stories and I am aware of several clients who are concerned by the new eligibility criteria. With this in mind, we know that the end of JobKeeper could cause a real change to the business cashflow so it’s important to start preparing for how this will effect your business.
Review your current cashflow situation and test it to see what things will look like without JobKeeper
Practically speaking, your software should have a cashflow report showing inflows and outflows on a monthly basis. Review this for the last 3 months and ask yourself the following questions:
- What does my cashflow look like without the JobKeeper supplement?
- Do I expect my income to be more or less than these months I am looking at?
- What will the business cash at the end of each month look like with these things in mind?
While it’s sometimes hard, it’s important to consider a “worst case scenario” approach and then determine some action points if this were to occur. Now is the opportunity to be proactive.
Consider whether you may need to speak to your financial lender to obtain a loan or line of credit to help cover your expenses.
If you have been using the JobKeeper funds to begin a new project or you are waiting on a payment from a customer who is COVID effected, make sure that you think ahead and speak to your lender in advance as applications can take time. Sometimes banks will require updated accountant prepared financial statements or tax returns so it’s important to know in advance what is required to avoid any delays.
If in doubt, seek help
If you are uncertain about your cashflow position then seek help. It is crucial to speak to a trusted advisor like an accountant or a financial planner to get advice in a timely fashion. Often, poor cashflow can create other problems within an otherwise successful business and it’s generally cashflow that keeps us awake at night.
Here at IQ, we are ready and willing to help with a wide range of services for clients who need assistance. We have been:
- preparing cashflow reports for clients and then having 15 minute phonecalls to explain what these mean and creating action points to deal with the issues raised
- having 30 minute monthly meetings to review trading and profit trends and discuss growth and profitability strategies
- doing financial modelling with clients to assist them in determining what the cashflow will do if “we make this choice” vs “making this choice”
- holding “understand your business better” meetings – explaining what the bookkeeping reports mean and teaching clients how to get more data and information out of their own bookkeeping information and then how to use that data
- providing affirmation, being that trusted person to run a new idea past and providing yes/no “does this make sense” feedback
- reviewing processes and offering a set of “fresh eyes” for new opportunities, increased efficiencies and increased revenue
- providing other guidance tailored to specific clients needs.
If you would like to find out more about these services or more, please email firstname.lastname@example.org or phone 07 5576 0011.