There are many things Australians can expect to look forward to once we reach our 80% vaccination target. As our locked down states begin to open back up, and life returns to a new normal, financial support for our COVID-impacted businesses is set to come to an end. With this in mind, it’s more important than ever for business owners to have a clear understanding of their current and upcoming cash flow position to ensure that their businesses reopen successfully.
In this article, BlueRock accounting advisor Johanna McCartney outlines the changes to current funding and support, and how successful cash flow management can help set businesses up for success.
Current Financial Support Provided to Businesses
As well as the JobKeeper scheme, which finished up on 14 April 2021, COVID-affected businesses may now be receiving the following support, which is being jointly funded by State and Commonwealth Governments:
- COVID-19 Disaster Payment (Vic)
- Business Costs Assistance Program (Vic)
- Licensed Hospitality Venue Fund (Vic)
- Small Business COVID Hardship Fund (Vic)
- JobSaver (NSW)
What Will Support Look Like as We Reach Vaccination Targets?
Treasurer Josh Frydenburg recently announced that federal funding would taper off once vaccination rates hit 70%, and will come to a stop once 80% of a state’s population over 16 is fully vaccinated.
COVID-19 Disaster Payment (Vic)
When 70% of the population over 16 are fully vaccinated, individuals receiving the COVID-19 Disaster Payment will have to re-apply for it each week. Once the vaccination number reaches 80%, the payments will taper off over a period of two weeks, until they reach 0.
Business Costs Assistance Program (Vic)
On 30 September 2021, one final round of Commonwealth-supplemented business support for Victoria was announced, with the state left to fund remaining measures. COVID-impacted Victorian businesses will continue to receive weekly support payments of between $1,000 and $8,4000 (based upon a company’s payroll) for another 6 weeks.
Licensed Hospitality Venue Fund (Vic)
More than 9,000 licensed hospitality venues across the state receive automatic payments between $5,000 and $20,000. Through the first week of November, venues that are still relying on the fund will face reduced rates to reflect the lower restrictions that will be in place.
Small Business COVID Hardship Fund (Vic)
The Small Business COVID Hardship Fund will be extended in order to allow a further 30,000 businesses to receive one-off payments of 20,000.
JobSaver (NSW)
JobSaver payments are currently the equivalent of 40% of a weekly payroll, with a minimum payment of $1500 per week, paid fortnightly.
When NSW reaches a 70% vaccination rate, payments will be reduced to 30% of a company’s weekly payroll. Based on current vaccination trends, this could occur as soon as 10 October 2021. Along with this, the minimum payment will drop from $1,500 to $1,125, while the maximum payment will also be reduced from $100,000 to $75,000.
Once NSW reaches a vaccination rate of 80%, the Commonwealth contributions will cease entirely. From here, the program will be funded solely by the NSW Government, and funding will be reduced again from 30% of a company’s weekly payroll to 15%. The program is expected to conclude by 30 November 2021.
Setting Your Business Up for Long-term Success Through Effective Cash Flow Management
To help you mitigate the changing landscape as government funding draws to a close, we suggest reviewing the following cash flow tips:
Cash Flow Management Tip 1: Keep Your Books Up to Date
Your cash flow is only as good as your accounting and reporting. If you’re seeking funding from external sources, such as a bank, you’ll need to provide this information to them in a timely manner.
Cash Flow Management Tip 2: Monitor Your Cash Flow Forecast
It’s crucial that business owners set a cash flow forecast for their business and monitor it regularly – at least monthly. This provides you with the best chance to address any issues before they get out of hand, while taking up any opportunities that may arise.
Cash Flow Management Tip 3: Know How Much You Need to Break Even
Before you can work towards a positive cash flow position, it’s important to first understand how much your business needs to earn in order to break even.
Cash Flow Management Tip 4: Monitor Your Cash Flow Regularly
Monitoring your cash flow enables you to predict when things may need to be managed more tightly, and periods where you can expect more freedom. You may wish to leverage a software system like Xero or Float to make it easy to report on and interpret the data. If you’re not sure where to start, BlueRock’s Melbourne-based accountants are happy to help.
Cash Flow Management Tip 5: Have an Emergency Cash Reserve
With many businesses struggling as a result of the current climate, it can be difficult to have an emergency cash reserve. For additional support during these trying times, businesses can access the Federal Government’s low-rate SME Recovery Loan Scheme to provide funds in the event of an emergency. BlueRock’s Melbourne-based finance brokers can assist with this application process.
Cash Flow Management Tip 6: Set Clear Timelines and Terms for Invoicing Businesses
Before taking on new clients or suppliers, it’s important to establish clear payment terms up front and in writing. Some businesses are also able to request part/full payment upfront, which will reduce the amount of time spent chasing debtors in future.
Cash Flow Management Tip 7: Review Your Cash Flow vs Profit
It’s important to recognise that cash flow and profit are not the same. While you need to be able to show profits on paper, it’s of no help to you or your business if it’s not flowing through to your cash flow. Business owners should take the opportunity to examine what expenses and obligations they have that don’t impact their profit and loss.
This could include:
- Hire purchase repayments
- Loan repayments
- Investment in new equipment
- ATO payment plans
For further support in monitoring your cash flow and preparing your business for the end of COVID-related financial support in the coming months, get in touch with our Melbourne-based accountants for a free consultation.
