Given the uncertainty of the times ahead, it is critical to be as prepared as possible. We outline what you can be doing now to put your Business Continuity Plan in place to put you in the best position for the months ahead.
Be clear of your position relating to COVID-19
Now is the time to determine your organisation’s policies in relation to COVID-19 and ensure this is clearly communicated to your staff and clients, areas you should cover in this policy include:
- Client/customer meetings.
- Event attendance.
- Staff travel.
- Working from home, including hardware and software requirements, video conferencing and management of data security.
- Infection control, including how you will respond if a member of your team becomes infected.
- Health policies, including procedures your employees should follow should they fall ill, feel unwell or come into contact with someone who has recently travelled.
Given the rapidly changing nature of what we are all dealing with, it is important to be fluid and keep everyone informed.
- Communicate regularly with your customers/clients through email, your website and social media pages to ensure they know you are open for business and to advise them of your business’ COVID-19 plans.
Advise your customers/clients about the measures and protocols you are taking to make your premises safe and how you will interact moving forward.
You have a duty of care towards your employees to provide a safe place of work. This includes not putting them in a position in which they could become infected by the virus without taking all reasonable precautions. To meet your duty of care, conduct a risk assessment to determine the risk that coronavirus poses in your workplace and implement necessary controls to eliminate or reduce risk.
You should be communicating openly with your employees and be clear about the options available should they be required to isolate themselves. Things you consider include:
- Policies regarding working from home, including where employees are required to stay home to mind their dependents if schools are closed.
- Offering flexible work hours.
- Potential reduced hours for staff.
- The legal requirements regarding reducing your employee’s work hours.
- Compliance with any relevant industry awards.
How you will respond if employees refuse to come to work due to the threat of infection.
Maximise your cash position
For many it is business as usual, however given the uncertainty it is critical for business to maintain an appropriate cash flow to enable continued operation.
Maximise stimulus benefits
The Federal Government has announced a number of measures (Click here to view our newsletter on this topic) to assist businesses.
- Ensure you are aware of how these work and maximise them.
- There may be an opportunity to restructure how business owners are remunerated (ie instead of dividend or trust distribution, consider paying wages) to maximise these benefits.
The WA State Government has also announced a number of measures to assist employers:
- Increase of the payroll tax threshold to $1 million effective 1 July 2020. For employers with taxable wages less than $7.5 million this will mean an annual saving of $8,250.
- Defer payment of 2019-20 payroll tax to 21 July 2021.
- An application needs to be made to defer this payment.
- One-off grant payment of $17,500 for employers with taxable wages between $1 million and $4 million. There is no need to apply for this grant, the grant will automatically be paid via cheque from July 2020.
Prepare a cashflow forecast
Create or update your business cash flow plan for the coming months. You need to quantify your daily and weekly planned cash position to make informed decisions
Make use of ATO support
The ATO has announced the following measures for those experiencing difficulty.
- Individuals and businesses can request deferral of some payments (such as income tax, activity statement, FBT and excise payments) by up to 4 months.
- Businesses with under $20 million of turnover can elect to report and pay their GST monthly instead of quarterly to accelerate access to GST refunds (but only from 1 April 2020 and the registration must remain monthly for 12 months).
- Quarterly payers can vary their PAYG instalment for the March 2020 quarter and claim a refund of instalments paid for the September and December 2019 quarters. Variation of PAYGI still needs to be supported by realistic expectation of income for the 2020 year.
- Businesses can request remittance of interest and penalties applied to tax liabilities incurred after 23 January 2020.
- Businesses can request a low interest payment plan for their existing and ongoing tax liabilities.
These measures are not automatic – businesses will need to contact the ATO using the hotline 1800 806 218. We can of course assist you in this regard.
It is critical that businesses continue to lodge and report obligations in a timely manner. Failure to do so can result in additional penalties being charged.
Maximise cash in-flows
- Verify accounts receivable – verify outstanding invoices with customers, so you know there is no realistic reason for a customer to dispute or delay payment when the time comes.
- Confirm expected receipt dates – confirm the date that your customer has in their payable schedule for paying your invoices. You can then send reminders to ensure the payment arrives on time, and if not you have an alarm bell to be proactive in following up your cash flow.
- Chase up late payments promptly – don’t be complacent in chasing late payments. You need to set a standard with your customers of what is expected. It’s proven that setting the expectation means you will be paid quicker than the other suppliers who are not chasing up on this.
- Sell unused equipment – be realistic about what equipment you need in your business. Decide if you can sell any underutilised or obsolete equipment.
Minimise cash out-flows
- Supplier terms – discuss payment terms with your suppliers to see if you can extend your terms or receive a discount if you pay early.
- Reduce costs – reduce costs where possible. Many businesses have extras that in the good times seem to be needed (e.g. lunches, training courses). Be critical and if there is an expense that will not put you at risk or reduce productivity at this time, then think about cutting it.
Loan and lease repayments – Most banks have hardship teams offering a range of services that may be of support. For more information, or to find the number for your bank’s hardship team go to https://www.ausbanking.org.au/campaigns/financial-hardship/
It is important that you consider your business’ ability to meet its creditors and service its debts over the next 6 – 12 months, particularly if you are experiencing reduced cash inflows from your customers and clients.
- Most banks have hardship teams offering a range of services that may be of support with regards to renegotiating repayments. For more information or to find the number for your bank’s hardship, team go to https://www.ausbanking.org.au/campaigns/financial-hardship/
- Consider alternative funding sources – debtor funding solutions can free up cash without requiring property security.
- Consider whether additional facilities or increased credit are appropriate in case of emergency, it may make sense putting these arrangements in place now.
Be clear of your internal business procedures and policies
- Review your general insurance policies for any Business Interruption Insurance inclusions. Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
- If key decision makers need to self-quarantine or are incapacitated in any way, are there mechanisms in place to ensure that the business can continue to operate.
- Ensure any EPOA and Will are up to date now and ensure your family and professional advisors know where the original signed documents are.
At Cooper Partners, it is business as usual. We are available to support you and assist you in making your business decisions over this unprecedented time. If you have queries in relation to any of the above, please contact your Cooper Partners engagement team.
This newsletter is current as of 18 March 2020, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve. Please contact us to discuss.