Fordham manager Scott Douglas asks, are you keeping up your business hygiene as well?

We’ve all heard the phrases on repeat these last few weeks, social distancing, flatten the curve, personal hygiene and business hibernation.

The last phrase is an interesting one, how exactly do you put a business into hibernation when there are still significant cash expenses such as wages and rent that need to be met?

The answer to the question is that it is simply not possible without some form of assistance from the State or Federal governments and they have most certainly started coming to the party in this sense.

Below is a summary of the announcements made by both Federal and State governments to date but this is just one piece of the puzzle as at this difficult time business hygiene is more important than ever so we also wanted to share with you what we’re talking to our clients about to assist them in navigating these murky waters.

Overarching the below is the need for every business to have a rolling 12-week cash-flow forecast.

Your forecast should be flexible in the sense that you need to know the worst case, best case and likely case scenarios.

You should be looking at this forecast almost daily to determine if you are still on track and update it as often as you need.

Armed with this forecast you will be able to make decisions on the fly and hopefully fight your way through today’s problems to emerge tomorrow stronger than ever.

Rent relief

The Federal government announced on Sunday night that there will be a six-month eviction moratorium to provide employers with a means of retaining their cash through withholding rental payments, although how this will work in practice is yet to be determined.

What we have seen is that some of our clients have been engaged directly by their landlords offering deferrals or reduced rental payments for the duration but if you haven’t been engaged directly by your landlord we urge you to pick up the phone and see what they can do to help.

The Federal government also announced that they will be extending the 50% loan guarantee scheme offered to small and medium business to include larger employers.

Banks have also announced the extension of the loan payment deferral scheme to businesses with loans up to $10m bringing the total package of funding assistance so far to around $250bn!

What we have been urging our clients to do to manage their debt repayments, regardless of their qualification for the assistance package, is to engage with their financiers and seek payment holidays, P&I freezes or loan extensions.

If these are too difficult to negotiate, perhaps look to move to interest-only for a period.

Some States have also announced the deferral of Land Tax payments and local councils are also starting to come to the party with forgiveness of trading permit fees, council rates and even not enforcing parking fines!

Wages assistance

There has also been a raft of store closures and armies of people stood down from their employment across numerous industries. 

The challenge then for both employer and employee is how to ensure the employee is looked after whilst not bleeding dry the employer in a period when they are effectively unable to trade.

There have been numerous announcements so far from both State and Federal governments in relation to this, Payroll Tax holidays and deferrals from State governments as well as the ATO picking up the bill for up to $100,000 of PAYG Withholding over the March and June quarters.

On top of this the Federal government have announced the introduction of a new JobKeeper Payment which will provide all full-time and part-time employees, as well as casual employees with over 12 months service, that were employed as at 1 March 2020 with a payment of $1,500 per fortnight before tax.

Further information on this payment as well as a summary of all stimulus measures announced so far can be found on our website.

These JobKeeper payments will be administered by the ATO through the Single Touch Payroll system and will start flowing through to employers’ bank accounts in May 2020.

Right now, you have an opportunity to re-enlighten your staff to allow them to access this payment and we would strongly encourage you to do so.

In addition to registering for the JobKeeper Payment, what we are advising our clients to do is to keep communicating with your staff during this challenging period. 

The JobKeeper payment is aimed at allowing employers to keep an employment nexus between business and employee when perhaps the business might otherwise be unable to do so. 

As such, aside from ensuring a level of cash flow for employees of businesses that have been affected, it also positions both employee and business to pick up where they left off, when the Covid-19 haze lifts.

Whilst management and owners are focussing on business survival, employees are similarly focussed on their survival. 

Ultimately, if stronger measures are required to be implemented by employers and work forces are stood down or redundancies being made then the messaging from the senior management needs to be that they’re feeling the pain with their staff and taking pay cuts along with them.  

Qantas CEO Alan Joyce was a perfect example of this with his three-month salary holiday prior to standing down their workforce.

So keep reworking your cash flow, keep communicating with staff and stay safe!

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