With the new financial year craziness wearing off and we settle into our new normal, now is a good time to rethink your strategies. For this year in particular, it is essential that you do this.
It is essential that small businesses are on the ball in thinking creatively. Here are some simple tips to implement as we slowly set into FY21:
Form a strategy team
If you do not have a strategy team in place for your business, now is the time to form one. Even if you are a one-man business, you still need a network around to review your strengths and weaknesses. In that case, co-opt your accountant to join the team and reap the benefit of their expertise and critical thinking.
What you do know is that continuing to run the business as you did previously may well prove fatal, due to the lingering effects of the pandemic.
Been avoiding your tax return?
If you’ve been preoccupied with other things and still haven’t lodged your tax return, ensure that you stress to your accountant to take all legal steps available to defer profit. You more than likely enjoyed many months of normal trading and solid profits last financial year, and this year saw fragmented trading and profit due to coronavirus.
This includes writing down the value of stock, writing off fixed assets which are now of no use to you and ensuring that bad debts have been written off in the books as at June 30.
Another thing to note is if you are considering purchasing a major capital asset of up to $150,000 in value, do so before December to obtain the instant asset write off.
If you have already completed your tax return to boost cash flow, don’t worry. These steps can be implemented in next years return, especially as the long-lasting impacts of the pandemic will be felt well into FY21.
Create conversations with your lenders
If you have any business loans, including lease finance, contact the lenders. You should also request your bank to defer capital repayments, so you can accrue interest rather than having to pay it now.
The principle behind this, is that you should do whatever you can to avoid spending money. With such uncertainty, cash on hand may be critical in enabling your business to survive.
If your debt level in the business is low, spend the time now to check with your bank and other lenders about finance options. It’s better to obtain finance if you can, even if you simply leave the money in your bank as a buffer. Whilst this will cost you the interest differential, it may provide a lifeline in the future.
Deal with outstanding creditors
It’s important to prepare a list of all your significant outstanding creditors. Of those creditors, those which you don’t expect to be recurring (e.g. one off debts) should be contacted to set up an instalment program. Most of your creditors will be open to this, provided that you reach out to them with a reasonable repayment schedule (around six months), make it easy through setting up Eftpos payments, and stick to it.
For recurring suppliers, talk to them about extending your trading terms. If you’re on 30 days at the moment, ask if they will accept 60 days. There’s no harm in asking.
Approach your landlord
If you have qualified for JobKeeper, contact your landlord and request rent relief. If you have been a good tenant, it is likely that your landlord will agree to an arrangement.
A typical agreement to put forward would be a 30 per cent reduction in rent, with 50 per cent of the reduction treated as an outright waiver and 50 per cent repayable interest free over a two-year period.
Reducing wage costs
Businesses which survive the coronavirus-recession will tend to be those which have been able to reduce their wage costs.
This may involve a combination of reducing staff numbers, improving productivity by setting up efficient business processes, job sharing positions and reducing staff hours.
The only way you can effectively do this is to talk to each team member, individually, and see what works for them. You may well find that a full-timer is more than happy to drop to 30 hours a week and still be able to carry out the same amount of work in those reduced hours.
The four months have no doubt been the most challenging you have faced in your business life. The next six months will be equally challenging but also offer many opportunities.
Roger Mendelson is the CEO of Prushka Fast Debt Recovery.