Preparing Your Business For The End Of JobKeeper
Whether or not you are currently receiving JobKeeper payments, the winding back of JobKeeper in recent months, and its eventual end in the next few weeks has the potential to affect the entire economy and all businesses. This, together with the winding back of payment holidays by the banks and the ATO could adversely affect consumer spending and business cash flow.
No one has a crystal ball, so it is impossible to predict what will happen. I hope that the government’s strategy of a staged reduction in government assistance, plus the roll out of the vaccine, will mean negligible impact as the broader economy continues to get back to normal. However, it is probably wise to prepare for the worst and welcome anything else
The Direct Impact of the End to JobKeeper Payments
Many of our clients, and obviously many businesses throughout the economy, have already seen an end to the JobKeeper payments. For some businesses, especially in the trades and home improvements sector, the end to the JobKeeper payments didn’t adversely affect them since business has been strong after the initial downturn in March/April.
However, many other businesses in sectors such as residential and commercial construction, hospitality, tourism, events have relied on JobKeeper to keep staff employed and to keep their doors open. An end to JobKeeper doesn’t mean that their businesses have fully recovered – many are still down, they are just not down by the 30% required to meet the JobKeeper eligibility criteria.
Whether JobKeeper was providing a welcome savings or spending boost, or whether it was providing a true lifeline, as JobKeeper payments end there is going to be an inevitable reduction in spending by these businesses and some will even find that they are no longer able to retain all of their staff. Some may even decide to close their doors altogether, especially if the banks and the ATO comes knocking.
How To Prepare Your Business
There are two main ways in which you may be affected by the end of JobKeeper payments.
- You may be currently receiving JobKeeper or have had payments end recently.
- You may have customers who will be affected and this can in-turn affect your business.
In the first instance, you need to really be on top of your numbers and understand exactly what your new profit and cash flow situation will be without these JobKeeper payments. In particular, speak to your advisors about the following:
- Understand what your new break-even position will be. This is the amount of sales you need to make each week or each month to cover your costs, including loan repayments.
- Put in place a cash flow forecast for the remainder of the year. This should include anticipated changes in revenue and expenses and account for the number of working days in each month, the number of pay periods, when BAS payments are due, etc.
- If the forecast shows a shortfall then examine areas where you can cut costs or strategies to grow your revenue.
- As with any change, communicate with your team but be decisive and act early.
If you are not receiving JobKeeper payments currently, or an end to them won’t be a big deal for you, you may still be impacted by customers who feel the effects of JobKeeper ending. This could be business customers who no longer receive JobKeeper payments or it could be employees of businesses that are let go or whose hours are cut back. You need to look at the following areas to protect yourself if your customers are impacted:
- Tighten up your credit processes and stay on top of your debtors. There may be a risk of more bad debts or slow paying debts and the squeaky wheel normally is the one that gets oiled first.
- Understand which customers may be impacted and how this may affect your sales and cash flow. Run some cash flow scenarios that show the potential financial impact to your business.
- Look at strategies to diversify your customer base or range of services to make you less vulnerable to certain revenue sources.
- Conserve cash and be prepared to make cuts to your expenses if sales are eventually impacted.
- Review your finance facilities and whether these need to be upgraded while your position is still strong. Ironically, it’s more difficult to put in place finance when you actually need it, so do it while you can.
Reach Out For Help If You Need It
Many of the strategies that I have outlined above require you to be on top of your numbers and be able to forecast the potential impact on your financials and cash flow.
I work with many businesses and I totally understand that numbers don’t always come naturally to people. Don’t bury your head in the sand and make sure that you reach out to your existing accountant or advisors to help you in these areas. And feel free to contact us if you need some advice or assistance preparing your business for potential changes or to assist with your growth objectives.
Director, Chan & Naylor Business Coaching