According to Scottish Pacific, too many SMEs have not yet added up the total value of expenses they have deferred in the last six months, and with the September cliff just around the corner, the financier has warned that the time has come to factor in what cash businesses will need between now and Christmas.
“When COVID-19 hit and JobKeeper and other initiatives were put in place, September seemed a long way away — it’s only a week away now, and small businesses need to act,” said Scottish Pacific’s general manager for Victoria, Jane Starkins.
She believes SMEs should consider funding that will help them maintain and grow their business, and explained that by organising this now, business owners could avoid bigger problems later in the year.
“Accountants can play a pivotal role in encouraging their SME clients to work out their obligations now and take steps early if they don’t think they’ll be able to pay everything that has accrued. The wave of debt coming at some businesses will be too great if they do not start planning for it now,” Ms Starkins said.
“It would be heartbreaking if a business finds itself in a position in October where it has to choose between paying their overdue rent [and] purchasing stock to sell in the lead-up to Christmas.”
Ms Starkins, a Turnaround Management Association board member with big four bank and big four accounting firm insolvency experience, said it was important to help small-business owners understand that to have a successful future, now’s the time to make a payment plan.
“Advisers can help business owners bite off this task in small chunks so it’s not one overwhelming debt. They don’t need complicated analysis models, it’s about sitting down and helping them work out what they’ve deferred that they’ll need to catch up on,” Ms Starkins said.
She noted that while many businesses may be reluctant to take on traditional bank debt in uncertain times, there are other options available to help them get back on track.
“Businesses concerned about taking on debt should also be concerned about how they’ll be paying their bills. Not paying bills doesn’t mean the debt does not exist. All the unpaid bills and deferred expenses are real debts that need to be paid,” Ms Starkins said.
“Business owners are reluctant to extend their borrowings. They are busier than ever trying to navigate the COVID-19 environment, which means accountants and brokers have a crucial role to play in making them aware of other funding solutions.”
She explained that now is the ideal time for business owners to find funding paths that harness the value of assets already in their business, such as their sales invoices or plant and equipment.
Ms Starkins concluded: “It’s also the time to protect the family home by unlinking it from a business’s debt.
“More than ever before, business owners have to think on their feet and act quickly.”