Friday, 19 June, will mark 100 days until the end of the government’s JobKeeper wage subsidy program, but experts are questioning whether SMEs are ready to stand on their own two feet.
According to the Australian Bureau of Statistics (ABS), 72 per cent of businesses have taken a revenue hit as a result of COVID-19, while 73 per cent of Aussie businesses have accessed support measures, including wage subsidies, renegotiated rent/lease and deferred loan repayments.
But with these measures due to cease in 100 days, Andrew Spring, partner at insolvency solutions firm Jirsch Sutherland, has questioned the readiness of businesses to fend for themselves.
“The JobKeeper safety net is being removed in three months — not to mention other stimulus initiatives and forbearance measures ending soon — and that means business owners should be getting on the front foot now to survive,” Mr Spring said.
He urged company directors to be proactive about assessing the impact of the COVID-induced crisis on their business and the changes required to get back on the right course.
“That includes getting your accounts in order, meeting taxation and superannuation obligations and, if necessary, seeking professional help from a qualified adviser,” Mr Spring advised.
Bill Lang, executive director of Small Business Australia, believes SME “heads are out of the sand now” and many business owners are recognising the value of a survival plan.
“There are practical steps owners can take to avoid bankruptcy, so with the right advice early on, owners should not be scared to consider shutting their business with a view to preserving resources to reinvent themselves in a post-COVID-19 marketplace. Getting educated about their options is critical,” Mr Lang said.
Mr Lang advised businesses to situate their cash-flow planning “under the worst-case scenario”.
He said: “If neither a COVID cure nor vaccine is found, society will have to live with it.
“Before JobKeeper ends, business owners should determine what expenses can be reduced to minimise the cash-flow impact on their business, invest in further digitisation, particularly e-commerce and digital marketing, and most importantly keep healthy, talk to other business owners and family, keep close to creditors and involve them in their plans.”
Mr Lang also advised businesses to seek professional advice.
According to Mr Lang, SME owners should be asking themselves the following eight questions:
- Cash flow: What is my cash-flow situation like now and what will it be like after stimulus ends?
- Revenue streams: Will my revenue streams recover and are there opportunities for new streams?
- Staff: Can I afford to keep staff on post-JobKeeper?
- Deferred liabilities: Can I meet deferred payments (e.g. rent, mortgage)?
- Tax obligations: Do I have the money to pay tax when it falls due?
- Superannuation guarantee: Do I have enough money to meet the next superannuation payment?
- Worn out/no mojo: Do I want to hang on or have I lost my passion for the business?
- Personal guarantees: Are my personal assets at risk (e.g. personal savings, house, car)?
Agreeing with Mr Lang, Mr Spring noted that it’s crucial for business owners to understand that personal guarantees don’t fall away under the COVID stimulus or deferral measures.
Mr Spring concluded: “Business owners should be aware of ‘sleeping personal guarantees’ that will awaken later — e.g. leases, make-goods, trade credit applications, finance, credit card debts etc.
“Any debt deferral decision may exacerbate liabilities, which could put personal assets at greater risk if the business is ultimately unable to meet the liability.”