COVID-19 – So what now for you and your business?
So the unthinkable has happened. We are in lockdown and for a majority of the population, the ability to generate income has been severely limited for some, but expenses are still expected to be paid when they fall due. So what do you do now?
The most important focus business owner in such turbulent times should be on keeping your business alive and cash is the king. You need to plan and take action in order to help your business survive in the next 12 months.
CONSIDER THE FOLLOWING KEY AREAS
Cash is king. Given the current times, it is important to now prepare cash flow forecast to see where you stand financially for the next 12 months. Cashflow forecast will highlight some key areas that you can tackle as well as give you an accurate picture of actions you need to take to manage cash flow. It is also equally as important to constantly review and adjust your cashflow forecast to see the effects of revenue reduction have on your ability to pay suppliers and debt.
Reach out to your bank for financial assistance. Financial institutions are in position to offer support through providing credit, mortgage repayment holiday, restructuring of loans and/or interest only payment. Contact your banking manager to discuss options available to you.
Changes have been enacted on the 26th March 2020 and will apply from the 2020-2021 financial year onwards. Take advantage of these changes which include;
Increasing the provisional tax threshold for all taxpayers from $2,500 to $5,000 for the 2020-2021 tax year onwards, therefore reducing the need to pay provisional tax for those that meet the threshold test. You are also able to delay paying your provisional tax until the 7th February the following year rather than making regular payments throughout the year. Ability to claim full deduction for low value assets have been increased from $500 to $5,000 starting 17 March 2020 for 12 months. This threshold is the reduced to $1,000 from 17 March 2021. Non-Residential buildings will be able to claim building depreciation. Use of Money Interest – IRD have been given the discretion to waive interest on late tax payment for customers significantly affected by the COVID-19. Take advantage of this when cashflow is not permitting. You may be able to access In-Works Tax Credit from 1st July 2020 onwards as the hours test of 20 hours (single parent) and 30 hours (couple) have been removed.
WAYS TO IMPROVE CASH FLOWS
Contact your customers and encourage them to pay early or negotiate periodic payments for customers who are also struggling themselves. Then review your bookkeeping processes to ensure all your expenses and invoices are captured so you will also have up to date financials to assess profit, stock level, overheads, debtors and creditors.
Keeping your accounting system up to date is particularly important to monitor any cost overruns. Reduce any unnecessary spending. Inventory Management Review your inventory for any slow-moving stock. Consider selling these stocks at a discount in order to bring money into the business and avoid the stocks going obsolete, which will then become an unrecoverable cost to you.
Take steps to negotiate with your supplier to get payment extensions if they are in the position to help. Review the lease for your commercial property and contact your landlord to negotiate rent and outgoing reduction during the lockdown period as you are not able to access the property. Fixed Assets Management
Review all the assets you hold in your business and consider selling assets that are not generating much revenue for your business.
These are just some of the key suggestion of managing business affected by the COVID-19
but they are not exhaustive list. We are here to provide support and assistance. Please reach out should you like to discuss further.
DISCLAIMER: We are dedicated to helping you continue with business as usual, as much as you can. Information on government help is changing constantly and within hours of articles being added, the specifics may be out of date or only partially accurate. While we endeavour to keep this website accurate and current, our top priority is providing our clients with dedicated and relevant personal advice. If you need specific and up-to-date information, please seek help from your usual advisor directly.
JHR Consultancy Limited will not assume liability for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.