How to support your business’ cash flow during COVID-19

May 5th, 2020

5 helpful ways to maintain cash flow for small businesses during the coronavirus pandemic

Cash flow for Australian businesses has already taken a hit en masse as a result of the recent pandemic. And unfortunately, many businesses are predicting the situation only to worsen in the near future.

In a recent survey the Australian Bureau of Statistics reported that 72% of Aussie businesses expected to face a reduced cash flow over the next 2 months. In addition to this, 69% of businesses predicted a limited demand for goods and services in the same time frame. If your business is currently struggling with insufficient cash flow, find out the five best ways to bolster your finances below. 

Government cash flow boosts 

As part of the government stimulus package released on 22 March 2020, eligible businesses will receive between $20,000 and $100,000 in government cash flow boost funding. These grants are tax free and available to all eligible businesses who lodge their activity statements up to the month or quarter of September 2020. 

Find out if your business is eligible:
  • Must have an active ABN that’s been active since at least 12 March 2020
  • Annual turnover of less than $50 million
  • Made eligible payments that you are required to withhold from (even if the amount you need to withhold is zero) for example:
    • Salary and wages
    • Director fees
    • Eligible retirement and termination payments
    • Compensation payments
    • Voluntary withholding from payments to contractors

These grants do not need to be applied for, you are simply required to lodge your activity statement. How much your business is eligible for will depend on the amount of tax your business pays on employee wages. 

Businesses can qualify for two cash flow boosts. Each cash flow boost is available for 100% of the amount of tax withheld up to a max of $50,000. They will be paid out in either two or four instalments depending on your reporting cycle.

The instant asset tax write off

The government has increased the instant asset tax write-off threshold from $30,000 to $150,000 as of 12 March 2020. The instant asset tax write-off allows businesses to instantly write-off eligible business purchases in their next tax return. The new instant asset write-off threshold applies to business assets bought between 12 March 2020 and 30 June 2020. 

There are two main ways that the instant asset tax write-off could help your company’s cash flow:

  • Purchasing new equipment before 30 June 2020. Updating your current business equipment or vehicles could increase your cash flow long-term if it helps to improve your business’ productivity and/or sales. However, while the expenditure can be instantly written off in your next tax return, it might be difficult to invest in if your business is really struggling to come up with funds at the moment.
  • Selling currently unused equipment to other businesses. Selling unused equipment/vehicles to those who are looking to take advantage of the write-off is a shorter-term and more quickly effective way to improve cash flow for your business. Unused equipment is effectively a financial deadweight, and if your business doesn’t have expendable funds right now, this is the best time to take advantage of the write-off and mutually benefit your business and another company who can write-off the purchase in their next tax return.

Invoice financing

If you run a B2B business that issues invoices for goods or services provided, invoice financing - also known as debtor finance - could improve your cash flow significantly during the coronavirus outbreak. Invoice financing allows businesses to unlock capital tied up in their unpaid invoices in as little as 24 hours.

With invoice finance you don’t have to risk your personal or business assets as loan security, because your outstanding invoices are used as collateral on the borrowed funds. Loans are also instantly repaid when your client pays, so there are no ongoing repayments. 

With invoice financing providers like Earlypay, businesses can qualify for up to 80% of their accounts receivables to be instantly funded, prior to client payment. Invoice financing can remain completely undisclosed to clients, so there’s no need to tell your customers that you are using an invoice finance provider. 

Government-backed business loans

The Australian government recently announced the Coronavirus SME Guarantee Scheme, in which it will back business loans to small-medium businesses struggling with cash flow in light of the pandemic by 50%. 

Loans under the scheme will be available up to $250,000, with no repayments due for the first six months and no interest charged on unused funds. All loans will be available on terms of up to three years and are unsecured. Select lending institutions are taking part in the scheme, including most of Australia’s big banks.

Jobkeeper payments

The government’s JobKeeper payment program will give eligible businesses access to $3,000 per month per employee for up to six months. This scheme is intended to help businesses to retain their current employees and limit job losses across the country. 

To be eligible to apply for JobKeeper payments, your business must have:

  • Employed at least 1 eligible employee on 1 March 2020
  • Experienced a 30% fall in turnover (for an aggregated turnover of $1 billion or less) or a 50% fall in turnover (for an aggregated turnover of more than $1 billion)

Finding the best solutions for your business

If your business is facing cash flow problems as a result of COVID-19, it’s a good idea to contact any of the resources mentioned above, as well as any creditors that you may have, as early as possible to inform them of your situation. This is a difficult time for many businesses and measures are being taken wherever possible to protect SMEs. 

If you think that your business can benefit from earlypay's modern debtor finance facility and would like to find out more, please contact our team today on 1300 760 205.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].