Unless your business was severely impacted by the Covid-19 related restrictions over the past 6 months, you may find you currently have a comfortable amount of cash in your bank accounts as a result of the cash boost, payroll tax and JobKeeper assistance.  Regardless, for many businesses the support received to date is about to run out or be reduced.

So… Have you looked beyond September? Do you know what your profit and cash balance might look like over the next 12 months? How do you best deploy the cash you currently have in the business bank account?

If you haven’t done this already, one of the most important things you can do right now is a 3 way forecast.  A realistic and detailed forecast is crucial for guiding your business to tackle unexpected challenges and to ensure you stay on track during these uncertain times. A 3 way forecast is the most robust type of forecasting as it brings together your balance sheet (working capital, assets and loans) and your forecast profit to help predict your cashflow into the future.

Many clients tell us that due to the uncertainty of the current times, it is impossible to look forward.  However by doing a 3 way forecast we have been able help our clients to:

1. know what costs are ahead and therefore know the minimum sales required to meet those costs – this is called a breakeven analysis;
2. keep track of the payments they have deferred paying (tax, rent etc) to ensure the business has enough cashflow to pay them in the future;
3. run various scenarios regarding the 12 months ahead – what happens to my profit and cash flow… If my sales are down 15%? If we lose a major client?  If my staff work 4 days a week?  When the government stimulus runs out?  If we pay ourselves a dividend?  If our clients start paying us slowly?  If I buy this important piece of equipment for our business?…  The scenario planning options are endless; and
4. track actuals results against the forecast for the year identifying warning signs for the business and making decisions before it is too late.

Running your business without a forecast is pretty much like driving a car in the dark without the headlights on…

By taking the time to set are 3 way forecast and managing that forecast, you will give your business the best chance of survival and even growth during these uncertain times!

If you would like to have more certainty about your businesses future, please contact your Harris Black team member.

The current JobKeeper program ends on Sunday 27 September 2020.  A two-tiered reduced rate of JobKeeper continues depending on the hours worked by employees in either February or June 2020.

In order to qualify from 28 September onwards, there must be at least 30% reduction in actual GST turnover for the September 2020 quarter, compared to the September 2019 quarter.  Businesses currently enrolled for JobKeeper will not need to re-enrol.

Although the September 2020 quarter is not yet finalised, you should consider doing the following now:

– Estimate whether you will likely have reduced GST turnover of 30% or more for the September 2020 quarter;

– Decide whether to suspend paying employees top-up payments where it is unknown whether the business will have reduced GST turnover of 30% or more (where employees would ordinarily be paid less than JobKeeper); and

– Ascertain if eligible employees meet the 80 hour test in the 4-week payroll period commencing before 1 March 2020 or 1 July 2020 (you can choose either period on an employee by employee basis).

There are a number of alternative turnover tests as well as additional rules where payroll records are unavailable to test hours worked.

There are also ATO concessions which allow wages to be paid prior to 31 October for the 2 JobKeeper fortnights from 28 September to 25 October 2020 to allow businesses to evaluate whether they still qualify.