This article is based on a publication issued by the Australian Restructuring, Insolvency and Turnaround Association, of which we are full members. The original article is available here.
The coronavirus pandemic has seen many businesses cash flow decrease or even stop due to government shut down measures. So, if your business is suffering financial problems due to this crisis here are eight essential steps you should take.
1. Be honest with yourself
The first step to solving your financial problems is admitting they exist. So review your business’ financial situation and then if you are in financial difficulty follow the remaining steps below.
2. Keep your financial accounts up to date
You need to know what you owe, to who, when the major bills are going to fall due and how much they are going to be. Look especially at rent, loans, tax and major suppliers. You also need to check who owes you money and if they’re going to be able to pay. Making sure your books and records are up to date is also critical in protecting you later if things get worse.
Even if you are unable to pay tax, you must lodge BAS shortly after they are due and if you cannot pay superannuation you must lodge Superannuation Guarantee Charge Statements. This will help you avoid being personally liable for these debts if your business is traded through a company, under the ATO’s Director Penalty Notice provisions.
3. Are you already insolvent?
This is a tough question to face – but you need to. The law says you are insolvent if you can’t pay your debts as and when they fall due. If you can secure more funds from a lender or an investor that will pay those bills, then you are ok. But, if not and that’s the spot you’re in, you should immediately seek professional advice.
4. Talk to the Tax Office
Tax bills are one of biggest costs that a business pays. It’s important to remember that GST revenue and income tax withheld for employees isn’t your money. But we also know that it’s quite possible you don’t have what’s required to pay the bills when they fall due.
The ATO has now issued special advice about help that’s available which you can access from their website.
5. Talk to your bank & lenders
Here is where it helps if you’ve got your accounts done. Being able to sit down with your bank and show them you know the situation you’re in and being able to discuss the outlook is the best way to gain their support.
Most banks have made public announcements about their willingness to support their customers in these tough times. Remember, it is absolutely in your bank’s best interest to have you trade through tough times and remain a customer in the long term. They are likely to be firmly on your side.
6. Talk to your suppliers
They are probably facing a tough time as well. And they will certainly know others amongst their customers doing it hard. Have an open discussion with them and work out what you can agree together. Just like banks, it’s in your suppliers’ interests to keep you going and remaining a customer over the long term. But do understand that they too might be squeezed for cash right now.
7. Get professional advice
Pearce & Heers specialise helping businesses in financial distress. So who better to help you now? We can assess all options with you and advice and assist implementing viable solutions.
8. Look after your mental health
Contact us for advice and assistance
If coronavirus has affected your business, you must act quickly to minimise the impact, so please contact Pearce & Heers at our Brisbane or Gold Coast offices for an initial obligation-free consultation.