Give your Business best Recession chance
If you read anything insolvency related at the moment, there are predictions that there is a recession to come especially after the Government Stimulus package has finished.
We have not had a recession in Australia since the late 90’s with the “recession we had to have”. Australia had a severe economic downturn during the Global Financial Crisis but we were saved from a full blown recession because the Labour Government propped up the economy with a massive cash boost.
In a recession we see a number of events occurring, people spend less on everything except the bare essentials, interest rates increases as the cost of money goes up, unemployment rises and markets start to correct themselves back to a point. Such markets include share market, property markets, bonds markets.
Even though the Government has provided significant cash boosts to the current economy, we may still see a recession around March 2021 onwards when the cash boosts and JobKeeper end. Even at this time, I am hearing of businesses that are only just hanging on. So, if these businesses are just hanging on now, what is their business life going to look like when they have to pay their staff or rent again?
Whilst we agree that there may be a recession towards the back end of 2020 / beginning of 2021, there are things that you can be doing to try and recession proof your business now….
1. Review Your Business with Fresh Eyes
This means look at your business genuinely and not as something that you have created but as an outsider looking in. Review all the numbers. Look at your business’ sales and its expenses. Look at your staff and their roles.
While you are looking at these numbers, are there expenses that you really do not need at the moment? Is there a course that you are currently doing that is not yielding you any benefit? Is there a membership that is not really supporting you?
Have a look at your staff and their roles. Do you really need all of the staff members you have? Is there overlap in people’s roles that one person could be doing? Is there a task that you could be doing that may save a years’ worth of wages? Could you automate someone’s role and save money?
Review your sales. See who your biggest customer is and go and see them for a coffee to strengthen your business relationships. See if there is a market you could sell your products or services to that you had not thought of before. Ask people around you, connections on LinkedIn, complete strangers in the street, is there a market for my product or service that I am not seeing.
Unfortunately, now is the time to review the numbers and make all of these changes to your business to run it as lean and mean as possible. Because if it is not now, will it be after a Liquidator has been appointed?
2. Check all your documents
When I was a Cub Scout the motto was “Be Prepared” and now is no different. Be Prepared.
Look at all the documents you have been provided by suppliers. Check to see if you have provided any supplier with a personal guarantee. If so, you may want to consider your business relationship with that supplier. Are these supplies essential to my business? If so, is there someone else that can supply the same supplies for the same price? If there is another supplier, if I open an account with that supplier, will they ask me to supply a personal guarantee? If the answer to the final question is no, you may want to consider getting the previous supplier paid in full and closing the account with them and opening a new account with a new supplier.
Look at your company’s debt and outstanding lodgements with the Australian Taxation Office. Have all of the Business Activity Statements been lodged within 3 months of the due date of the lodgement? If the answer is no and you have employees, do you realise that the ATO can issue a Director Penalty Notice to make you personally liable for PAYG.
The above can also be applied to outstanding superannuation previously, however as at 1 April 2020, there is no more 3 month grace period to lodge a Superannuation Guarantee Charge form.
What also came into effect as of 1 April 2020, is that the ATO can make a Director personally liable for GST if the BAS’ have not been lodged within 3 months of the due date. Are you aware of this?
Look at getting BAS’ lodged on time in the future and the past ones brought up to date. If you owe Superannuation, get the Superannuation Guarantee Charge form lodged and then look for ways to pay the ATO beginning with the Superannuation, not all debts at the same time cause you will not win.
Do not use the ATO as your second bank, it will hurt you down the track.
Finally, have you lent your business real money (not just sweat and tears) to trade or paid a bill on behalf of your Company from personal funds. While you may be calculating the amount owed to you and saying that “one day” you will re-coup it, that “one day” never comes. I have seen clients owed hundreds of thousands of dollars personally by their businesses but because they did not secure it on the Personal Property Security Register (“PPSR”), they line up with all the other unsecured creditors, rather than being 1st in line.
If you have large loans owed by your business to you, contact me to discuss how we may be able to help you properly secure your loan.
3. Plan, Plan and Execute
So you have looked at your numbers, looked at your market, looked at your workforce, reviewed your documents and hopefully brought everything up to date and things are looking good again.
Now is the time to reach out to people that may need your product or service to set up a meeting to show them why they need your product or service. It is also the time to reach out to people in your networks to see if they can introduce you to “your ideal customer”.
Finally, it is also the time to write your ad’s and post them in local malls and shopping centres, on LinkedIn, Facebook or even a letter box drop depending on your clients but also in a targeted way.
These are designed to improve your top line number, your sales. Because without sales, no business can survive.
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As always, if you are struggling with any aspect of business, thinking of putting your company into Liquidation, been told your business has no future or have any sort of debt enquiry, please reach out and lets work through it together.
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