The early withdrawal of JobKeeper is a cause of concern for businesses of all shapes and sizes. Yet, it also opens new windows of opportunity for those who are well-prepared for the transition.
As businesses are navigating through the economic impact of the global pandemic, the JobKeeper wage subsidy has been a much-awaited lifeline. However, the scheme is expected to end soon in March 2021 and the conversation quickly shifts to significant higher wage bills that potentially affect viability, profitability and cash flow.
Challenging as it may seem, the post-JobKeeper environment is actually an opportunity for businesses to overhaul their finances and operations and build a much stronger, more profitable business model. Let’s check out these 5 tips and make sure you are well-prepared for this crucial transition.
Have strategies in place for different scenarios
The post-JobKeeper market is uncharted waters and it is more important than ever for top executives to carry out scenario planning as well as internal assessment. Hope for the best but don’t miss planning for the worst-case scenarios. What would you do if your revenue suddenly declined? In case of revenue increase, do you have a strategy in place to keep the momentum going? What do you do if the headcount is cut off by 10%, 30% or even 50%? Are third parties such as bookkeeping services or marketing providers the answer to go?
In the next three months, arm your business with various scenario planning and strategies so that you will not be taken aback with anything that may happen in “the new normal”.
Restructure and streamline business operation
For many companies, reducing headcount is inevitable to reduce their wage bill and remain profitable. Should it be your case, carefully consider how, when and in which department(s) you will cut cost. The final goal is to balance between keeping wage costs as low as possible and retaining knowledge, skills and talent.
Integrated solutions are a viable option to redistribute responsibilities and optimise overheads, especially among small and medium-sized enterprises (SMEs). For instance, you can entrust back office functions like bookkeeping services and other accounting services to chartered professionals and direct your resources instead to business development, customer service or multi-disciplinary roles.
Forecast cash flow and cut costs
“Cash is king” may sound cliché but it is very true in the post-JobKeeper environment. In fact, forecasting cash flow is in the centre of most if not all successful businesses surviving through the pandemic. Simply speaking, a cash flow forecast helps track forecasted income alongside forecasted costs to see when your costs may exceed income, how often you will need to dip into your cash reserves and if you have sufficient cash to afford any upcoming costs.
Once you have a clear picture of what may happen to your cash flow down the line, the next step is to reduce as many expenses as possible. This will prevent you from dipping into the cash reserves too much. All initiatives count such as negotiating new accounting packages, discussing payment terms with suppliers or encouraging staff to work from home some days per week.
Understand profitability and streamline accounts
Profitability is not simply about gross or net profit but requires a deeper understanding of profit margins on every product or service that your company is offering. Upon assessing, you may find out that you are better off dropping certain items and focusing instead on key products that convert. You will also know where to optimise on the whole production process for more efficiency.
You will be surprised to know how improving payables and receivables can make a big difference to a businesses’ cash flow. Ensure that you send invoices promptly and have clear policies for overdue payments and early payments. It is advisable that you closely follow up and charge interest on overdue invoices to dissuade late payments. In contrast, consider offering a discount for early payments as an incentive.
When it comes to payables, try to introduce more flexibility to actively manage cash flow. For example, you can negotiate creditor payment terms, prioritise suppliers with flexible payment options and free up your cash by paying close to the deadline.
Does all of this overwhelm you? Don’t worry as using CFO services or chartered accounting services will take the worry off your shoulders. Third party providers offer bespoke end-to-end accounting and business advisory services which leverage the cloud and, more importantly, free up your capacity for other business development tasks to catch up with the new market.
Access capital and build recurring revenue
While restructuring and cost savings help strengthen your business for the post-JobKeeper environment, accessing capital is also vital to push the business forward. Look at ways to access credit, introduce liquidity and increase cash reserve to safeguard against cash flow challenges.
Another long-term strategy is to build recurring revenue. Unlike one-off sales, recurring revenue provides your business with reliable, consistent income that occurs at regular intervals going forward and include subscriptions, retainer contracts or membership programs.
What to expect next
Australia’s economy is already in recovery with positive growth in the last quarter of 2020. Therefore, as long as your business is well-prepared and takes prompt action to adapt, the end of JobKeeper is actually the force you need to compete and scale up again.
As always, the Keeping Company team are here to help. If you need any assistance or want to discuss more regarding those afore-mentioned tips, please don’t hesitate to get in touch.
At Keeping Company, we’re not just accountants, we’re business people too. With our counsel, your business can reach its full potential.
We have a team of experts; Cloud Accountants, Business Advisors, Finance Specialists working together and ready to help, contact us today.
For all media enquires please contact Tracy Miller, CMO, Keeping Company 0414 898 452.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.