Warning to SMEs: payment times have completely blown out

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Small businesses are receiving payments from clients a month late on average – that’s 18 days longer than last year. Make sure your business’s cash flow isn’t adversely impacted this holiday season.

The blow-out in payment times is having a “devastating impact” on small businesses across the country, warns the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).

In October, small businesses were paid 31 days late on average, compared to 13 days late in October 2019, reveals CreditorWatch data published in a recent report.

ASBFEO Kate Carnell says the delay in payments is hitting businesses already under strain due to COVID-19.

“It’s more important than ever to remember that although Small Business Counts is a statistical report, behind every number is a person,” she says.

“Small businesses are the engine room of the Australian economy, but they are also hard-working people who have had to overcome huge obstacles in 2020.”

What businesses are worst impacted?

The transport, postal and warehousing sector has been hit hardest by the blowout in payment times, with those businesses receiving payments an average of 90 days late, compared to 9 days late in October 2019.

Other sectors with average payment delays of over 30 days include:

– financial and insurance services

– professional, scientific and technical services

– construction

– rental, hiring and real estate services

– healthcare and social assistance businesses, and

– many other service-based businesses.

It’s doubtful these figures will improve over the next couple of months, with the summer holidays a notorious period for late payments.

So if you haven’t started invoicing clients yet, you should consider doing so now – especially those who have a history of being tardy.

Silver linings in 2020

It’s worth noting that the ASBFEO report isn’t all bad news.

It also highlights the resilience and agility of Australian small businesses.

It shows 40% of small businesses have pivoted their operations to adapt to the rapidly changing conditions faced in 2020 – whether that be due to the summer bushfires or COVID-19.

“It’s been inspiring to hear the stories of small businesses that made a decade’s worth of change in a matter of days and managed to keep their business afloat,” says Ms Carnell.

Funding options are available

If your business is struggling with cash flow issues due to late payments from clients, or a recent change in direction, then please get in touch sooner rather than later.

We can run you through some financing solutions that may be available to help your business make the transition from 2020 (good riddance!) to 2021 (here we come!).

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

8 ideas to improve your business’s cash flow over the festive season

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The festive season is fast approaching and this year, more than ever, it’s important for businesses to ensure they have their cash flow management in order. Here are our top 8 ideas to help you through the upcoming period.

While the holiday period is usually a boon for retailers, cash flow problems still hamper many businesses, as accounts departments across the country take a much needed holiday.

With COVID-19 causing all sorts of headaches and heartaches for businesses big and small in 2020, you’ll want to make sure you’re transitioning into 2021 with your best foot forward.

So, with the festive season just around the corner, below are 8 cash flow tips for navigating the silly season.

Top tips

1. Invoice now: Begin sending out your invoices now, and start with clients who have a history of being tardy.

2. Discounts: If you want invoices paid super fast, consider offering a 10% discount to clients who pay within 7 days.

3. Extension, please? Chat to your major suppliers about possibly extending your terms over the upcoming period to 30 days (or more, if possible).

4. Outsource: If you don’t want to personally ask clients to pay overdue invoices for fear of getting them offside, use accounting software such as Xero, or hire a third-party bookkeeper, to chase up the payments on your behalf.

5. Invoice Financing: If you don’t want to hassle your clients to pay you promptly, another option is Invoice Financing, which is a line of credit secured by unpaid sales invoices (get in touch to find out more).

6. Request deposits: For new projects over this period, consider requesting a 20% to 50% deposit from the client.

7. Minimise expenses: Minimise unneeded expenses where possible. For example, if you don’t have the personnel to onboard new clients during the holiday period, consider switching off or dialling back your Google and/or Facebook ads.

8. Last but not least, get in touch

If you think you’ll still have a gap in your business’s funding over the months ahead – especially with JobKeeper winding down – then it’s important to start considering your financing options as soon as possible.

It’s worth noting that the RBA recently cut the official cash rate to record low levels, and many lenders are offering competitive financing options to businesses as a result.

So to find out more about what financing options are available to you and your business, get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Flow of credit to small businesses remains strong

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Small business owners in need of credit will be buoyed by new data that shows the approval rate for loans has remained strong throughout the coronavirus crisis.

In fact, about 70% of SME business loan applications received by lenders have been approved since early February, according to Australian Banking Association (ABA) statistics.

That’s resulted in more than 128,000 Australian sole traders, small businesses and medium-sized businesses receiving loans, with an average loan size of $320,000.

Breaking it down further, that’s 500 new SME loans a day for more than 250 days.

The ABA data is in line with the latest Sensis Business Index, which shows 26% of businesses that applied for finance over the past three months were knocked back.

Why the flow of credit remains strong despite COVID-19

The figures have no doubt been assisted by the relaxation of business lending rules, the federal government’s Instant Asset Write-off Scheme (now expanded to “temporary full expensing”), and the Coronavirus SME Loan Guarantee Scheme.

Temporary full expensing allows businesses, both big and small, to immediately write off any eligible depreciable asset, at any cost, up until 30 June 2022.

This can help improve your business’s cash flow by allowing you to reinvest the funds back into your business sooner.

The Coronavirus SME Loan Guarantee Scheme, meanwhile, allows businesses with a turnover of up to $50 million to apply for loans of up to $1 million with participating lenders.

The loans can generally be offered by lenders “more cheaply and more freely” compared to ordinary business loans, as the government will guarantee 50% of the new loans.

How we can help

While 70% of loans being approved is great news, it’s obviously not quite a done deal when you apply for finance in the current financial landscape.

So, to help avoid being among the unfortunate remaining 30% of businesses, get in touch with us today.

Our job is to act as a conduit between you and the lender, which allows you to focus on your business while we focus on getting you the finance that your business needs.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Turbocharged instant asset write-off scheme unveiled

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There was one big-ticket initiative in the federal budget that really caught our eye, and that was the turbocharged version of the instant asset write-off scheme. Today we’ll look at how it could improve your business’s cash flow moving forward.

Did you catch the announcement that businesses, both big and small, can now immediately write off any eligible depreciable asset, at any cost, up until 30 June 2022?

Well, that’s any business with a turnover of up to $5 billion (and I don’t know about you, but I don’t rub shoulders with many businesses that size).

Treasurer Josh Frydenberg says the initiative will unlock investment opportunities for businesses by freeing up their cash flow.

“A trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester and a good manufacturing business will be able to expand its production line,” Mr Frydenberg says.

Let’s look at the scheme in a little more detail

The government is calling the new initiative “temporary full expensing”.

But to put it more simply, it looks like an expanded version of the popular instant asset write-off scheme, which was previously only available for small and medium-sized businesses (SMEs) and for assets up to $150,000.

Now, however, any business with a turnover of up to $5 billion can immediately deduct the full cost of any depreciable asset purchased from 6 October 2020 and first used or installed by 30 June 2022.

The cost of improvements made during this period to existing eligible depreciable assets can also be fully deducted.

There are a few other key details you should be aware of, however, especially when it comes to the purchasing of second-hand assets, including:

– Full expensing also applies to second-hand assets for SMEs (with an aggregated annual turnover of less than $50 million).

– Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing instant asset write-off scheme.

– SMEs that acquire eligible new or second-hand assets under the $150,000 instant asset write-off by 31 December 2020 will also have an extra six months, until 30 June 2021, to first use or install those assets.

To help explain things further, below is a brief case study provided by the ATO.

Case study: Grace’s Grains

Grace owns an agricultural company, Grace’s Grains Pty Ltd, which has an aggregated annual turnover of $20 million for the 2021-22 income year.

Grace’s Grains Pty Ltd purchases a combine harvester for $600,000, exclusive of GST, on 1 July 2021.

Without temporary full expensing, Grace’s Grains Pty Ltd would claim a total tax deduction of around $180,000 for 2021–22, with the remainder of the cost being depreciated over future years.

Under temporary full expensing, however, Grace’s Grains Pty Ltd will instead claim a deduction of $600,000 for the full cost of the combine harvester in 2021–22, approximately $420,000 more than before.

At the 2021–22 tax rate for small and medium companies of 25%, Grace’s Grains Pty Ltd will pay around $105,000 less tax in 2021–22.

This will improve the company’s cash flow and help Grace reinvest and grow her business.

Your next step

Being able to write-off assets purchased is all well and good, but if you don’t have access to the funds to purchase them, then the scheme won’t be of much use to your business.

So if you’d like help obtaining finance to make the most of temporary full expensing for your business, get in touch with us today.

We can present you with financing options for the scheme that are well suited to your business’s needs now, and into the future.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

More than a quarter of SME businesses knocked back for finance

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As if small and medium-sized businesses weren’t already facing an uphill battle this year; now it turns out that more than a quarter were knocked back when they applied for finance in recent months. Here’s how we can help.

The latest Sensis Business Index – which surveyed 1,015 businesses in the first week of August – shows 26% of businesses that applied for finance over the past three months were knocked back.

The figure was worse in the bush with 37% of those applying in regional areas declined, compared to 25% in cities.

Additionally, fewer and fewer businesses are applying for finance.

The percentage of businesses that applied for finance dropped to 13%, down from 16% in March and 17% in December 2019.

How we can help

All of the above figures highlight the importance of having a broker like us guiding you through the process.

Here’s what small business lender OnDeck has to say in regards to its recent research on the importance of having a trusted professional to speak to while applying for finance.

“Our survey clearly highlights that SMEs place significant value on the input of a broker in the commercial finance process,” says Robbie Fidler, OnDeck Australia national broker channel manager.

“Brokers can act as a conduit between lenders and SME owners, providing the person-to-person link that is so valued across the SME community.”

Additionally, SME lender Scottish Pacific recently highlighted the important role brokers can play in helping businesses prepare for that September “cliff” you’ve probably heard about.

“When COVID-19 hit and JobKeeper and other initiatives were put in place, September seemed a long way away – it’s only a week away now, and small businesses need to act,” says Scottish Pacific’s General Manager for Victoria, Jane Starkins.

“We are having regular conversations with accountants and brokers who realise their clients need funding in place to pay expenses they have been deferring, including rent, asset finance, PAYG, superannuation and payroll tax.”

Ms Starkins adds that now is an ideal time for business owners to find new funding paths that harness the value of assets already in their business, such as their sales invoices or plant and equipment.

“Business owners are reluctant to extend their borrowings. They are busier than ever trying to navigate the COVID-19 environment, which means accountants and brokers have a crucial role to play in making them aware of other funding solutions,” she says.

Get in touch

If you’re an SME owner in need of finance solutions to get through the months to come, get in touch.

The sooner we can discuss your options with you, the better placed your business can be to avoid the September cliff and thrive beyond.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.