JobKeeper Set to End, So What Next for Businesses
The Australian Government’s JobKeeper program is in its final stages and set to cease on 28 March, 2021.
Introduced in March 2020, JobKeeper provided vital cash flow to cover operational costs for businesses impacted by the Covid-19 global pandemic. It also helped businesses to retain employees and ride out the lockdown periods.
As of midnight Sunday, 28 March JobKeeper is scheduled to cease; so how should you be preparing your business for the future?
Some of the steps to recovery for businesses receiving the wage subsidies, include:
- Evaluate your business models
- Review your cash flow & financing
- Continue to focus on keeping costs down
- Seek advice from your trusted advisor.
With a Covid-19 vaccine beginning to be rolled out in Australia, and forecasts for economic recovery on the horizon, it’s an ideal time to consider what has worked for your business, what you want to continue doing, and how you can create opportunities to reduce ongoing costs and increase sales.
Evaluate Your Business Model
The COVID-19 crisis forced businesses to be more creative about the way they do things; restaurants pivoted to provide take-home meals, fitness studios ran online classes, and healthcare providers pressed ahead with telehealth services. Now is the time to evaluate your pandemic practices and decide whether they should become permanent.
“Many industries found new ways to sustain business during the Covid disruptions. They will need to consider if the innovations are worth keeping now as part of an ongoing business model, or if they return to their traditional operations,” said Marcus Staker, an Associate in the Accounting & Business Advisory team at Hood Sweeney.
Among the biggest adjustments was the shift to working from home, and the increased reliance on technology for meetings and other communications. Workplaces may need to assess if they allow employees to work from home permanently, and increase the number of suppliers to reduce the risk of your supply chain being disrupted.
Understanding your new industry norm and structuring your operations accordingly can help you keep up and compete as the economy recovers.
“The goal is to be at the forefront of your industry, and not reactive. It’s about committing to your business model, and businesses that act first tend to perform the best when it comes to weathering the storm.”
Review Cash Flow
Businesses need to plan for what will happen when their cash safety nets are removed. How will you, as a business owner, cover costs? How will you adjust operations, and how will you grow?
Firstly, you will need a revised cash-flow forecast. With JobKeeper and other government stimulus measures out of the picture, what is your cash flow going forward?
If you’ve been relying on JobKeeper payments, this will be the biggest risk to your business over the coming quarter. With as much detail as you can, put together a forecast for the next few months.
Once you have a clear understanding of how things will look financially, you can realistically consider necessary adjustments.
During and after the adjustment period of JobKeeper ending, make sure you keep your forecast up-to-date and update costs as necessary. Keep records of all outgoing purchases, plus spending and staffing decisions.
This is especially important if a business needs to apply for funding, either through new loans, increasing existing loans or for any form of business-based government grant or stimulus measure.
Banks and financiers will be looking for updated cash-flow budgets that include detailed descriptions and assumptions on how cash flow has been disrupted, what remedies are in place, and projections on how future business cash flow is sustainable.
Cash flow projections or budgets have assumptions around fixed costs and variable costs, which must be accurate for businesses to be able to borrow.
Your accountant can help to identify changes in cash flow, develop new cash flow forecasts and budgets, and assist with monitoring and managing performance to achieve a forecasted budget. A finance manager can assist with the next steps towards borrowing, if necessary.
Keep Costs Down
Many businesses went on a cost-cutting mission back in March 2020 when the first pandemic-driven shutdowns were announced.
Continuing to run as lean as possible, and storing any surplus cash while you still have the support of JobKeeper, will put you in a stronger financial position when the scheme ends.
“The biggest risk to businesses is uncertainty. Having some cash on hand can provide a buffer in case of further disruptions,” said Staker.
We know there haven’t been a lot of luxuries in the past year, and there’s probably not a lot of expenses to lose right now. But if any areas have come up in your cash flow forecast in which you could potentially tighten the belt, consider doing that while you adjust to losing the subsidy.
Your Trusted Advisor
Things can change quickly and government announcements could have a significant impact on your strategy and direction. That’s why it makes sense to stay in touch with your trusted advisors such as your accountant, financial planner and lawyer.
“As events unfold, business owners need to question what they’re doing and how events might play out,” Staker said. “Bouncing your plans off your advisors can help you make sure you’ve thought of everything and are making good decisions for your business.”
After JobKeeper ends, businesses will likely be back to fending for themselves in what’s expected to be a challenging economic environment. Strengthening your position now will give you a better chance of surviving and thriving when that time comes.
You already have March 28 in your diary, but start thinking now about how to prepare for a future without the JobKeeper wage subsidy.