Some of the popular end of financial year measures businesses undertake could be risky unless SMEs put in place measures to secure adequate cashflow.
Jon Sutton, the Chief Executive Officer of ScotPac Business Finance says, “Measures such as the temporary full expensing extension are there for SMEs’ benefit, but taking advantage of such measures requires good cashflow.”
“It’s no good using the instant asset write-off measures to buy a piece of equipment if making that purchase puts a severe dent in your cash flow.”
“Putting in place a flexible capital structure, offered by funding options such as invoice finance, means a business can act when opportunities arise.”
ScotPac has the following tips for SMEs as the financial year comes to a close.
Understand the exact cash needs of your business
Having a clear idea of how much cash you need to maintain your business-as-usual activities allows you to. Identify if you have excess cash which may be better invested or even used to take advantage of available incentives such as the instant asset write off.
Identify if there’s a shortfall which will impact your ability to meet obligations as they fall due – this is particularly important when considering outstanding ATO liabilities
Think about fixed assets your business needs
Providing you meet the eligibility criteria, your business should be entitled to an immediate tax deduction for the cost of the asset. Remember for this to hit your FY21 tax position, the asset must be installed and ready for use BEFORE 30 June.
Book an advisor and chat about your business ambitions
Partnering with a trusted advisor such as an accountant, bookkeeper or broker now will help give you the best chance to position your business for success.
Getting on the front foot with the ATO
Mr Sutton had a word of caution for businesses who had relied on the ATO’s lenience over the past year by not keeping up to date with lodgements or not making their BAS payments.
“The Australian Taxation Office (ATO) has been very lenient during the pandemic, allowing the small business sector a lot of leeway and time to recover,” Mr Sutton said.
“As we move into a post-COVID environment and many businesses return to growth, those with outstanding lodgements or payments need to get on the front foot with the ATO,” he said.
“Approaching the ATO and working out a payment scheme is much more advisable than simply putting your head in the sand about ATO debts and waiting for them to approach you.”
“It all comes back to careful cashflow management. If you have ATO debts, work out how much you can really afford to pay and have a dialogue with them about repayments,” Mr Sutton said.
“Using Invoice Finance funding helps in these situations. It brings forward payment of your invoices so you have cash in hand. You get 80% of your invoices paid straight away.”
“Assess whether your business could benefit from a self-liquidating revolving line of credit facility, rather than further exposing yourself by taking on more loan repayments,” he said.