Why you should consider a Business Health Check Now that JobKeeper has Ended
The JobKeeper programme came to an end on March 29th. With a total cost of $101 billion over the course of the year, JobKeeper was the largest direct stimulus offered by the federal government to Australia during the coronavirus pandemic.
That is why it is more important than ever to conduct a business health check!
Changes to the Statutory Demand system were adopted in tandem, reducing the statutory demand’s effectiveness as a debt recovery weapon, secured lenders such as banks provided moratoriums on credit facilities, and the Tax Office curtailed its debt collection efforts.
As a result, many firms avoided formal insolvency, with overall insolvencies for the last 12 months being around 3,000 firms lower than the historical average, according to Australian Securities and Investments Commission statistics.
As these diverse regimes come to an end, many businesses and their directors should conduct a health assessment of the company to determine its current state.
How to undertake a Business Health Check
- Create a cash flow forecast/budget to determine the business’s cash flow requirements and anticipated cash burn for the following twelve months;
- Examine all business expenses to see if there are any areas where costs can be cut and profits can be enhanced.
- Examine the company’s creditor status to confirm that all creditor accounts are up to date and in compliance with trade agreements. Within the cash flow forecast, an evaluation should be made to guarantee that these outstanding creditors can be met from ongoing business operations.
- Examine all finance facilities within the business to ensure that they are fit for purpose and that funding is available to meet any expected cash burn;
- Consider the risks associated with the ongoing business, such as the risks of snap lockdowns like those in Victoria and Queensland, additional border closures, or a general economic downturn.
If you need a more detailed explanation of how to conduct this assessment, we highly suggest checking out this article.
If your business is in trouble, what can you do?
What exactly is it? If the business health check reveals worries about the company’s ability to repay creditors, finance facilities, or meet any continuous cash burn, what should you do?
Then, as soon as possible, take efforts to understand your business options and reduce your personal liability from dealing while bankrupt.
These are some of the possibilities:
-Restructure/workout in an informal setting
-Ordered business wind down
-Voluntary Administration or Small Business Restructuring Plan
-Members Voluntary Liquidation or Creditors Voluntary Liquidation
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If you found this blog post helpful and informative then you definitely need to checkout some of our previous blog posts, including the Bank Account Theory vs Financial statement theory and The importance of having a business plan.