What Could Possibly Go Wrong?
You have had a great idea, worked really really hard, endured the late nights, a few bumps along the way, built up a good business and now it should be time to reap the benefits….
But now things have taken a serious turn…..down.
Most small businesses have cash flow problems from time to time, it’s a part of life in small business. However, when cash flow problems become bigger it is time to ask someone for help, not when the bank or ATO are chasing you because, by then, it could be too late.
The Government recently announced a possible change to the rules that would allow the ATO to disclose tax debt information to credit reporting bureaus where the business:
- has an ABN,
- has a tax debt of at least $10,000 that is overdue by more than 90 days, and
- has not effectively engaged with the ATO to manage its tax debt.
If these rules are implemented, it will mean that a business thinking of obtaining finance or extending an overdraft may end up being declined by the bank.
Ask yourself a few questions about the way your business is dealing with its customers such as:
Are they going OK? What happens if they go under or can’t pay you? Do you have one in mind? A big one that owes you a lot?
Maybe now is the time to contact them and keep the lines of communication open and honest.
Are they always late in paying your invoices? Maybe they need to pay a late payment charge or similar to encourage earlier payment. Alternatively an incentive to pay early either via credit card or an early settlement discount?
Maybe it is even time for you to be spurred into action finding new customers that do pay, allowing you to stop doing work for someone that might never pay you.
Consider formal agreements that can be entered into with your bigger customers’ that can be relied upon if things go south. Often these agreements can contain a personal guarantee, so that if their business fails you may still be able to get some payment from their personal assets.
There are things a business should be doing regularly so that financial strains are minimized:
- Do your financials as early as possible so that they can be reviewed with your accountant and advisors.
- Everyone keeps an eye on the bank balance, but what about the balance sheet – this tells you if your assets like cash and trade debtors (what you are owed) are higher than your current liabilities and trade creditors (what you owe).
- Are there other liabilities that you have not taken into account, super up to date? ATO paid up?
- Are you up to date with your Tax Returns and BAS lodgments? When the ATO calls these in, it can cause serious cash flow problems.
Don’t hesitate to call us here at Paris Financial as soon as you become worried or suspect that tough times might be on the horizon.
We specialize in this area, never be embarrassed or stick your head in the sand, this is a real issue that can happen to any business and it can be prevented or minimized with the right action.
Ken Burk, Partner, Paris Financial