The Financial Cliff is fast approaching – have you prepared your cash flow forecast?


By Jason Bertalli, BNR Business Accountants 

Australia, and Victoria, in particular, are heading into what are possibly the hardest financial times in living history. Unemployment figure estimates at anywhere from 10 –15% depending on who you ask, potential property devaluations, and a depressed business climate that is still lying on the ground, severely wounded by the various COVID lockdown levels since March. 

The economy is only limping along in its current state due to Government assistance, via JobKeeper, Cash flow boosts, and the like, that have increased Government debt by around half a trillion dollars.  

Come the end of September, much of this support will stop. Many businesses that are only surviving due to this assistance may also stop. Dead in their tracks. With some adjusted extensions, the cliff has had its edges smoothed over. JobKeeper will stay to March but in a much tighter qualification format and reduced rates. The $550 fortnight bonus for those on benefits stays until December, but that doesn’t directly keep businesses afloat. The banks will be able to lend up to $1m in government-backed loans, with the ironic twist of the banks’ criteria based on “if you can afford the loan, you probably don’t qualify…”. And did I mention that the bank loan payment deferrals are coming to an end shortly too? Oh, and those ATO payments everyone deferred are still there… 

Depressing stuff. So what should you, as a surviving business owner, do now? Go back to basics and remember the Boy Scouts motto of “Be Prepared”. 

Acknowledge that this is going to be a long slow recovery, but also realise that some of your competitors may not be around, so it may be a prime opportunity to grab some market share. 

Check that what you do is still what people will want in this adjusted environment. The word pivot is overused, but the theory is sound, check what you do and tweak your offering if needed. 

Maybe most importantly, you want to hit this period with as much available cash as possible. If opportunity presents, you want cash. If things get tight, you want cash. If it’s not as bad a drop as we expect, having cash is still not a bad thing! 

So our top tips to get ready over the next few weeks: 

  1. Do a cash flow forecast. If nothing else, this is the one essential tool to guide you through this mess. You need to know what is coming. Your bank will need this to give you access to cash. If you don’t know where you are now, and your short-term receipts and payments, how can you possibly plan ahead? 
  1. Collect your debts, quickly. This could be the last time some of your customers have cash. It’s possible your debtors list has some “zombie companies” (collecting the cash grab from the government until the flows stop and they call insolvency) or even just some unfortunates who will run out of money anyhow.  Don’t be the one who doesn’t get paid. It may even pay to offer discounts for early payment to get ahead of the queue. Sure you have PPSR to fall back on (don’t you?) but cash in hand beats fighting insolvency lawyers for payment. 
  1. Plan to cut a deal with creditors Your suppliers are businesses too. This will affect them. If you have the cash, maybe talk to them to get better rates or discounts for early payment. Don’t run yourself out of cash, but use your cashflow to evaluate whether this could work for your business. 
  1. Check your stock levels. Now is the time to review stock, and ensure you haven’t tied up too much money in stock that may move slowly or not at all over the next few months. 
  1. Talk to your bank If you have all your numbers up to date and forecasts done, talk to your banker. You may be able to get access to a COVID loan (50% government back) or if not, at least review your position and maximise available cash. Maybe go for 6 months interest only on a business loan or mortgage. Lift your overdraft facility. Get access to cashflow. 

I realise this is a doom and gloom piece that paints a very dystopian business landscape for the near future, and I really hope I have overshot the downside on this and we come back stronger and quicker than expected. And if that happens, the advice above will only have you in a stronger position anyhow, so what do you have to lose? 

As always, reach out if you would like some assistance with this or any other business issues. Good luck, and we are here to help! 

Leave a Comment