Business People ….Watch Your Cashflow - 20 Quick Tips
Business People ….Watch Your Cashflow - 20 Quick Tips
If you can forecast a loss in 2020 or 2021 apply the loss carryback provisions to get tax paid in 2019 or 2020 refunded
Forecast your cash-flow weekly.
Cut all non-essential expenditure.
Talk to your creditors and ask for payment flexibility. When they give it, stick to your promises to them to pay. Even offer to hand back stock where it is not required.
Work on collecting debtors, offer to write off some of what is owning if it helps get cash in.
Discount old stock even to below cost if necessary. Reduce stock levels generally
Review insurance cover ... does your business interruption cover serve you well? Are you still paying for it?
Check your lease for clause 27.5 that requires your landlord to offer a negotiated concession for restricted access. Even if the clause isn’t in the lease, ask anyway.
If you need to go to your bank, go early. Be prepared, the bank will not lend to you if you cannot demonstrate a plan to get through. Tell them what the problem is, what you are going to do to fix it, how they can best help and how you will repay them. In short, don’t give them any reason to decline you.
If you do need to cut staff, do it as soon as you forecast the need, not when you have burned through your reserves, but follow proper process and honour your commitment to the subsidy.
If you can see a way through by reducing staff pay or moving to 4 day weeks to retain your team, ask them to support you and in return be open, fair and honest with them.
Take advice from anyone qualified to give it and nobody who isn’t.
Focus advertising and marketing only on initiatives where you can measure the result. If they work, carry on, if they don’t, stop the spend.
Focus on dealing with the things you can control.
Ask suppliers to reduce their pricing and try to build your margins. They will want to keep your business more than ever, use this leverage to your advantage.
Sell any assets that are not being used. Even if you only get peanuts for them the loss on disposal will save you tax. IF it is only needed occasionally you can alway hire it.
Act decisively and take action but don’t worry if not every decision is the right one. The ability to act is more important than being paralysed by fear.
Look for opportunities and believe that there are more in a recession than in boom times.
If you can reduce fixed costs and replace them with variable ones, do so. A variable cost allows you to operate relative to your revenue. E.g. can you reduce a salary cost in favour of contracted labour as need dictates.
If all options run out, and you realise there is no way through. Face this as soon as possible. There is no shame in it. Trading on while you are insolvent will expose you to personal liability and only make matters worse. We can provide advice on the processes.
Inland Revenue Policy Initiatives
for COVID-19
Depreciation Deduction on Commercial Buildings has been restored. This will help support your business with cash flow in the near-term and assist with the broader economic recovery by encouraging business investment in new and existing buildings.
The applicable depreciation rates introduced are 2% DV and 1.5% SL.
Increase in the provisional tax threshold
As from the 2020/2021 tax year, the threshold for having to pay provisional tax has risen from $2,500 to $5,000. This allows more small taxpayers to delay paying their taxes to the end of the year.
Threshold increase for expensing low-value assets
Businesses can now deduct the full cost of more low-value assets in the year they purchased them, rather than having to spread the cost over the life of the asset.
Taxpayers were previously able to claim an immediate deduction for the purchase of assets that cost less than $500.
This threshold has been increased, effective from 17 March 2020, to allow the immediate expensing of assets that cost up to $5,000.
This increase is temporary and will only apply until 16 March 2021. After this date, the low-value asset threshold will increase permanently, but only to $1,000.
Use-of-money interest and penalties remission
The Commissioner now has the ability to remit use of money interest (UOMI) and/ or penalties charged if the taxpayer’s ability to pay tax (not GST or PAYE) on time has been significantly adversely affected by the COVID-19 outbreak.
HAVE WE GOT YOU THINKING?
Give us a call on (04) 563 6965 or email: dennis@taxman.co.nz or shawn@taxman.co.nz
Keep an eye out for July’s article!
TAX DATES TO REMEMBER
- 20 June. 2021 - monthly employers PAYE payment…
- 28 June. 2021 - Bi-monthly GST Return for Apr/May 2021…