Corona Virus Update
March 16, 2020

What does Covid-19 (Carona Virus) mean for your Business. 

Whilst I have been a “calm down the flu is worse” type of person, I know that COVID- 19 is about to impact all of us.

When stock markets crash by 10% in one day, the signs are irrefutable.

When sporting events are called off or played in front few only the team employees, we are in strife

When self-quarantine is recommended or enforced then it is only time that is between survival and failure.

The short term economic outlook is not good, not even neutral, it is dire. But there is hope. We will recover. Life will go on, and businesses will endure.

Financial survival is your only goal today. You to get to the time when you are able to rebuild your business. That will mean profits – just minimising the hurt.

Cash is King:

Cashflow is the weapon in your arsenal. Paying “things” is now on an “absolutely necessary” basis.  You must spread it around to help as many of your business partners as you can – not just the ones hassling you on the phone every day. You MUST keep enough cash in your kitty for essential activities – staff, rent – YOU. Yes, you do need to prioritise yourself for once in your business career.

At some point the prospect of laying off staff will become very real. You very likely will lose key people, but there is little that you can do to stop that, other than manage everyone’s expectations and get through this together.

Most of you are in industries that really should be impacted only on your access to staff – as opposed to client/customer exodus. If you are a retailer, café, restaurant then life will be considerably harder, however in transport, trades and property development your operations will continue albeit at a reduced level.

Some of you may well do pretty well. Real estate agents will probably do well other than reduced commission levels as prices plateau, and core services such as aged care and broking (insurance and finance) will continue to be resilient if not insulated.

The banks will not be lending in the short term to business. If I was a betting man then I would expect the government to provides further stimulus packages and address the need for small business lending – but that is mere speculation at this point. I would also expect to see some pressure on existing debts at some point in the next 3-6 months as the level of arrears starts to take lenders by storm.

Practicalities

So, what practical things can you do to avoid a disaster [and a warning some of these will seem harsh, but they need to be]:

  1. Only send cash out for essential items. Keeping cash reserves will be critical, and whilst it seems harsh to impact your suppliers, every business will be in the same boat. Maintaining an emergency level of cash could be the difference between short and long term success.
  2. You have to start making decisions. You need to assess every staff member and determine whether they are critical to what will inevitably be slower operations. If you cannot make “that” decision yet, then you need to treat everyone equally, so that we all share the pain – so to speak. Make layoffs where you can, shorten hours to provide something for everyone, remove overtime and be prudent about wage increases. You are legally able to request employees to use their annual and long service leave and should be looking at this option.
  3. Be very careful about short term money borrowing options. These guys are sharks circling and will not hesitate to call in their debt. They will be very active during this crisis, seeking to assist you but are no better than the hoarders of toilet paper.
  4. Look at ways of innovating your sales process, that may well become the norm. Look at meeting via Skype or Zoom rather than face to face meetings,. Look into websites where you can turn your stock into cash quickly (at a reduced price, but at least with cash quickly). Locate different suppliers of products that have the stock you need – as pricing will be very competitive for a while in most items. .
  5. Review your customers/clients. This is something that you should be doing periodically anyway, and it allows you to review how much a customer actually costs you. For example, do you have to answer 42 emails with every order, do they query every invoice, do they delay payment every month. These things cost you money and perhaps they should be managed out, or their custom restricted. Maybe make them pay up front for service, reduce their credit limits, call more regularly for payment and demand that they make a payment before accepting an order, or have a discussion about the problems that you are encountering, with the understanding that they may leave.
  6. Access the Federal Government Stimulus program for small businesses.

On that last point, the program is still being finalised however the cash injection to your small business will have some conditions – as always.

What we know is that:
  • Any asset that you buy can be written off immediately – up to $150,000 (up from 30,000)
  • Any new asset over $150k can be written off by 50% in the first year. (up to June 30 2021)
  • Cash flow incentives/assistance:
    • Each small business will get at least $2,000 [assuming that they employ at least one person.]
    • Then any business which employs someone will get up to $25,000 being 50% of that employee’s PAYG withheld.
    • 50% wage subsidy for apprentices.
    • It will be delivered automatically through the tax system via refunds in your BAS.
    • Tax deferral measures (still to be confirmed) for a four-month payment moratorium.

As these measures are delivered through the tax system, it appears as though only those businesses that have their tax obligations up to date, will be eligible.

So all tax returns and BAS/IAS must be lodged. Getting these up to date is now critical.

{More to come}

 

And now the legalities.

As an employee r and business owner you are still required to adhere to all the normal laws.

So take heed of the following;

  • Only employees who have leave credits are eligible to be paid if self isolating or quarantined.
  • You cannot force them to take leave or use the entitlements, but they can be on leave without pay.
  • Potentially, if it can be proven that an employee caught the virus at work then they may have access to Workers Comp.
The Fair Work Act has some provisions to note:
  • Safe work
    • Employers are required to ensure a safe work environment. The risk must be assessed.
    • Monitor the health of employees.
    • Provide information about the issue, causes and symptoms.
    • Ensure that others are not exposed to risks.
  • Fair work.
    • Where an employer directs a full-time or part-time employee not to work due to workplace health and safety risks but the employee is ready, willing and able to work, the employee is generally entitled to be paid while the direction applies. Employers should consider whether their obligations are impacted by any applicable enterprise agreement, award, employees’ employment contracts or workplace policies.
    • Under the Fair Work Act, an employee can only be stood down without pay if they cannot be usefully employed because of equipment break down, industrial action or a stoppage of work for which the employer cannot be held responsible. The most common scenarios are severe and inclement weather or natural disasters.
    • Standing down employees without pay is not generally available due to a deterioration of business conditions or because an employee has the coronavirus

Conclusion

There is little doubt that this is a crisis and that strong, thoughtful leadership is required.

Your businesses can only survive, and by extension seek to prosper, by leading your own organisation effectively, with clarity and empathy. It will be tough – make no mistake – but these are the risks that we took when we all started our businesses and so we have little other choice that to “get busy living”.

Please reach out to any of us if you need some further information or assistance.

 

Athar Nasir (athar@ignitus.com.au) - 0452 248 073

Ginnie Tan (Ginnie@ignitus.com.au) - 0430 534 898

Colin Linke (colin@ignitus.com.au) - 0409 421 40

Farhan Daud (farhan@ignitus.com.au) - 0430 585 538

www.IGNITUS.com.au