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Small- and medium-sized enterprises (SMEs) should take three necessary steps to secure cash flow before undertaking risky measures as the financial year ends, says an expert from non-bank business lender ScotPac.
Jon Sutton, ScotPac CEO, said embedding cashflow forecasting into the business and securing funding that ensures good cashflow will help SMEs navigate any risks around their EOFY and new financial year initiatives.
“Putting in place a flexible capital structure, offered by funding options such as invoice finance, means a business can act when opportunities arise," he said.
Sutton said there are three things SMEs need to do and know before closing the year. On the top of the list is understanding the exact cash needs of the business. He said this will allow businesses to determine whether they have excess cash that could be invested even used to take advantage of available incentives such as the instant asset write off.
"This will also allow you to identify if there’s a shortfall which will impact your ability to meet obligations as they fall due — this is particularly important when considering outstanding ATO liabilities," he said.
The second thing SMEs need to think about is the fixed assets that their businesses need. Tax deductions for the cost of these assets can be given if SMEs meet the eligibility criteria.
Lastly, SMEs need to reach out to their advisors to discuss their business plans for the next 12 months.
“Partnering with a trusted advisor such as an accountant, bookkeeper, or broker now will help give you the best chance to position your business for success in FY2022,” Sutton said.
Sutton said it is crucial for businesses, especially those who relied on the ATO’s leniency over the past year due to COVID-19, to be cautious and to ensure that they are up to date with their lodgements and BAS payments.
“As we move into a post-COVID environment and many businesses return to growth, those with outstanding lodgements or payments need to get on the front foot with the ATO,” he said. “It all comes back to careful cash flow management — if you have imminent ATO debts, work out how much realistically you can afford to pay and have an open dialogue with them about repayments.”
