Many self-employed Australians are getting nervous about the possible recession effects of COVID-19 as their income is less manageable at this time.
The best thing self-employed people can do is to review their cash flow. Doing this can help mitigate risk and prepare the business for what is ahead.
How to prepare
Remember, you are not the only one experiencing an impact. There will be an impact at varying levels for everyone, business and individuals alike.
We’ve witnessed other parts of the world – their governments and communities – creating ways to support affected individuals and businesses. In Australia, we’re more fortunate than most with support from the government.
To prepare, do your best to analyse the possible impact on your income. Reach out to us If you need help developing some viable operational scenarios.
We’re taking our clients through this process now:
- Review your cash flow – check if income protection is included in your insurance policy.
- Cut operational costs and focus on areas that produce income. Consider innovations required to maintain your income
- Cut unnecessary expenses for the meantime.
- Delay spending if possible, talk to your supplier
- Focus on increasing profit than expenditures
- Innovate and adapt to the current situation
- Pivot services should customers or clients are no longer accessible.
- Utilise resources you can use to stay in touch with potential customers.
How to free up business cash flow
- A drop in income: freeing up cash reserves can offset any decline in revenue.
- Forecasting your cash flow: identify any future bottlenecks.
- Set up a payment plan: to pay tax in instalments or arrange for a payment holiday during this period.
- Free up cash flow: Shift from annual to monthly payments.
- Incentivise early payments: crackdown late payments and bad debt.
- Consider contra arrangements: leverage each other’s expertise without putting pressure on cash flow.
How to free up personal cash flow
- Cease any voluntary super contributions.
- You may be able to vary your PAYG instalments if you think the current rate will result in you paying too much tax for the year.
- Request a mortgage repayment holiday from your bank or lender.
- Seek possible arrangements for your rent.
- Reduce daycare payments
- Move personal insurances such as income protection, life insurance and TPD insurance into your superannuation. Speak to your financial advisor to see whether this is possible.
- Negotiate with your providers to pay annual bills in more frequent instalments.
- Drop non-essential regular expenses such as regular magazine subscriptions.
Do the federal government’s stimulus packages apply to self-employed people?
Check if you qualify for
- Federal Government $189B Stimulus package
- JobSeeker Payment
The current lockdown due to COVID-19 continues to keep everyone worried about their income, but you can expect further stimulus packages around the world.
Adapt accordingly and stay resilient. Challenges like these are unprecedented.
Prepare, do your research, put an action plan to keep you afloat on worst-case scenarios.