It is hard to think of any industry or sector that has not been impacted negatively by the pandemic and the global lockdowns that have gone with it. Of course, some sectors have been harder hit than others but nobody has been immune.
Certain assistance measures that are or have been available may either stop or become harder to access. You need to account for this and draw up a financial survival plan.
The JobKeeper scheme
As a sole trader, you do not have the staff to worry about in relation to the imminent end of the JobKeeper program. However, you may have applied for support under the scheme and be receiving fortnightly payments.
If you were eligible and are on and benefitting from the scheme, we do not need to tell you that losing that regular payment from the Australian Taxation Office is going to hurt! Even if your business is starting to recover and income is beginning to flow again, you need to anticipate and get ready for a bumpy time.
Protect yourself against liability risk
As a sole trader, you have unlimited liability risk. Even in the most robust economic climate, all businesses are open to the risk that they may be sued for injury to a third party or damage to their property.
If your business is struggling to survive and your savings or financial resources are already depleted, facing the potentially huge costs of a successful lawsuit against you would spell the end of your business. Public Liability Australia compares insurance companies online with quick competitive online quotes.
No business can be without public liability insurance. If you do not already have this crucial business insurance, contact a Public Liability Australia representative that can advise you and provide quotes and quick cover.
Business funding or financing
Many businesses, including sole traders, have made use of funding from banks in the past and continue to service these loans. Many may be relying on obtaining a new or additional loan to ride out this period. The banks are already issuing cautions because the national economy is now dealing with recession conditions.
Lenders indicate that obtaining approval for a loan of some sort will become harder. In addition, although applications will still be considered, decisions and approvals will take longer to come through than previously.
Finally, it is crucial to do all you can to put financing in place before you reach a stage where your business is facing collapse and closure. Your tasks should be:
- Sourcing funding from a reputable lender such as a bank
- Put in an application for funding sooner rather than later
- Obtaining the most favourable terms so that the terms and interest are not going to grind you down on their own.
Boost your cash flow
Unlocking cash from assets
If you need an injection of cash for your business, it is a good idea to look carefully at your assets first. There may some hidden or forgotten ones that could be a source of funds. Do you have any equipment or premises that you do not need and could sell? What about investments that you could convert to cash?
If you can identify any such assets, turn them into cash by selling them. This will be a less costly way to raise money than an interest-bearing loan, for example. However, if you cannot sell certain assets, investigate the possibility of using them as security against a loan.
Collect outstanding income
In times of crisis, it can be easy to lose sight of everyday issues. Take the time to carefully go through your invoicing.
- Have you sent out invoices for all the goods / services you have provided?
- Are there any unpaid invoices you can follow up on?
If there are any outstanding, prepare and send out accurate invoices immediately. Make sure that the payment terms and options are clearly stated.
If you are still owed money you should collect this income as quickly as possible. Do not allow customers to go past the due date on invoices without sending out a final demand letter. If necessary, hand long overdue accounts over to a Collections Agent of some kind.
Protect your personal assets
If you have used your home as security on an existing loan, see if you can negotiate using business assets instead so that you can safeguard your personal assets. This of course means that you cannot sell these assets. However, protecting non-business assets may be more important to you than realising cash. This is a choice that ultimately only you can make.
Conclusion
These are indeed challenging times. Fortunately, there are things you can do to help yourself. In addition, there are resources and organizations that you can reach out to for information, guidance, and support. They can help you draw up a survival plan for your business.
