Finding a Way Through The Pandemic
Updated: Jun 3, 2020
Job Keeper, Rent Relief, Interest Deferral and other financial support available in the current crisis provide welcome, temporary reductions in cash outflows. This applies to businesses suffering from an unexpected fall in revenue.
However, putting off essential restructuring steps or in a worst case a liquidation until the special financial support ends is a recipe for disaster.
For example, Directors often have provided personal guarantees for rent and to key suppliers. Allowing these debts to pile up can therefore put Directors at risk of bankruptcy if the business is unable to eventually pay them.
There are many questions that people are asking such as:
How can we navigate the crisis?
When/will things start getting back to normal?
How can I manage cash flow?
If things will be forever different what will be the new normal?
Will my business ever be profitable again?
Now is a good time to take a thorough look at all aspects of your business to determine if it is likely to be viable going forward. Doing this alone can be daunting and sometimes key points are missed.
If it is likely to be able to be viable it's important to determine its optimal structure in order to survive the current crisis and to thrive into the future. Informal advice or a formal voluntary administration will require professional expertise.
If it cannot be saved then the company should be placed into liquidation. There is a government scheme the Fair Entitlements Guarantee ("FEG") available in liquidations for payment of some entitlements to employees that are eligible for the scheme. The scheme covers unpaid wages, holiday pay, annual leave, long service leave etc. up to specified limits. Superannuation is not covered by FEG.
JobKeeper pays $1,500 a fortnight per eligible employee. However, it doesn't cover amounts in excess of this amount.
It can be difficult when you’ve put your heart and soul into a business to look at things in a dispassionate and objective way.
It is our experience that the sooner steps are taken to address the situation the better the outcomes.
Give us a call on (03) 9896 9000