CashFlow Chasm

Now that cashflow boost has ended, some businesses may be facing a cashflow chasm. One of the little hacks I’d like to share is how to work out if you need additional funding over the coming months. While this is not expert advice and more for educational purposes, the idea is to review your cash flow even if the hack shows you are in surplus.

Get your September BAS statement, and on the first or second page, depending on your printer, you will see a “Cashflow boost 2” amount. If you lodge quarterly, take that figure and multiply it by four, write that down. If you lodge monthly, take that figure and multiply it by eight and write it down. Now effectively the number you’ve written down should be how much excess cash you have in your bank account if your business has traded well during COVID.

If not, that amount of money is how much the government has helped fund your business. If your current bank balance is zero at the end of October, then you may have to look at cash flow funding or cash management to keep your business running. If you did get the boost and you know where you spent it, such as on more equipment or to pay down debt, and not for operating expenses, then that’s good. But if you were using it to fund trading operations, there could be quite a dramatic shortfall.

Cashflow boost one and two worked as an offset against your BAS for each month or quarter and assuming you paid PAYGW (i.e. staff wages tax withheld). This means most businesses were eligible for the offset of between $20,000 to a maximum of $100,000 depending on the size of your wages bill and the amount of wages tax withheld.

What if you’ve worked out, hang on, I am at zero, and I don’t have that extra cash in the bank account and I haven’t reinvested it or paid down debt. That’s where you need to come up with a plan quickly because that figure, divided by eight is how much may go backwards each month.

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Contact us if you need help, we have the experience, technologies and support to navigate your way out of the cash flow chasm.