Without a doubt these are uncertain times. The news cycle has been saturated with endless information on COVID-19 and its impact on the world.
The aged care sector has come under scrutiny as the virus poses the biggest threat to the elderly particularly in light of the interim findings of the aged care royal commission. Your stakeholders will be wanting to understand what steps you are taking now to guide your operations through this period with minimal impact on the care afforded to residents.
What steps can you take?
There are various measures that have been announced by the Federal and State governments and the banking sector. These may be accessible wins for you to get your facts on and secure the immediate tax breaks and assistance measures. These measures include:
- Cash flow boost amounts of between $20,000 – $100,000 to subsidise the cost of the tax withheld from salaries & wages (if turnover <$50m)
- Jobkeeper payments of $1,500 per fortnight per eligible employee, where turnover drops below prescribed levels
- Instant asset write off thresholds of $150,000 installed before 30 June 2020
- Payroll tax rebates
- Government guarantee on unsecured loans of up to $250,000
- Rent relief for commercial tenants under the mandatory code of conduct for landlords and commercial tenants
RSM Australia has published numerous materials detailing the specifics of the above and other stimulus measures that may be applicable to your business and can assist you in accessing these measures. Links to these resources are enclosed at the end of this article.
Critical business areas review
As facility operators, you will need to put in place strategies through the next 3-6 months and hopefully be able to take advantage of an economic bounce back.
Below are several key areas to review in your business:
In order to plan for and identify downside risk, a 3-way forecast incorporating balance sheet, profit & loss and cash flow should be built and monitored on a weekly basis. It should model alternate scenarios including:
- Continue business as usual
- Partial closedown
- Cost reduction strategies
Building a forecast will also give potential lenders confidence in any requests you make.
Working Capital & Liquidity:
Review cash flow projections and determine if it is sufficient or if more is needed:
- Will this come from ordinary operations, bank facilities or accommodation bonds?
- Prioritise essential expenditure – can any significant refurbishments be delayed?
- Regularly review resident debtors
- Review creditor payment terms for key suppliers – can payment terms be extended?
- Engage with the ATO to defer any tax payments
- Consult with your landlord to discuss a potential rent deferral or waiver.
Perform a P&L review from top to bottom and consider:
- Moving swiftly to eliminate unnecessary costs
- Review staffing levels to see where positions can be merged & rationalised
- Review supplier agreements
- Consider any redundancy payments as a result of staff lay-offs
The quantum of factors that may impact an approved provider during these times are complex and significant. It is imperative that you regularly reach out to your advisers to navigate you through this critical time.
RSM has also published numerous materials on areas that may be of assistance to your operation. These materials can be assessed via the links enclosed at the end of this article.
For more information or guidance around navigating this challenging period for your operation, please contact Patrick Flanagan, please call on (02) 8226 4500 or alternatively via email on Patrick.Flanagan@rsm.com.au.
RSM Coronavirus Resource Centre
Specific Federal & State Government Stimulus Measures
- Jobkeeper payment – https://www.rsm.global/australia/insights/tax-insights/1500-jobkeeper-payment-further-support-businesses-retain-workers
- Cashflow boost toolkit – https://www.rsm.global/australia/business-tools/boosting-cashflow-for-employers-toolkit
- Payroll tax rebate toolkit – https://www.rsm.global/australia/business-tools/calculate-your-covid-19-payroll-tax-rebates-incentives