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Make Your Working Capital Work for You: Ways to Optimise Your Accounts Receivable

Make Your Working Capital Work for You: Ways to Optimise Your Accounts Receivable

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Accounts receivables are one of the most important components of your working capital. Receivables refer to the money which you must receive from your debtors, i.e., the people you sell your products or services to. When you get your payments on time, your working capital remains in good health.

But many people struggle to take control of their receivables process. When this happens, increasing cashflow becomes difficult and it becomes challenging to run your business operations.

Here we explore what you can do to ensure your accounts receivables practices work well and you optimize your collections.

Step 1: Make accounts receivables a key metric in financial performance measurement

Many times, working capital takes a backseat when we’re measuring company profitability and financial health. Typically, the section which companies falter with is the accounts receivables. When you don’t keep an eye on your receivables, it becomes difficult to identify any existing problems with our receivables process.

But, when you make your accounts receivables a KPI, you strictly track your receivables and you get a better picture about who owes you what. You’ll be able to identify customer accounts that are draining your coffers and amend those processes that are harmful to your working capital health.

Step 2: Bring your departments together to ensure a collaborative collection effort

Accounts receivables management isn’t just the prerogative of your company’s accounts department.

The sales team, which deals with clients on-the-ground, plays a huge role in getting collections faster. Additionally, your finance teams – who control budget allocations – affect the company’s ability to offer extended credit periods and limits to customers.

When your sales, accounts and finance departments work together, you will have a bird’s eye view of your accounts receivable management processes. You will be able to determine the exact payment terms and credit limits to be offered to each customer, to ensure you’re always repaid and have the lowest default rate.

One process to initiate here is a comprehensive credit check to gain credit insights about current and prospective customers. This credit check will give you information about the purchase and repayment history of your customers, whether there were any defaults and the frequency of on-time payment vs default. This way, you’ll be able to plan how to reduce your default rates and ensure you receive your payments and your working capital is optimized.

Step 3: Use a robust Accounts Receivables Solution to collate bills of the same customer

It’s easy to miss out on a specific invoice when the same customer has a hundred different bills. This is where Accounts Receivables Solutions like accounting software, order management software and a master excel sheet can help. They give you the means to bring together data that is completely staggered in your system and make sense of the overall receivables each customer owes you.

When you have this collated information in a single place, there’s a lesser likelihood of your missing any bills that need to be followed up. Plus, this will help you identify any wrongdoing that any customer might be doing to cheat the system.

Step 4: Automate your receivables to ensure you always get paid on time

Finally, the best way to optimize your working capital and get your payments is by automating accounts receivables.

Manual receivables management can lead to a lot of errors. You may either claim lesser than what is owed to you or accidentally include wrong invoice details that can reduce your credibility in front of your customers.

But software like MYOB, XERO & Netsuite can help you manage your invoices carefully. These tools also take control of the payment follow-up process, ensuring you don’t need to do the heavy lifting. Contact our team at ezyCollect for more information.

A CFO’s Guide To Business During The Pandemic

A CFO’s Guide To Business During The Pandemic

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The global pandemic has forced nationwide lockdowns and has brought the global economy under distress. Countries were forced to take unprecedented measures to slow down the spread of the contagion. Likewise, organizations had to resort to quick action to protect their customers, finances, suppliers, and employees.

McKinsey, the US-based management consulting firm, surveyed 1592 respondents across a range of companies and industries globally. The survey was conducted between 2 – 6 March 2020. 84% of those surveyed viewed the pandemic as a threat to the global economy. Several companies lost 75% of their annual profits in the first quarter of this year. Others had no other choice but to reduce costs by laying off staff and encouraging the remaining ones to work from home.

In such chaotic situations, the role of the CFO (Chief Financial Officer) is of critical importance. In the last few years, the role of the CFO has expanded a great deal. They are now looking beyond finance, accounting, and compliance, and are taking on bigger responsibilities such as strategic planning, business transformation, and company investments. CFOs are vital to the financial health of the organization and can help it tide over the current economic crisis caused by the unprecedented challenges we face in a world disrupted by the effects of the pandemic.

As per McKinsey, CFOs should take action on three fronts – immediate survival, stabilizing the business during the crisis, and guiding the recovery of the company once the situation has stabilised.

Here’s how a CFO could help their organization recover from the financial crisis caused by the pandemic:

Immediate survival of the business

The global pandemic has forced many companies to shut down, some temporarily and some permanently. The restricted cash flow has taken away the freedom from most customers to make discretionary purchases, and supply chains have been disrupted. The entire world has been in the grips of the pandemic and it is difficult to fathom the magnitude of the current crisis. It is thus necessary to optimize the cash reserve of the company for surviving these trying times. 

A CFO would ideally take the following short term steps to ensure the immediate survival of their business during these difficult times:

  • Assess the current financial situation

Successful leaders do three things effectively – have their priorities right, work with the right people, and maintain the right relationships to get results. Taking stock of the current financial situation may help CFOs prioritize and further plan their strategies.  To keep the business afloat, they would need to pay special heed to the cash flow as well as get their hands on any capital they can access. The current situation is stressful for many, which could likely increase the number of defaulters. Collecting payment from defaulting customers should be a priority as that could help improve the financial situation of the company. CFOs may consider other options too, like a line of credit or raising capital through joint ventures or divestments when the working capital is insufficient. They may also want to seek relief on debt covenants to consolidate the balance sheet. The current situation demands the real-time tracking of liquidity.

  • Plan for different scenarios

The global pandemic has forced many innovation plans to go on the backburner and CFOs have had to take on more strategic roles. The impact of the pandemic has been different for different locations in different geographies. CFOs now have to keep track of the impact in different locations and strategize accordingly. They could form a small task force within the business that could monitor the current conditions so that business decisions can be made accordingly. The pandemic could give rise to a range of scenarios and a CFO may need to take financial decisions accordingly. Every financial decision taken in real-time could have a profound effect on the future of the company.

  • Set up a communication plan

The company’s primary focus during the pandemic is to preserve cash and use it carefully. It is, thus, important to keep the board of directors and investors abreast of the situations. Proactive communication on the part of the CFO can keep important stakeholders aware of the current situation and its effect on the company. Setting up a robust and detailed communication plan may also be necessary to keep the stakeholders aware of the liquidity situation and the steps taken to protect the business. A strong communication plan helps maintain the confidence of investors and other stakeholders regarding fast and resolute action taken as per the situation.

Stabilize the business

In the current situation, robust and effective planning is necessary to stabilize the company and ensure it continues to operate effectively. Making operational improvements, strengthening productivity, and reassessing the investment portfolio may be essential to stabilize and keep the company running optimally.

The CFO can help stabilize the business by:

  • Supporting productivity

To tackle the current situation, robust planning is necessary to support and improve productivity once the situation is back to normal. Along with the finance department, operational measures need to be put in place to support performance improvement. The CFO may encourage the development of newer products or services that help customers in need to bolster their loyalty and, in turn, increase revenue and the lifetime value of their customers. For instance, many companies are now utilizing alternative sales and delivery channels, including fast tracking their eCommerce plays and leveraging digital and technology channels.

  • Reassessing investments

In times of financial crisis, it becomes imperative to delve deep into the company balance sheet. Inventory reduction, refinancing of outstanding credit, accounts receivables and payables are aspects that demand special attention. A balance sheet cleanup can make the company more financially flexible while being focused on key metrics. CFOs play a vital role in optimizing the company’s investment portfolio by reviewing R&D and IT allocations. In some situations, it may be necessary to revisit the initial projected return on investments as it is most likely to change in the current situation. Higher-yielding projects or projects with shorter road maps to deployment may be given more attention, and more financial and human resources may be diverted to them.

  • Financial planning & analysis

The current economic situation requires the finance team to quicken its pace of forecasting and budgeting. The pandemic has not just affected the health and well-being of people globally but also the financial well-being of many companies. It is vital that the CFO receives updated business information so that he and the finance team can incorporate it into an integrated forecast. Collaborative tools may be used to manage and monitor key performance indicators. A real-time dashboard is also a good idea as it can help business leaders focus on the key metrics that can guide the organization’s operations in the coming months.

Post-pandemic business recovery

As the pandemic situation subsides, CFO are shifting their focus to helping the company recover. While the pre-recovery situation is a fight for survival, the post-pandemic scenario requires a plan for growth. Investment plans to diversify the company’s portfolio and implementing significant productivity measures can help the company grow after the pandemic is over.

To help the company recover, the CFO needs to take the following steps:

  • Be prepared for transformation

A crisis could often be an appropriate time to rethink or redesign parts of the business. Transformation may be the keyword here, as that’s what businesses would need to do in the post-pandemic world – transform. Business transformation may need adjustment of productivity targets and re-evaluation of performance metrics. CFOs are vital for business transformation and should review the entire company portfolio with a focus on helping each business unit reach its full potential. Transformational plans could significantly boost revenues or cut down costs helping the business recover and thrive.

  • Consider ways to improve company portfolio

During an economic crisis, uncertainty and decreasing valuations of companies could give rise to an optimal environment for mergers and acquisitions. The CFO may want to assess if mergers and acquisitions, or other avenues like strategic partnerships or SBU divestments that may provide a pathway to improve the company’s portfolio. History shows that resilient companies divested 1.5 times more than their non-resilient peers.  Product, geography, or supply-chain acquisitions could hold a lot of promise during these troubling times. A strategic approach to mergers and acquisitions could improve a company’s portfolio.

  • Embrace digitization

During this pandemic, a huge chunk of the global workforce is working remotely to contain the spread of the pandemic. Working from home has never been so popular as it is now. More and more companies are looking for ways and means to improve the productivity of their staff working from home. CFOs may want to continue to support digitization as it can positively impact the finances of the company even after this crisis is over. Digital initiatives, like automation of various processes, and real-time forecasts, are critical for running the business smoothly. Embracing digitization will ensure informed decision-making, accurate reporting, and business continuity in the event of any future crisis.

The global pandemic has disrupted the global supply chain and has significantly impacted the return on investment almost overnight. The focus has shifted from efficiency to accounting for stability and resilience. CFOs need to shift their attention on digitizing and automating core business processes to minimize their exposure to external shocks and create resilience.

Preparing for business re-opening after the closures

Many countries have now slowly begun to relax their lockdown directives and are supporting the re-opening of businesses. The CFO plays a significant role in the re-opening and needs to take steps to resume operations while keeping the trust and confidence among the customers intact.

As economies begin to reopen and return to a semblance of the pre-covid normalcy the need to plan for tactical and strategic initiatives that are responsive to customers’ needs and behaviours is critical. The CFO plays a significant role in the re-opening and needs to take steps to resume operations while keeping the trust and confidence among the customers intact. He can be instrumental in taking steps and precautions in making the workplace safe for both employees and customers.

Some of the necessary steps could be:

  • Transitioning the workplace according to social distancing guidelines. It may involve simple steps like changing the layout of the office or installing barriers between desks.
  • The CFO, along with the concerned teams, may allocate funds to create a wellness plan to monitor employee health.
  • To limit the spread of the virus and safeguard the health of the employees, the CFO may instruct the concerned departments to resort to cashless methods. Special emphasis is needed in the handling and storage of physical items.
  • The CFO may also need to clearly communicate the details of the wellness plan and the precautionary measures taken by the company to the employees. It is important for the staff to understand their role in mitigating health risks.

Conclusion:

In these uncertain times, communication is vital. As much as it is important to have clear and frequent communications with key stakeholders, it is also crucial to have a line of communication open with employees. Business leaders must demonstrate empathy in these times as employees struggle with anxiety about their health and future. 

CFOs can play a fundamental role in keeping the morale high of employees. Regular communication is essential wherein the CFO apprises the employees of the company regarding actions and plans to tackle the crisis. Effective communication dispels rumors, reduces distractions among employees, and keeps them motivated. CFOs need to consider the best case as well as the worst-case scenarios in mind when formulating strategies. No one knows how this global crisis will pan out; hence, they need to consider all situations keeping their stakeholders, suppliers, customers, and employees in mind.

How to get your business cash flow boost from the Australian Government

How to get your business cash flow boost from the Australian Government

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On 24 March 2020, the Australian Government’s Economic Response to the Coronavirus package passed without objection through Parliament. With the green light to go ahead, the economic stimulus package, currently worth $84 billion, promises direct financial support for workers and students and a cash flow boost for businesses and not-for-profits. 

As a result, the Australian Taxation Office (ATO) will deliver the tax-free cash flow boosts to small and medium businesses and not-for-profits from 28 April 2020. Entities do not need to apply. The ATO will calculate a business’ eligibility for the cash flow boost when the business lodges its activity statement. Businesses will receive tax credits, which means that eligible entities will pay less tax to the ATO.

Key points

  • The Australian Taxation Office is administering the business cash flow boost.

  • Your entity must have held an ABN on 12 March 2020 and still be active.

  • A business must lodge its activity statements so that the ATO can assess its eligibility for the cash flow boost.

  • Not-for-profits, sole traders, partnerships, companies or trusts with an aggregated annual turnover under $50 million (based on prior year turnover) are eligible.

  • Your entity must have lodged its 2019 tax return on or before 12 March 2020.

  • The ATO will issue businesses with payments from 28 April 2020, as credits in the activity statement system.

  • Additional payments are available for businesses that are still active July-October 2020.

Lodge activity statements to receive the cash flow boost


The ATO will deliver the cash flow boost of up to $100,000 (minimum $20,000) per eligible businesses through credits in the activity statement system. Therefore, to be eligible, businesses must lodge their activity statements.

Your business will receive its first cash flow boost from 28 April 2020, even if it has lodged the activity statement earlier.

Eligible entities that remain active throughout July-October 2020 will receive an additional payment, equal to previous payments they have received under the Boosting Cash Flow for Employers scheme.

March 2020 activity statements are due to the ATO in April 2020. If your business lodges monthly, the due date is 21 April 2020. Quarterly reporters must submit by 28 April 2020.

Is my business eligible for the cash flow boost?


12 March 2020 is a critical date. Your business must have held an ABN on 12 March 2020 and continue to be active. Only registered charities are exempt from this cut-off date.

The ATO will assess your business’ eligibility based on your most recent income tax assessment for a prior year. (You may still be eligible if you do not have any income tax assessments for prior years.)

Not-for-profits, sole traders, partnerships, companies, and trusts with an aggregated annual turnover under $50 million are eligible if they meet all other criteria.

Your small or medium business must have made the eligible withholding payments it was required to:

  • salary and wages

  • director fees

  • eligible retirement or termination payments

  • compensation payments

  • voluntary withholding from payments to contractors

In addition, your business must also have either:

  • Lodged your 2019 tax return on or before 12 March 2020 to declare your business income in the 2018–19 income year. 

  • Made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.

How much money will my business receive?

In the initial cash flow boost, your business will receive 100 per cent tax back on the withholding tax you pay the ATO for employees’ salary and wages (maximum limit of $50,000). 

Even if your business is not required to withhold tax, you will receive a minimum payment of $10,000 if you pay salaries and wages.

If your business remains active and eligible in July, August, September and October 2020, you will be eligible for additional payments, equal to previous payments you have received. 

However, you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periods.

How do I receive the money?

The ATO will apply the cash flow boost as credits to offset your business’ liabilities owing from the current activity statement. 

For example, a quarterly activity statement lodged in April 2020 will receive credits for quarter 3 ending March 2020. A monthly activity statement lodged in April will receive credits for March 2020. Monthly lodgers will receive a credit that is calculated at three times the rate (300 per cent) in the March 2020 activity statement, to align with quarterly lodgers.

If your business receives more credit than it has tax liabilities, the ATO will refund the excess amount within 14 days. 

Note: The ATO acknowledges that some business systems will be unable to take the cash flow boost into consideration when working out how much tax is payable on the activity statement. Businesses that overpay will receive a refund.

The earliest the ATO will release credits is 28 April 2020.

Additional payments to eligible businesses for the July-October period will be 100 per cent of the initial cash flow boost. The ATO will distribute additional payments in four or two equal instalments depending on whether your business lodges activity statements monthly or quarterly.

Resources:

For more information, refer to the  ATO Boosting Cash Flow for Employers

Read the Australian Government’s Fact Sheet on the Economic Response to the Coronavirus.


ezyCollect is offering to set up new businesses with 2 months free use of its accounts receivable tools through the COVID-19 period.

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Speed up your cash recovery process online for free

Speed up your cash recovery process online for free

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As of today, ezyCollect has committed to setting up businesses with its online accounts receivable platform for free for two months.

At ezyCollect, we have watched in awe as businesses do everything in their power to move online and keep working. Digging deep. Innovating. Powering on. ezyCollect has a suite of online tools to help businesses recover the cash that’s owed to them faster, whilst also supporting their customers through the credit crunch. That’s why we want to support your online efforts, too.

The next few months are critical as we all move to a remote way of working. And it’s essential that where possible, your business remains open to collect cash and support your staff and customers.

Business support now

Even if your physical office is closed, your accounts team can keep working. Our platform is designed for team sharing, to give high visibility to your debtor ledger, and to keep communication flowing between you and your customers.

Payment communications that you used to generate manually can be automated, giving you more time to think about innovating other parts of your business that will keep the money coming in. There are simple things every business can do to make it easier for customers to pay so they can keep trading, too.

Our tools can help with:

  • Automating payment reminder communications
  • Collecting money online
  • High visibility of your ageing trial balance and credit risks.


Read more about what you can do with online accounts receivables

Supporting the entire supply chain through difficult times

Some of your small business customers will want to keep buying from you, even though it’s tough. They might rely more on credit facilities to keep their shelves stocked and their doors open. Accepting their credit card payments online means they can reserve their cash, keep up their trade relationship, and pay you even if your admin office is closed. Some banks are temporarily pausing business credit card repayments. All banks are offering other finance facilities to keep the credit flowing to businesses on the frontline.

Your big business customers have more of a responsibility now to pay on time. For too long, big business has made their small and medium-sized suppliers bear the credit burden. Many big businesses like Woolworths and Coles have already committed to paying their suppliers faster. Government agencies have previously made their prompt payment commitments off the back of the 2017 Late Payments Inquiry.

This is the time to make sure your big business customers know that you need to get paid on time.


Making it easy


We hope you’ll leverage every advantage you can right now. Our hope for your business is that you never miss an opportunity to get paid, you can support your customers with tools to make their life easier, and your staff can keep doing their best work.

We’ve made it super easy to get started on our platform:

  • Most cloud accounting software users can self-serve to get set up straight away.
  • Our installation team is ready to guide you through any help you need.
  • Our online payments portal will always be free to use.
  • We will train you and your team (online, of course) for free.
  • Don’t continue beyond the first two months if you don’t need to. Simply use what you need now for free and continue if you like it.

To get set up today, please head to www.ezyCollect.com.au/business_support

Bank-by-Bank COVID-19 Business Support

Bank-by-Bank COVID-19 Business Support

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The  financial contagion of the COVID-19 pandemic is expected to reach every business and every household. No one will be immune. Business banking units across all major banks have pivoted to engineer their own COVID-19 economic response to help businesses stay open or re-open in time.

No doubt it’s an ever-changing landscape and packages could change. Here’s what we can gather so far:

The Australian Banking Association advises people or businesses in distress to contact their bank’s financial hardship team.

Banks are providing assistance in relation to the following:

  • Deferring loan payments
  • Waiving fees and charges
  • Consolidation of debts
  • Easier access to term deposits
  • Deferring credit card payments and increasing limits

The Australian Banking Association has provided the following contact details for banks:


BANK

PHONE NUMBER

WEBSITE
AMP 1300 130 191 Experiencing financial hardship 
ANZ 1800 252 845 Customer Connect 
Arab Bank  1800 64 64 84 Hardship Assistance
Bank Australia  132 888 Contact Us
Bank of Sydney  13 95 00  Financial Hardship
BOQ  1800 079 866 Financial Hardship Assistance
BankSA 1800 679 461 BankSA Assist
Bankwest 1300 769 173  Experiencing financial hardship
Bendigo and Adelaide Bank 1300 652 146 Financial difficulty assistance
Citibank 1800 722 879  Hardship assistance
Commonwealth Bank 1300 720 814 Emergency assistance
HSBC 1300 555 988 Financial difficulty
ING  1300 349 166 Financial Hardship
Macquarie Bank  1300 363 330 Financial Hardship 
ME Bank 1300 500 520 ME Bank financial hardship
MyState   13 800 1  MyState financial hardship
NAB  1800 701 599 Financial Hardship 
Rabobank  1800 025 484 Financial Hardship
Rural Bank  1800 660 115  Financial Hardship
St. George Bank 1800 629 795  St. George Assist
Suncorp Bank 1800 225 223 Suncorp Customer Assist 
Westpac 132 142 Westpac assist


Learn more about ezyCollect’s Business Support Program


Banks to defer small business loan repayments

On 20 March 2020, Australian Banking Association CEO Anna Bligh announced a small business relief package on behalf of Australia’s banks.

Australian banks will defer loan repayments for small businesses affected by COVID-19 for six months.


Describing it as “a lifeline for small businesses when they need it most”, Ms Bligh urged small businesses to contact their bank to apply.


COVID-19 support from the major banks for small and medium businesses

The big four banks have all announced their current COVID-19 response support for business customers.


ANZ

  • Decrease variable interest small business loan rates in Australia by 0.25%pa, effective from 27 March 2020.

  • All impacted customers can request a six-month payment deferral on loan repayments for term loans, with interest capitalised.

  • Making available temporary increases in overdraft facilities for 12 months.

  • A reduction by 0.80%pa to a new two and three-year fixed rate of 2.59%pa for secured small business loans up to $1 million, effective 3 April 2020.


Commonwealth Bank of Australia

  • Reduced rates on business loans by 25 basis points.

  • Faster decision times for small business loans.

  • Deferring repayments and waiving fees.
  • Deferring repayments on a variety of business loan and overdraft products, for 90 days.

  • Waiving merchant terminal fees for impacted customers with CBA payment terminals, for 90 days.

  • Waiving early redraw fees on business term deposit accounts (including Farm Management Deposit accounts).

  • Waiving establishment fees and excess interest on Temporary Excess products.

  • Deferring repayments on vehicle and equipment finance loans, and providing tailored restructuring options that meet individual customer needs.

Commonwealth Bank of Australia has also committed to paying its Australian suppliers faster.


Get paid faster with ezyCollect’s Business Support Program


NAB

  • Defer principal and interest for up to six months on a range of business loans, including floating and variable rates and equipment finance loans.

  • Reduction on variable rates for small business loans by 100 basis points, from 30 March 2020.

  • Receive a 200-basis point rate cut on QuickBiz loans and overdrafts from 30 March 2020.

  • Pause business credit card repayments for up to six months (including a three-month checkpoint).


Westpac

  • 200 basis point reduction on overdrafts for new and existing customers from 6 April 2020.

  • 100 basis point Interest rate reduction for small business cash-based loans, from 6 April 2020.

  • Waiving merchant terminal rental fee for three months.

  • No establishment fees for equipment finance loans until the end of June 2020.

  • Eligible Westpac small business customers who need help to manage their cashflow can defer principal and interest payments of business term loans (excluding credit cards, overdrafts, cashflow/invoice/trade finance, commercial bills), equipment finance facilities and equipment loans for six months.

Eligibility criteria apply.


Coronavirus SME guarantee scheme 

The Australian Government recently announced the Coronavirus SME Guarantee Scheme to support the flow of credit in the Australian economy, especially for small and medium enterprises (SMEs).

The Scheme is designed to help SMEs access additional working capital funding from lenders.The Government will provide eligible lenders a guarantee of 50 percent on new unsecured loans made by SMEs. The following criteria apply:

  • Maximum total size of loans of $250,000 per borrower.

  • The loans will be up to three years, with an initial six month hold on repayments.

  • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

  • SMEs with a turnover of up to $50 million will be eligible to receive these loans.

  • Loans will be subject to lenders’ credit assessment processes in the context of the uncertainty of the current economic conditions.

Lenders are currently assessing their facilities and are expected to announce further details soon on how business customers can apply for a new unsecured business loan.

The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

ezycollect’s Business Support Program is helping SMEs survive this critical COVID-19 period.

Learn more