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Small-business owners will need to take stock of deferred rents and bills ahead of the September cliff, warns one financier.
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Account for September deferred payments now, businesses warned
25 August 2020
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With a number of six-month deferrals including rent, bank loans and payroll tax coming to an end in September, accountants have been urged to help their small-business clients understand what expenses will need to be paid in the last quarter of the year.
With just one week to go before September, Scottish Pacific’s general manager for Victoria, Jane Starkins, is concerned many small businesses haven’t factored in what cash they’ll need between now and Christmas.
“We are having regular conversations with accountants and brokers who realise their clients need funding in place to pay expenses they have been deferring, including rent, asset finance, PAYG, superannuation and payroll tax,” Ms Starkins said.
“Accountants can play a pivotal role in encouraging their SME clients to work out their obligations now and take steps early if they don’t think they’ll be able to pay everything that has accrued. The wave of debt coming at some businesses will be too great if they do not start planning for it now.
“It would be heartbreaking if a business finds itself in a position in October where it has to choose between paying their overdue rent or purchasing stock to sell in the lead-up to Christmas.”
Deferred debt adding up
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Ms Starkins, a Turnaround Management Association board member, believes that while many businesses are averse to taking on more debt to pay off deferred expenses, owners will need to work out the cost base of operating in a new economic environment and look for funding to continue paying their expenses in the meantime.
“Businesses concerned about taking on debt should also be concerned about how they’ll be paying their bills. Not paying bills doesn’t mean the debt does not exist. All the unpaid bills and deferred expenses are real debts that need to be paid,” Ms Starkins said.
“Now is an ideal time for business owners to find new funding paths that harness the value of assets already in their business, such as their sales invoices or plant and equipment. It’s also the time to protect the family home by unlinking it from a business’s debt.”
Ms Starkins also believes accountants are best placed to help their business clients understand what obligations are due once deferrals come to an end.
“Advisers can help business owners bite off this task in small chunks so it’s not one overwhelming debt,” Ms Starkins said.
“They don’t need complicated analysis models; it’s about sitting down and helping them work out what they’ve deferred that they’ll need to catch up on.”
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