As July 1 draws ever closer, many founders and business owners are trying to make sense of the end to an unprecedented financial year. Between stimulus packages, JobKeeper payments and disrupted revenue, this EOFY is arguably a little different to most.
But, for Remco Marcelis, founder of Standard Ledger and all-round startup accountancy guru, this year, more than ever, it’s all about “cash, cash, cash”.
When asked what startups should be focusing on to manage their EOFY finances during a pandemic, Marcelis points to the advice he gave us this time last year. Much of it still applies, he notes.
However, in the COVID-19 environment, there is more focus than ever on keeping as much cash in your pocket as possible.
“Push out revenue, bring forward expenses,” he tells SmartCompany.
“Other than that, it’s all about keeping your eye on the cash.”
Grants and incentives
Often touted as a cash lifeline for startups, the research and development (R&D) tax incentive is arguably more important than ever this year.
Firstly, Marcelis notes that while there’s been renewed chatter about making changes to the scheme, “none of those changes are in yet”.
Several of his own clients are working on getting their applications in as soon as possible after July 1, to get their hands on any cash they can, as soon as they can.
“It’s all stuff they look at every EOFY,” he explains.
“But our startups and their boards are saying they want that cash in their bank, right now.”
Marcelis also points to changes to the Export Market Development Grant program, made to help support businesses affected by the COVID-19 crisis.
“Companies that are starting to export, in particular, get the maximum EMDG grant in their first year,” he explains.
Again, for eligible startups, it’s about getting those applications in as soon as possible, he says.
“From a cash perspective, that’s the major thing.”
Instant asset write-off
One of the biggest tax-time changes from the government has been the expansion to the instant asset write-off scheme, and acceleration of asset depreciation.
While previously businesses could write off tax on assets worth up to $30,000, that was increased to $150,000 in response to the COVID-19 pandemic. The extended scheme is now in place until December 31.
But, for startups, the aforementioned focus on cash makes the scheme pretty much irrelevant, Marcelis says.
“We’ve always said to buy stuff for business purposes, don’t be silly about it,” he explains.
He himself has only one client who will benefit, and they were planning on spending anyway.
“People are not spending that money, because they’re worried about their cash — at least in startup land,” Marcelis explains.
“Many of the investors, when they’re looking at their own startup portfolios, they’re saying make sure you know you’ve got cash until the end of 2021,” he adds.
“That means stopping all unnecessary spending.”
Right from the beginning of the crisis, the advice for startups has been to have enough cashflow to stay afloat for two years. Many businesses have had to make tough decisions in order to make that happen.
“Staff cuts have been made in order to achieve those targets in some cases,” Marcelis says.
“Certainly now is not the time to be spending on assets you don’t need — you should never do that.”
The scheme is “a bit of a non-incentive”, he adds.
“At least in the startup world.”
JobKeeper is income
While not specific to startups, one question Marcelis says he’s fielding often is whether JobKeeper payments should be filed as income.
“JobKeeper is definitely income,” he warns.
“If you’re in a profit position, cash has been great from JobKeeper, but you will get taxed on it.”
Payroll tax changes
Another important thing to consider is the upcoming changes to payroll tax benefits.
As the COVID-19 crisis hit, several states brought in payroll tax waivers, Marcelis notes.
As of June 1, in New South Wales, Victoria, Queensland, Western Australia and Tasmania those waivers (or refund eligibility, in Victoria) will expire. Eligible businesses in some of these states and territories, will instead be able to claim a deferral of payroll tax, meaning the money is still owed, but due at a later date.
“Understand that whatever benefits you were getting from payroll tax, you want to make sure you understand what those changes are,” Marcelis says.
When it comes to boosting their coffers, many startups have been been striving to take advantage of the government’s $105 billion business loan stimulus.
Again, startup’s don’t slot easily into this package, especially those that are pre-revenue, Marcelis notes.
“Banks are a bit shy of it”, he says.
This isn’t necessarily something that’s EOFY-related. But, if you’re applying for a loan, it can help to have up-to-date financials, so the time of year lends itself to that.
“EOFY itself doesn’t necessarily mean anything in that process,” Marcelis says.
Rather, he advocates for “financial hygiene”.
“Get your ducks in a row, so that if you’re going to talk to banks for a lifeline, make sure that all your finances are in order,” he advises.
“Get all that stuff sorted so that it’s clean when you’re talking to banks and investors.”