Cashflow and Debt Management for Practice Owners

Last Updated: 22 March 2020

If your practice is forced to close or you decide closure is the best course of action, there are several measures to consider when it comes to being financially prepared.

Cash flow implications and minimising expenses/overheads

Contact your business accountant and advisors and have them help you work out the short-term implications on the profitability of your business due to reduced revenue/closure. Your profit and loss statement will outline your revenue and expenses. Your balance sheet will outline the current financial health of your business. Identify all expenses within your business that are fixed and variable, and discuss with your team which expenses you can defer, and which expenses you can cease immediately. 

Also discuss your current tax obligations with your accountant and determine what can be deferred. Also request a full analysis of your business's eligibility for government subsidies (further information below).

If you are leasing a premises, we recommend discussing your situation with your landlord and requesting rental assistance/deferral if necessary. A property lawyer may also be of assistance if you require further guidance with your tenancy contract.

Debt management

Have your practice manager or accountant prepare a full list of your loan facilities outlining the various terms of the loans such as the outstanding balance, interest, remaining loan term, and repayment amount. This can be obtained directly from your bank or finance broker. Examples are the following:

  • equipment finance including motor vehicles

  • leases

  • overdrafts

  • goodwill/business loans

  • property loans

The government has recently provided subsidies to banks which will enable them to help small businesses defer their loan repayments for a period of up to 6 months. Each bank will have slightly different offerings therefore we highly recommend you contact your finance broker or business bank as soon as possible to understand your options in the event you will need to defer loan repayments.

In addition to the above, the Government will also be providing a guarantee of 50% of new loans written by banks and SME lenders to support new short-term unsecured loans to small businesses. This will thus provide small businesses easier and faster access to loans by reducing the red tape and 'risk' that banks ordinarily face when lending to business customers.

Cash Flow Forecast

Based on the previous points above, prepare a cash flow forecast taking into consideration any amended monthly expenses, any payments you can defer, all subsidies that you are eligible for, and any other cost-related factors that are either fixed or that can be eliminated. Ask your accountant and advisers to help you structure this in a format that you can quickly amend and easily understand. Formulate different scenarios and consider multiple time frames (3 months, 6 months, 12 months) based on the following:

  • no revenue (full closure)

  • partial revenue (emergency services only).

  • increasing revenue (as business re-opens)

  • stabilising revenue (as business gets back to a normal state)

Your cash flow forecast will indicate your surplus or deficit cash position. Based on the current situation, it is likely most businesses will be in a short-term deficit position. Discuss your cash flow forecast and scenarios with your finance broker and/or business bank and if need be consider cash flow assistance in the form of a business loan or overdraft facility.

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