As a public health issue, the outbreak of COVID-19 has led to the implementation of social distancing measures, the restriction of border crossings, and tragically, the loss of life.
But it is also having a significant impact on the Australian economy. We are now navigating our way through the ‘next normal,’ with some businesses reopening and others back in lockdown with the advent of a second wave in some states.
How might the coronavirus affect your company? And what financial assistance is available?
How has COVID-19 impacted Australian businesses?
Stock crashes, business closures, and job losses have led to Australia’s economy shrinking for the first time in nine years. We are in a recession.
According to the latest report from the Department of Education, Skills and Employment, the majority of businesses have been impacted. Cash flow and the demand for goods and services has been considerably reduced, 30% of companies have reduced staff numbers, and others have had to let staff go.
Food services, health care, social assistance, and accommodation industries have fared the worst with over 80% of businesses reporting that COVID-19 has affected them ‘a great deal’.
What areas of business have been affected?
The way businesses have responded to COVID-19 has varied greatly across industries. Some have pivoted their businesses to remain sustainable, and others have moved from rapid assessment to swift responses.
Many organisations are having to test their preparedness in real-time as they evaluate the potential impact it may have. They are also exploring techniques that allow processes, people and information systems to adapt to change, and mitigation strategies have been focused on six key areas.
1. Crisis management and recovery
As businesses plan for the ‘new normal’ after the pandemic, business leaders are considering how to negotiate various critical issues, including:
- Undertaking effective and empathetic communication to stakeholders
- Identifying, managing, and mitigating business risk
- Adopting crisis management recovery strategies
- Instigating incident management and scenario plans
- Implementing business continuity planning
- Negotiating change management with employees
- Considering business restricting planning
- Understanding government priorities and policies
- Mapping the economic impact
2. Workforce of the future
As we adapt to new ways of working, leaders have also needed to address how COVID-19 is affecting individuals, including:
- Instigating working from home (WFH) policies and practices
- Understanding the technology needed for remote work
- Providing adequate training and support
- Negotiating leave policies and entitlements
- Deciding how staff will return to business locations including offices
- Undertaking workforce capability planning
- Considering how skills can be redeployed and staff up-skilled
- Dealing with the impact on immigration and global mobility
- Understanding the changes to employment law in the emerging environment
- Maximising employee health and wellbeing
- Ensuring the safety of employees, customers and other stakeholders
- Leveraging culture and engagement successfully
- Offering advisory services regarding personal finances and super
3. Operations and supply chain
In terms of how the coronavirus is affecting business, the ripple effects are widespread, particularly for supply chains. Key considerations include:
- Minimising production impacts
- Enhancing supplier resilience
- Identifying alternative supply chain scenarios
- Examining the sourcing of materials and parts
- Investigating alternative pricing strategies
- Prioritising asset management particularly on technology platforms
- Maintaining contact and call centres
- Minimising operational risks including cybersecurity
- Reviewing the impacts of exports, imports and access to markets
- Improving inventory by leveraging on-line marketplaces
- Focusing on improved margin contribution and sustainable market growth
4. Finance and liquidity
As businesses prepare for the next wave of the pandemic, CFOs will need to focus on scenario planning and forecasting as well as continuing to manage day-to-day operations. Key issues include:
- Considering liquidity and working capital
- Factoring in business impairment, including the permanent reduction in company asset value
- Ensuring financial, legal, compliance and regulatory reporting obligations are upheld
- Understanding the impact of stimulus support such as JobKeeper
- Analysing payment terms, and debt and capital structuring
- Enhancing productivity and cost reduction
- Mitigating operational and tech risk
- Leveraging the benefits of regulatory compliance and wealth creation
- Reassessing cash flow and financial modelling strategies
5. Tax concessions
As organisations build their resilience through the challenges of COVID-19, continuity decisions have led to several tax governance and compliance considerations, including:
- Considering eligibility for government research and development incentives
- Accessing enhanced tax concessions for capital investment
- Leveraging ATO support in terms of payments, GST refunds and low-interest payment plans
6. Brand and marketing strategies
As businesses begin to rebuild after COVID-19, strategies that will enable them to recover and keep customers loyal can include:
- Reviewing and tailoring business models to the current challenges
- Ensuring marketing is relevant, updated and empathetic
- Ensuring a robust digital and technology strategy is in place
- Leveraging digital channels to keep customers engaged
- Investing in long-term branding building strategies
How to get help for your business
The Australian Government has released a number of economic stimulus measures for businesses in response to the challenges of COVID-19. This temporary assistance will help organisations withstand the impacts and encourage future economic recovery. They include:
- A wage subsidy to support businesses and not-for-profits (NFPs)
- A wage subsidy for apprentices and trainees
- Assistance with managing cash flow
- A safety net for companies facing financial distress
- A time-limited asset investment incentive
- Credit and loans
Specific measures include:
JobKeeper will help businesses keep more Australians in jobs. Eligible employees of companies including NFPs will be paid a fortnightly payment for part or all of their wages/ salary. In July, the Government announced an extension of the JobKeeper payment until 28th March 2021. Further changes were announced in August to adjust the reference date for employee eligibility and make it easier for organisations to qualify for the extension.
Temporary cash flow payments of up to $100,000 are available for small to medium-sized businesses, to help pay wages and bills, retain staff, and continue to operate.
Apprentices and trainees
Eligible businesses can access a 50% wage subsidy to retain trainees and apprentices, and support the continued development of Australia’s skilled workforce.
Businesses will be offered a safety net to lessen the threat of actions that could force them to close, become insolvent, or go bankrupt. This will ensure they can resume normal operations once the crisis has passed.
For businesses with an aggregated annual turnover of less than $500 million, the instant asset write-off threshold has been increased from $30,000 to $150,000. This can assist with the purchasing of new equipment and is available until 31st December 2020. Accelerated depreciation deductions will also be available for eligible businesses via a 15-month investment incentive initiative.
Credit and loans
The Government is guaranteeing 50% of new short-term loan applications to SME lenders, under the Coronavirus SME Guarantee Scheme (available until 30th September 2020). This will further enhance lenders’ ability and willingness to provide credit by providing businesses with funding to meet cash flow needs.
The Scheme will be extended as the economy recovers to support lenders’ ability to provide credit and ensure SMEs benefit through lower interest rates. This phase will commence on 1st October 2020 and be available for loans made until 30th June 2021.
Lenders providing credit to existing small business customers will also be granted an exemption from responsible lending obligations. This will be valid for six months and will apply to any credit for business purposes, including credit limit, credit variations and restructures, and credit limit increases.
$1 billion has been set aside by the Government to support the regions, communities and industries most affected by COVID-19. In addition, the Government is assisting Australia’s airline industry through a package of up to $715 million.
Do your staff need a ride?
Have you asked senior staff to avoid public transport when coming into the office? Hughes can take care of their commute in the meantime, taking them to and from your office in one of our modern, safe, and comfortable vehicles.
- 2020, Impact of COVID-19 on Australian businesses – part two, Australian Government, Department of Education, Skills and Employment
- 2020, Economic Response to the Coronavirus – Business and employers, Australian Government, The Treasury