Professional Help Kit

Protecting personal finances during uncertainty

With economic uncertainty, comes financial uncertainty and with that, the need to be financially mindful. The most important question to ask yourself is: Am I going to be able to cope with all of this financially?

Follow these steps and you may just come out at the other end in a stronger financial position;

Switch to an Emergency Budget

Take a hard look at your budget to determine where you can free up some funds or cut back. If you don’t have a budget or aren’t sure where to start, use a budgeting tool to first work out your current financial position and then, start eliminating all unnecessary expenditure. 

You will need to prioritise some payments and debts over others. Prioritise payments for needs, which include shelter, food and utilities. contact your creditors’ hardship departments if you are going to struggle to make repayments.

Like paying mortgage, rent remains a high priority payment.

Increase cash flow

If you have a mortgage, use your biggest debt to your advantage. With fixed rates as low as 2.09% and variable 2.77% on offer for eligible home loan borrowers, one of the best ways to increase your cash flow is through refinancing

Use that extra cash to make extra repayments, either directly into the loan or use an offset account. On a side note, you can use your offset account to build an emergency cash reserve and the savings made by refinancing can supplement your reserves. 

Utilise Your Emergency Fund

If you have an emergency fund, try to use it sparingly.  Once you are back at work, be sure to save a small amount each pay cycle in a separate bank account to re-establish (or start) your emergency fund.  

Being prepared for the next financial emergency will provide you with peace of mind, whether it’s being quarantined, another government furlough, or needing an expensive car repair.

Funding your Business during economic uncertainty

During uncertain time, business must change their focus to immediate challenges without losing their long-term goals. One of the key things a business must pay attention is keeping cash flowing by managing near-term revenue and expenses.

Start with a financial health check, get your accountant to complete one if you don’t have the capacity. It’s important to know if the business has the liquidity needed to survive any revenue disruptions. 

If the business already has financing in place, they should contact their lender and renegotiate the terms of their facility. You can ask for a rate reduction, pause in repayment, extension of interest only loan period for starters. 

Where there is revenue uncertainty and no finance facility in place, don’t wait for government programs, apply for working capital finance to cover your short to medium term business commitments. Options include secured or unsecured term loan, line of credit and overdrafts. 

Secure near-term revenue

Companies can secure near-term revenue by asking customers with outstanding invoices to pay sooner rather than later. Consideration should be given to the fact that some of your customers may be in financial stress themselves and thus unable to pay their accounts.

Implement new revenue/pricing models.

Companies should test new payment terms with their largest accounts. This may require discounts to be tiered, quicker the account is settled, greater the discount. 

Manage your cost and creditors

Finally, it would be futile for your business to generate cashflow, only for it to be spend unnecessarily. Where possible, delay capital expenditure and negotiate wage freeze with employees if you are able to retain them.

Another source of cashflow relief is through negotiating new payment terms with your suppliers, cancel orders if contract permits or delay delivery. And don’t forget your commitments to the ATO, negotiate instalment plan and avoid being penalties.  For businesses in certain sectors, delays in arranging working capital finance could mean the difference between surviving this period or folding.

Written by (Proud BJCC Member):
Navneet DharanloansHub