2020 It’s a WRAP!

Dear all

We’re well and truly in the last phase of this momentous year. While things are still uncertain and challenging on many fronts, we hope there’s still an element of positivity and optimism about putting 2020 to bed and welcoming a brighter 2021.

Heading into the Christmas period, a warning to remain vigilant if accepting payments for goods and services via credit cards. A few of our clients have recently been caught out by clawbacks (a financial institution’s chargeback policy). To avoid customer disputes that could potentially see a credit card transaction being reversed, ensure you use a clear payment descriptor, have a signed contract in place, and deal with any disputes in a timely manner.

Unfortunately, cybercrime has also been on the rise during COVID and lockdown. In the last article in this newsletter, we share some excellent tips from a specialist cybersecurity trainer on how to protect your and your customers’ data.

Lastly, we’re looking forward to holding our final Learning Lunch for 2020 next month. We’ll hear from two experts about systemising manufacturing and processing. If you operate in these industries and are interested in attending, let me know.

Angela McDonald
Managing Director

The state of play for small business

By Helen Dickson

Optimum attended the latest CreditorWatch Quarterly Review, and below we share some of the more interesting stats and data:

Slowest paying industries

• Transport, Postal & Warehousing – up 463% YoY to average 90 days overdue
• Admin & Support Services – up 332% YoY to average 82 days overdue
• Financial & Insurance Services – up 520% YoY to average 62 days overdue

Payment defaults

• Increased by 23.25% from August-Sept 2020
• But decreased by 37.5% Sept YoY, indicating that creditors have been more lenient with extending payment terms

Court Actions

• Have decreased in most stats YoY, including a whopping 53.5% decrease in Victoria
• This reflects the current moratoriums in place, but watch this space when those are lifted in March 2021

Should we all fear The Walking Dead?

By Angela McDonald

The Government’s temporary cash-stimulus measures have been a lifesaver for small businesses, helping them remain operational and employing staff during COVID. But in many cases, they’ve also caused the rise of ‘zombie companies’ – businesses that aren’t viable long-term and are only solvent because of this government financial assistance.

The Government has announced it is extending these temporary measures until the end of December 2020, and in some instances until March 2021. This may delay the inevitable business closures even further, placing creditors under a very real risk of trading with organisations that are technically insolvent.

How many small businesses are at risk of insolvency?

The Reserve Bank of Australia recently reported that up to 25% of small businesses would be at risk of insolvency if those cash subsidies ceased today. And Treasurer Josh Frydenberg has declared that small businesses are a particularly vulnerable group, admitting that some will not survive COVID-19.

If you’re trading with customers or suppliers who are being falsely propped up by government stimulus packages, now is the time to swing into action and protect yourself from the ‘Walking Dead’.

Unlike the popular Zombie series, we’ll never advocate the use of crossbows or firearms to be your weapons of choice! When it comes to business, prevention is always better than a cure, and there are some clever, simple prevention strategies you can implement now to protect your business.

Our Zombie Prevention Hitlist

1. Be extra vigilant in all your dealings

• Don’t rush into agreeing to payment plans with your debtors without fact-checking their financial situation first.
• Register with a credit bureau and ask them to conduct a review of every one of your customers. They’ll send you automatic alerts of any worrying signs so you can act fast. Let us know if you need help.
• Keep talking to those you do business with – both your suppliers and customers. Regular and open communication can help you uncover any concerning issues before it’s too late.

1. Ensure your internal processes and terms are watertight

• Get expert assistance to review your current T&Cs, credit management processes and internal policies to make sure they give your business adequate protection in today’s economic climate.
• Optimum Recoveries can conduct a health check and identify any gaps that may leave you susceptible to hard-to-recover debt.

In the current business environment that’s both challenging and changing, Optimum Recoveries can help your business remain viable and thriving. Talk to us about how we can assist by tailoring robust systems and processes to keep the Zombies away from your door.

What the latest Government proposed legislation means for SMEs

The Federal budget handed down on October 6, 2020, seems geared to provide some much-needed tax relief to both businesses and individuals. This will hopefully encourage Australians to have the confidence to spend in the coming months, providing the financial support that businesses need to keep trading.

Here are some key points impacting SMEs:

1. Immediate asset purchases write-off: Any new asset acquired until 30 June 2020 will be eligible for a full tax deduction. The same will apply to second-hand assets, up to 30 June 2021. There is no dollar value limit to the deductions.
    
2. Loss carry-back: Businesses that have incurred tax losses in either FY2020/2021 or FY2021/2022, but have paid tax in FY2018/2019, can carry back the tax losses and be eligible for a refund of the tax paid in the earlier years.
    
3. JobKeeper and JobMaker: JobKeeper payments look set to wind up at the end of March 2021. The new JobMaker system offers employees a subsidy for hiring new employees from 7 October 2020 to 6 October 2021, provided the new employees have previously received JobKeeper or similar. This is excellent news for P2P and any clients who have been holding off recruiting new team members!
    
4. More stimulus measures: Spending initiatives are set to be introduced to kick start spending in a range of industries, particularly manufacturing, infrastructure, construction and research.

A fighting chance for small business? 

Recently, the Federal Treasurer Josh Frydenberg announced that as at 1 January 2021, new insolvency laws will be introduced to assist with the fallout of the COVID-19 pandemic. They represent the most significant changes to the insolvency framework in three decades. The Government is proposing:

• The move from a ‘creditor in possession model’ to a ‘debtor in possession model’
• To allow incorporated businesses with liabilities of less than $1 million (this equates to approximately 75% of Australian businesses) to continue trading while they develop a debt restructuring plan (over a 20-day period) with a small business restructuring practitioner
• That employee entitlements must be paid before the plan is then voted on by creditors  
• That this new regime will start once the temporary COVID-19 insolvency measures are lifted
• That safeguards will be put in place to prevent phoenix activity

While these proposals are yet to be legislated, we have some immediate concerns if they do pass into law:

• We have a healthy scepticism about whether these proposed laws will assist as they are intended
• Will small businesses be able to afford a small business restructuring practitioner without government funding when the cost is likely to be significant?
• Are we simply continuing to put off the inevitable by allowing zombie companies to continue to trade where they have little-to-no chance of survival once the government incentives such as JobKeeper come to an end?

Unfortunately, cybercrime has also been on the rise during COVID and lockdown. In the last article in this newsletter, we share some excellent tips from a specialist cybersecurity trainer on how to protect your and your customers’ data.

Cybercrime is on the rise.
Do you know what to look out for? 

By Melissa Rafferty

With so many people working from home during the pandemic, there has been a huge increase in cybercrime and scammers have been devising elaborately convincing tricks that have been fooling even the most savvy professionals.

Optimum is always vigilant about protecting our customers’ data as well as our own, but with so many instances of businesses getting scammed, we invited specialist cybersecurity trainer, Mike Ouwerkerk from WebSafeStaff to share some tips with our team.

First, the worrying stats

• 60% of businesses that suffer an IT breach go out of business within 6 months or less
• The average cost of an IT breach is $250,000, encompassing the stolen funds, plus recovery efforts, loss of productivity, mandatory reporting, damage to reputation and lost customers
• Hackers use a dragnet approach – just getting access to one piece of company information can open the doors to a company-wide security breach, especially if the same password is used for multiple platforms

The key take-outs

1. Be suspicious:
   • Treat every request for information, approval, activation or invitation as potentially fraudulent
   • Consider any file to be dangerous, especially if you didn’t request it or weren’t expecting it 
2. Stop and think, then act
   • Many scams use scare tactics, free offers or urgency to trick you. Take your time to investigate, before responding or clicking
   • Don’t hand out personal or company information unless you’re sure you know and trust the person requesting it
3. Clarify anything suspicious on the phone, not by email
   • Any emails requesting money to be transferred should be checked and confirmed via a phone to the company
   • Never respond via email, as addresses are easy to forge
4. Keep work and home separate
   • Keep work laptops, mobiles and contact details for work, and personal ones for home
   • Crossing these over can leave you, and your business, more vulnerable to a cybersecurity breach