HOW CPAs ARE ADVISING THEIR CLIENTS ON MANAGING CASH FLOW
A survey of 10,000 small businesses conducted in early April by the Canadian Federation of Independent Businesses found that cash flow was the biggest worry for 76 per cent of small businesses. In Ontario, only 30 per cent of small businesses reported having enough cash flow to cover their April bills. As the months continue, small business’ cash reserves will erode further, threatening their ability to operate.
Businesses that have shut down or with reduced capacity may need their cash flow forecasts updated weekly due to the uncertainty involved in the current climate. Noah Jensen, CPA, CA, from Racolta Jensen LLP in Cambridge, says, “Those businesses need to know when government relief will hit their bank account if they’re eligible, and in the meantime if they have a revenue gap they’ll need to start digging into lines of credit.” Jensen has found that, so far, banks are being responsive. "Some banks are permitting a ‘bulge’ for customers in good standing, that’s a 10 per cent increase in their line of credit and are open to negotiating interest-only payments for certain time periods." Businesses can also take advantage of new government relief measures such as the Canada Emergency Business Account that provides interest-free loans of up to $40,000 for qualifying small businesses.
In order to conserve cash, Jensen advises SMEs that are expecting their net income for 2020 to be lower than 2019, to hold off paying tax instalments until July or August and to take advantage of new government relief measures including federal and provincial tax deferrals. “At that point they can reforecast their taxable income for 2020 and adjust their instalments for the rest of the year accordingly. Any interest on under-remitted instalments will be due when the balance is calculated.”