Modernising the PAYG Instalment System

Take control of your cash flow

by Zilla Efrat

It’s often said that “cash is king” and if you have been running your business in recent turbulent times, you are likely to understand why.

Managing your cash flow is crucial to your business’s long-term survival and to keep it running in down cycles or if conditions get tough.

Put simply, cash flow is the amount of money that goes in and out of your business – that is, income and expenses. Having enough cash at the right time will make it easier for your business to pay bills and other expenses and meet your tax, superannuation and employer obligations.

Not having enough cash, however, may mean you can’t embark on your growth plans or offer the level of product or service you’d like. In fact, it can change the direction of your business.

There are many ways to better manage your cash flow and they start with watching your spending and ensuring that your customers pay you on time and that you have your pricing right for what you sell.

The ways also include keeping a sharp eye on inventory and staffing levels to see if you can cut down on some costs and wastage. You may also consider improving your business’s efficiencies and invoicing practices through new technologies.

Plus, having a cash reserve may help you deal with unexpected expenses. Furthermore, you may need to get better at cash flow forecasting so you will know when there will be extra cash coming into the business or when cash will be tight. This can provide red flags about future financial problems and help you avoid unexpected hurdles.

There are many ways to manage your cash flow and in its federal budget in March, the Morrison government provided yet another, called Modernising the PAYG Instalment System.

From 1 January 2024, small businesses can choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.

The choice will, if approved, allow you to align your company’s PAYG instalment liabilities with your company’s profitability. This will give you a more accurate picture of your tax liabilities and ensure instalments reflect your current performance.

This means you may benefit from paying a lower installment amount at the time when business is down, but you will ultimately pay the same amount of tax after lodging your annual income tax return.

There are also some ways in which your broker is well-placed and specialised to help you improve your cash flow.

One option, for example, could involve refinancing your loans to consolidate multiple debts into one business loan, obtain a loan with a lower interest rate or access the equity you have built up in your business over the years to fund future spending or upgrades.

Another option is to unlock the cash tied up in your customer invoices or assets so that you can keep your business moving.

We can also provide you with fast funding for stock, inventory and raw materials, so you don’t have to turn away new orders as you grow. This involves using a revolving line of credit to pay your overseas or local suppliers, when you need it, in almost any currency.

Please give us a call to find out how we can help realise your potential.

Feel free to contact us for anything that relates to your business finances so we can help with your success.

4 Pickett Drive , Altona North, VIC 3025