Don’t kill off the financial first responders

I see many, many people supporting the health first responders.

But I am concerned we are quickly killing off the financial first responders and they won’t be there when we need them.

Because if we do kill our financial first responders off, the whole Australian economy is going to be in severe trouble.  And then think of the impact on the health system of the jump in death from things like suicides and other stress related issues, domestic violence, etc.

Who will be the financial first responders?

It won’t be the government!  You could argue they already employee to many people and on wages on average above their private sector counterparts.

So, it has to be the business sector.  And who drives employment in the business sector?  Small and medium business!

In Australia of the nearly 885,000 businesses in Australia who employed staff, 99.5% of these businesses employ less than 200 people.   These businesses employ nearly 70% of the non-public sector workforce in Australia.

If each small and medium business was to employ one more staff member, that would be nearly 881,000 jobs back.   Each big employer would need to add on average 206 staff each to match this.

Hence why the financial first responders for Australia will be small and medium businesses.

But, as I said above, I am concerned we are quickly killing off the many small and medium businesses.

Cash is King

Anyone in the real business world knows that “Cash is King”.  Without it you deprive business of the oxygen to survive.

And right now, in my opinion, the policies in Australia are depriving many businesses of cash, their oxygen.

For example, in March the Federal Government mandated that a large number of businesses be shut down or extremely restricted.  Overnight the government stopped supply of oxygen to these businesses.

Yes, the government announced a range of measures, but even if you are lucky to qualify, you won’t get your cash till May.  That is six weeks without oxygen.  Imagine if we told a coronavirus victim you had to wait six weeks for your ventilator?

And that assumes you are eligible for all of this.

Take the situation of the JobKeeper, and it being a reimbursement scheme.  If you were a restaurant with 20 staff employed over fortnight (including casual wait staff etc) you would need to fund $30,000 a fortnight to pay these staff before you are eligible to get the JobKeeper reimbursement.

How many restaurants, cafes, bars, clubs, gyms etc have that surplus cash flow to do this?  Very few.

So, whilst the theory is good, many employers and hence many employees, will not get any benefit from JobKeeper.

The only upside is that there is no way there will be 6 million employees on JobKeeper, so the cost the scheme as delivered will be significantly below $130 billion – maybe we can use these savings another way (see below for my ideas on this).

What can we do instead?

We need a scheme that puts money in the hands of small and medium business now – not up to six weeks after many businesses were closed down.

Here are my suggestions:

1. Every business who is eligible for, and applies for JobKeeper should immediately be given a loan by the government of $3,000 per eligible employee as at 1 March 2020. Forget the banks, they don’t have any idea of how to lend to small business. Employers then use this float to pay staff now.  The employer then uses May reimbursement to fund May payroll, and this repeats each month till September.  After September there are some reasonable loan repayment terms.
2. The JobKeeper rules should be amended for the fortnight ended 12 April 2020. They need to allow employers to use the loan they received above to “back pay” all their eligible staff for that fortnight.  Otherwise millions of people will not be paid for this fortnight.
3. We need a better targeted way to reward innovation in this country. The current R&D claim process will not drive the innovation we need in the short term.  So where are the government announcements on helping innovators?
4. For selected industries who need consumable stock such a food and drinks, the government develops a new loan for these businesses to allow them to actually restock. It is a bit hard to run a restaurant if you have no ingredients to use.  And if you have no cash, how do you restock.  This loan comes into play when restrictions are lifted.
5. We need a sensible and consistent approach to lifting the current restrictions. If our kids can be at school under social distancing why can’t cafes have access to the same 4 square metre rules.  If a barber can cut my hair, which is right in my face, why can’t a massage therapist massage my ITB, which is on my leg?

Any other ideas?

Contact Wayne Wanders for your FREE Business Survival Session

At the end of this session, you will have multiple ideas on how your business can survive and thrive in these uncertain times.

Simply fill in the contact form below or email me at wayne@aRealCFO.com.au or call me on 0412 227 052 to organise one of these obligation free sessions.

Wayne Wanders, A Real CFO

wayne@aRealCFO.com.au