Don’t let payday super disrupt your cash flow

One of the biggest mistakes I see business owners make when it comes to managing their cash flow is the failure to plan ahead and anticipate when things might get tough, writes  Angus Sedgwick, CEO of OptiPay. The recent changes to payday super announced by the Federal Government don’t kick in until 1st July 2026, but small business owners should be taking action now.

Why? Because many small and even medium-sized businesses rely on Super Guarantee (SG) contributions as a source of working capital and they might find themselves caught short when the changes kick in.

Under the changes employers will need to pay their employees SG contributions at the same time as their salary and wages rather than on a quarterly basis. That means business owners will need that cash weekly, fortnightly or monthly now depending on pay cycles.

Those who do stick their heads in the sand will also find themselves personally liable when SG is unreported and unpaid more than seven days after an employee’s payday.
With an estimated $3.6B worth of super going unpaid by Australian businesses in 2020-21 the ATO has made the changes to monthly SG collections to minimise any loss for employees, especially given a large number of Australian businesses entering insolvencies have unpaid tax debts and unpaid super.

Business owners need to be on the front foot with these changes and put in place new strategies to support cash flow.

So how can you make sure you have enough working capital for your super guarantee?

Cut costs

Now is a good time to see if you can improve your cash flow by overhauling expenses. See if you can reduce monthly outgoings, negotiate better terms with suppliers or manage expenses more efficiently. Do an expense audit to see what areas you could be making savings to help with super expenses.

Prioritise sales activity

Focus on how you can generate additional income and more sales. Perhaps you need a rethink on your marketing strategy or your sales agents need an incentive to bring in more customers through the door. Come up with an actionable plan for how you can prioritise sales activity. What’s worked in the past may not always be best for the future because customers and their attitudes change rapidly and businesses need to stay on top of the shift.

Turn to investors

Depending on where your business is in its life cycle you could consider selling equity to a third party or external shareholders. Think about what other values and skill sets your shareholders could also bring to you other than just capital. The downside of this option is that you are diluting your own equity in the business which may not be desirable as the business owner.

Invoice financing

With traditional financing options such as bank loans, lines of credit or business credit cards harder to access in the current economic climate, B2B businesses may benefit from invoice financing. It allows businesses to be paid up to 90 per cent of their outstanding invoice value upfront with funds accessible usually within 24 hours. When a customer pays and the funds are received by the debtor finance provider, they’ll remit the remaining 10 per cent minus a small fee to compensate for early funding.

What we don’t want to see happen with payday super is what occurred during COVID, when many Australian small businesses delayed their tax obligations to the ATO to maintain cash flow. That temporary reprieve has come back to bite thousands of businesses as the tax office cracks down hard on these unpaid debts. Make sure you find a cash flow solution that doesn’t lead to more financial damage in the long term.

Want more? Get the latest coronavirus news and updates straight to your inbox! Follow Kochie’s Business Builders on Facebook, Twitter, Instagram, and LinkedIn.