Following our recent post providing a 6 Step Program for accountants to help their SME clients revive and survive, here are three practical checklists to identify which clients might need help and then how to help those clients.

These checklists may also prove beneficial for direct use by SME shareholders and directors.

1. Checklist for Helping Small Businesses Survive Corona Times

1. Is the client in a COVID High Risk Industry?

Examples: Hotels, Food, retail, events, Sport, fitness, travel, entertainment, etc.

If no…..focus on stimulus packages for maximum return.

If yes….

2. Has the business ceased operations either temporarily or permanently?

  • If permanent, go to the Shutdown Checklist below
  • If temporary:
  1. Has a review of the business future prospects been done?
  2. Did the review include stimulus applicability?
  3. Does the review  include projected cash flows based on a variety of different assumptions? 
  4. Can the business continue trading once it resumed, with or without an injection of funds?
  5. Are critical employees available and can more suitable contracts be negotiated?
  6. If it requires funds are they already sourced?
  7. If they are not sourced, how difficult will it be to obtain the necessary finance?
  8. If the owners/directors are injecting more funds, has an analysis been done as to the best way those funds are to be injected: loan (secured or unsecured) or equity (new or existing shareholders)? 
  9. If externally sourced, do the owners require other collateral?
  10. If the business can’t or won’t source required funds has there been a review of the possibilities of a restructure of the company via either Debt Compromise Agreements with creditors/suppliers/lenders or a more intrusive program of Voluntary Administration and possible Deed of Company Arrangement.
  11. Has there been any advice sought from a restructuring expert to help with making the decision on which way to go?
  12. Is the client aware of all the possible options available to them to restart the business and protect them personally from insolvent trading problems moving forward?

2. Checklist for Identifying SME Solvency During Corona

  1. What are the overall cash flows looking like for the short and medium term?
  2. Have the tax liabilities (state and federal) been reviewed to determine compliance?
  3. Are all employee entitlements accounted for and known?
  4. Are there any loans or liabilities of the company that have registered securities?
  5. Is the company premises subject to lease?
  6. Are there plant and equipment leases in or out of terms?
  7. Has the landlord been approached to renegotiate the terms of the lease?
  8. If the landlord has been approached, is there confidence that the best deal has been obtained?
  9. Are there alternative premises options for the business?
  10. Is remote working a possibility with no or smaller premises?
  11. What are the customers/clients prospects looking like moving forward?
  12. What credit terms would be best suited to trading moving forward?
  13. Are all critical staff being looked after?
  14. Have employee costs been negotiated downwards?
  15. Are the suppliers/service providers owed money?
  16. Are any critical contracts in default due to the close down? 

If trading in the existing corporate entity is deemed to be feasible, then a close monitoring role of performance will need to be implemented.

If trading cannot continue in the existing corporate entity, insolvency experts should be considered to work with the accountant and client around the most advantageous options to get the business up and running again.

3. Checklist for SME Shutdown During Corona

  1. What is the financial position of the company? In particular has a list of assets and liabilities been developed?
  2. Although the business has stopped trading, is the company still incurring costs, such as rents, other overheads, interest on loans, loan repayments etc?
  3. Is it likely that any assets when sold will be greater than the liabilities after taking into account the costs associated with selling the assets?
  4. In respect of assets are they the type of asset that can be easily valued by a registered valuer and if so have they been valued?
  5. Do any of the creditors have registered securities over the assets?
  6. Have all employee entitlements been paid?
  7. Are taxes up to date or behind? 
  8. Are all required returns up to date?
  9. If the liabilities are likely to be higher than the realised assets, what steps have been taken to understand the options available to the shareholders and directors?
  10. Has any analysis been undertaken as to what impacts a ‘liquidation’ of the company may have on them personally?
  11. Has any consideration been given to the possible timing of a liquidation?
  12. If there has been consideration how are the directors likely to choose an insolvency practitioner to undertake the role of liquidator?
  13. Has that liquidator spelt out how they will approach all the relevant issues? If no, are you clear on the criteria you will use to recommend the best option?

We strongly recommend that these Checklists be used in conjunction with the 6 Step Approach in our last post and hope that they prove beneficial for accountants and their clients.