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Managing the end of JobKeeper in NFPs
Australian organisations and not for profits (NFPs) heaved a collective sigh of relief in March 2020, when the federal government announced its $70 billion JobKeeper scheme. Designed to assist Australian-owned businesses and NFPs adversely impacted by COVID-19, the scheme has been a lifeline to many who have relied on the wage subsidy to stay afloat.
While the scheme has been tweaked and extended since its implementation, an end date has been scheduled for March 28, 2021. Understandably, this looming deadline has brought concern for many associations, charities and other NFPs.
We’ve noticed that while some of our clients have become ineligible for the final quarter, due to reasonable results for the December quarter, there are quite a few who are qualifying for the first time.
If your organisation did not meet the decline in turnover test for the December quarter, you are now ineligible for JobKeeper. There is no requirement to notify the ATO, but you will need to update settings per employee in your payroll software.
If your organisation has been relying on the JobKeeper financial relief to keep afloat, now is the time to think about how you will be impacted and take the necessary steps to prepare.
Monitor your cash flow
Ensuring you know exactly where your organisation sits in terms of cash flow is essential. As wages are typically 75%+ of a not for profit’s expenses, the end of JobKeeper assistance will be a significant loss in terms of money flowing into your business.
If you see that you might need to reduce staffing, it is important to have these conversations as soon as possible. Early conversations will help your team prepare themselves for the future and will also help protect your organisation’s reputation and culture.
The end of JobKeeper will also have ripple effects across the broader business landscape, as the scheme has been a lifeline for many corporates and corporate institutions.
It is important to consider the possibility that funders and/or donors may reduce their charitable contributions. Making allowances not only for the loss of direct JobKeeper assistance, but also potential changes in financial contributions, will help you manage the almost inevitable change in cash flow.
Cut costs
While many organisations implemented cost-cutting strategies early on, others may have been lulled into a false sense of security by the JobKeeper relief payments. Keeping your organisation running as lean as possible and cutting down on any unnecessary expenses will widen your financial safety net and help you weather the storm.
This may mean eliminating some expenses altogether, or deferring until a later date. By understanding your fixed, variable, direct and indirect costs you will be able to adapt to changing circumstances.
Be flexible
Your ability to adapt to the changing economic climate and be flexible in the way you do things is imperative in weathering the uncertainty of the current climate.
Your organisation may need to consider creative ways to adapt to the changing NFP landscape, particularly in regard to employees.
If your organisation has been relying on the financial relief provided by JobKeeper, it may be worthwhile to pause any recruitment until you know where you sit financially. For any essential new hires, it may be worth considering casual or contractual arrangements to protect your organisation from financial downturn.
If you are planning to change the way you do things, it is important that you have taken any additional costs into consideration, whether it be IT subscriptions, updated insurance policies or PPE.
Prepare for any scenario
If 2020 has taught us anything, it is that life can be unpredictable.
While planning is really difficult with so many variables and unknowns, it is important to be strategic in your thinking. By delving into a variety of scenarios — easing restrictions, another wave, or increased restrictions — and the ways your NFP can respond, you will be able to manage the changes quickly and skilfully.
Prepare a few versions of your budget, based on these possible scenarios, and ensure you identify your fixed and variable costs. By outlining each possibility and plan, and noting your assumptions, your future self will thank you for your preparedness!
How can we help you?
We know that the past year has been difficult for many, but we are committed to helping you through these challenges.
We are Australia’s leading experts in the non-profit sector. And crucially, we understand on a very deep level the financial constraints, compliance, regulatory and governance requirements faced by NFPs.
If you’d like to find out more about how we can help you, please contact our team today or find out more about not for profit accounting.
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