Avoiding cash flow issues once Payday Super kicks in

“Business owners only have four months until these changes come into effect, so businesses already struggling with cash flow must act now to prevent becoming insolvent,” he said.

Hunted also referenced how March often sees an uptick in business insolvencies, noting: “We’ve just come out of the Christmas period where many businesses will have had to pay employee entitlements while revenue slowed down or stopped entirely. On top of this, fourth quarter BAS payments were due at the end of February putting additional strain on their working capital.”

“For many small and medium-sized businesses, this new Payday Super legislation will only further increase the pressure on their cash flow and extend it throughout the year.”

Super guarantee contributions must be paid on payday and received within seven business days, or employers risk severe penalties worth in excess of 60 per cent of the superannuation shortfall. While some exceptions may apply, experts urge employers to prepare for on-time payments now. 

Rick Kimberley, partner and Australian global services leader at RSM, said that businesses shouldn’t wait until 1 July to opt in.

“These changes won’t be achieved overnight,” he added.

“It takes time to transition to a new system and there are almost always unseen hurdles employers will need to navigate, so the sooner they can start this process, the better.”

Kimberly recommended that employers review wage code systems and the entire payroll process across the business, including end-to-end onboarding, the superannuation payment process, treasury risks, cashflow considerations, bounce backs, and super capping to ensure all bases were covered.

Shifting payroll frequency to better manage payroll cycles and cash flow, and seeking financial advice were also advised.

“An effective option for some businesses who already find themselves facing cash flow issues could be the small business restructure (SBR) scheme," Hunter said. “If eligible, the business is allowed to keep operating with directors retaining control while an appointed practitioner works with you to create a plan for rehabilitation.”

“This can be a way of preserving the business and its ownership while working productively through ash flow issues, which may have already existed but could be worsened with the start of Payday Super.”