Financial recommendations and tips covering COVID-19
This paper/article covers two main areas:
- General financial measurements
- Tax relief and financial support from public sources
Under the current circumstances, the priority of your business right now is to revise your business plan, secure your revenues and make sure that you have a sufficient cash cushion.
1. General financial recommendations
Assess the general impact of the situation on
- Analyse the impact of the crisis on your business model / operations and supply chain
- Define the key challenges and key remedies for the stabilization
- If possible, identify new sub-product / business opportunities by modifying your business model to be part of a solution to the pandemic / quarantine problem
Manage cash flow across the supply chain
- Reassess your 2020 strategy / business plan and modify the figures based on new facts
- Your new object of your attention should be liquidity, i.e. preserving cash:
1. Realize that your revenue may get very unstable
- Be alert to customers' payment abilities when promoting new business
- Carefully review any cancellation clauses of your current contracts
- Contracts in your pipeline may be severely impacted; review the expected cash-in and related business sensibility
- Try to find new income streams, this may be your main remedy
2. Put in place a plan to conserve cash
- Receivable: Review any outstanding invoices
- Payables: Wherever possible, try to renegotiate longer payment terms and defer payments.
- Taxes: Delay tax payments as long as possible (check next section)
- Review your insurance options
- Expenses: cut all necessary items
- Terminate all third- party contractors that are not crucial (review your obligations to fulfill the obligations despite the pandemic).
- Evaluate any non-core expenses
- Consider the added value of each team member and if you can achieve the same with fewer people
- Reduce the working hours so you can afford the team
- Review the founders' salaries.
- This is very unpopular area, therefore act sensitively to keep a functional company culture. Assure the rest of the team, that you will make it only if you are sharp and focused.
- For the next few weeks, prepare a detailed weekly cash flow budget with clear objectives and top priorities for each day and week
Secure key risks to keep the business continuity
- Be in touch with your customers and reassure your commitment to keep the agreements and quality of the service
- Inform fairly your investors giving them realistic outlook
- Explore your options to get government grants.
2. Tax relief and financial support from the public sources
Please note, that some of benefits are dedicated for eligible tax payers only, i.e. the Tax Authority has a right to give a final approval decision.
Tax area (applicable to both corporations and freelances)
- Exemption from late submission of the fine for personal and corporate income tax returns until 1 July 2020.
- Exemption of income tax advance as of 15 June 2020.
- Tax Loss Chargeback - If a taxpayer reports a tax loss for the taxable period of 2020, it can be offset against the tax liability of the taxable period of 2018 and 2019 by filing an additional tax return.
Compensation bonus for freelancers
- The compensation bonus is intended for self-employed persons affected by crisis measures.
- It is provided in the amount of CZK 500 / each calendar day of the specified ("bonus") period, ie from 12 March 2020 to 30 April 2020; The maximum amount is CZK 25,000 / the entire bonus period.
- The support is requested on a form published by the Financial Administration. The application includes a solemn declaration confirming that the self-employed activity could not be carried out, in whole or in part, as a result of crisis measures or health risks. The application can be submitted until the end of June 2020.
Remission of advances for social and health insurance for freelancers
- The government decided on a six-month partial holiday in paying social and health insurance within the minimum threshold for freelancers who only have business income.
- Subsequently, in the final reconciliation of the year 2020, their liability will be reduced by these six months in the amount of the minimum advances. In practice, this means that freelancers will save CZK 29,376 over these six months (six times CZK 4,896).
Antivirus - compensation for the salary costs for the impacted businesses
The program is intended to help employees and employers who were negatively impacted by the COVID measurements. From 6 April 2020 it is possible to apply for contributions for the period from 12 to 31 March 2020.
- In the case of quarantine, the employee receives wage compensation of 60% of the average reduced earnings.
- In the event of the closure of an operation by a government decree, the employee receives 100% of the salary.
- The contribution is equal to 80% of the paid wage compensation, including social and health insurance; maximum monthly amount is CZK 39,000.
- In case of impossibility to perform work due to extraordinary crisis measures:
- Barriers to work on the part of the employer due to quarantine or childcare for a significant part of employees (30% and more), the employee is entitled to compensation of wages in the amount of 100% of average earnings.
- Restriction of the availability of inputs (raw materials, products, services) necessary for business activities, the employee is entitled to compensation of wages in the amount of 80% of average earnings.
- Limiting the demand for services, products and other products of the company, the employee is entitled to compensation of wages in the amount of 60% of average earnings.
- The contribution is in the amount corresponding to 60% of the paid wage compensation, including social and health insurance; maximum monthly amount is CZK 29,000.
The employer requests a refund of wage compensation through an application published by the Labor Office.
Nursing care while the schools and other children's facilities are closed
- Employees: The nursing allowance is reimbursed even after the statutory 9 days and parents with children up to 13 years of age is entitled.
- Freelancers: Providing care for a child (6 - 13 years) if the second member of the family does not receive the nursing benefit. Related state aid is approximately CZK 14,000 / month.
We wish you a lot of strength and energy in this challenging time. Feel free to contact us with related questions or assistance if needed.