Okay anyone who knows me knows I am a sucker for small businesses, so that led me to take a look at Andrew Holness’s 1.5 million dollars plan. Let me throw out my disclaimer I am not a tax accountant, tax lawyer or tax expert or an economist so forgive me if I err or if my analysis seems basic.
So let’s go, we all know what the new threshold means to employees, but what does it mean for small businesses? It means that they will now have to find 25% more to give workers on payday. The government collects its statutory on the 14th of the following month, this gives businesses a minimum 14 days to find the money to pay over. This means I can pay some of my suppliers/ creditors, as I have 14 days which to find money to pay the government.
What the government has done is to eliminate that break in which I have the flexibility to pay creditors or buy books, as I now have to pay my workers 25%more on pay day. Creditors will be inclined to give shorter credit period because they will now need 25% more cash on payday.
Anyone who does business knows that most business operates on a credit basis. The businesses that have a flexible cash flow (fairly amount of cash) will not feel the impact as much as the ones that are strapped for cash.
How to navigate this obstacle
- Talk with your workers to see if you can reach an agreement to pay them the 25% on the 14th of the following month.
- Try to improve sales and encourage customers to settle in a shorter period.
I am not against the increase for the employees, however, a balance must be struck between the benefit of the employees and that of the employers. If there are no employers there will be no employees.
Need help organizing an effective cashflow? Shoot me an email firstname.lastname@example.org