Helping businesses stay ahead of the curve!
The rapid impact of COVID-19 on every aspect of our life has been quite extraordinary. And whilst our primary focus is, and should be, the health and wellbeing of all people in our community, there are significant impacts on business too. Now is not the time to be alarmist; however smart business owners also need to be nimble and strategic in making informed decisions in difficult times.
Cash flow is the lifeblood of business. As advisors, we are particularly concerned as to the pressure COVID-19 is already placing on the cash cycle.
Evaporation of revenue streams
Many businesses are experiencing severe impacts on revenue now. Notably the travel, events and hospitality industries have been severely impacted. Industries such as retail, which are already dealing with technological disruption, are facing increasing challenges as consumers stay indoors and change purchasing behaviours. As consumer confidence continues to be impacted it is likely that this will flow through many more industries and the ability to pay suppliers and staff in a timely manner may be compromised. It is highly likely that accounts receivable days will drift out and a proactive and understanding approach in managing debtors may be required.
Whilst there is plenty of reason to be concerned there are also opportunities in this difficult time. Many businesses have an opportunity to rethink the way they deliver their product and engage with their customers. For some, the use of technology can enhance what they already do and many nimble businesses will find new ways to flourish in difficult times. Other businesses may find additional services or complimentary products that are in demand due to these extraordinary times.
Banks and financiers
We are seeing banks and other financiers offer ‘understanding’ of the situation and promises to assist in the short term. Experience would suggest a proactive approach by business owners and advisors is prudent in these situations and discussing your business situation with your bank and other finance providers becomes important. Should further funding be required to assist the business through a difficult period you should consider planning for this now as credit is already difficult to obtain in many areas.
Operating cost impact
It is likely that the ability to pay other major overheads, notably rent and wages will also be challenging. The ability to fund existing payables, particularly should your business revenue be restricted may already be a problem for some business owners.
Overall cash flow
In these circumstances short term cash flow planning becomes of paramount importance. Forecasting receipts and payments over an 8 – 12 week cycle can assist in managing expectations and assist business owners in prioritising. Such a tool will also facilitate the ability to enter into dialogue with suppliers, financiers and customers.
We can assist business owners in building cash flow monitoring tools to ensure that your business is not backed into a corner in uncertain times.
Other factors that you may wish to consider include –
- Are you in a position to obtain preferential payment terms from key suppliers?
- Will your bank provide additional credit or repayment holidays to help through this challenging time?
- How much can you help your customers? Are they in a similar position to your business and what level of tolerance is prudent and commercial?
- How can you avail yourself of any benefits under the government stimulus packages? We also expect a second stimulus package to be announced imminently and will keep you updated on any assistance available.
- Are you in a position to proactively negotiate terms with your landlord?
Staff and Employment issues
As business owners we feel a sense of loyalty and obligation towards our staff, many of whom are part of the fabric of our business. Unfortunately, in difficult times staff costs also need to be managed and this could extend to strategies such as enforced leave, reduced working hours, reduction of casual hours and contractors, or redundancy. Any such decisions have major impacts on the valued employees in your business and should not be taken lightly; particularly at a time where the mental health of many people is being stretched.
There are numerous legislative hurdles that also need to be negotiated if any changes to working conditions are being contemplated. Our office is available to assist in some of these areas. We also note that the Victorian Chamber of Commerce and Industry are currently waiving membership fees for new members and offer excellent advice to member employers.
We hope that the impact of COVID-19 is limited and that we can all emerge from this situation as soon as possible. The pace of change is astounding and our team are here to help your business in staying ahead of the curve. Over the coming days we are reaching out to as many of our business clients as possible to work through how we can help. We are also developing tools to assist in these challenging times.