If the impact of covid-19 has not yet reached your business, it is likely to in the short term. The full repercussions are not yet known, but the slowdown has been extreme all over the world. While Australian businesses are resilient, the quake hasn’t finished sending lapping waves on our shores. Coming right after the bushfires economic impact, this crisis is another blow to business.
The most positive critical action you can take immediately is to plan ahead. Design practical activities to soften the impacts of a slowdown in your post covid-19 business. Your plan will necessitate a good overview of your current situation and honest conversations with stakeholders.
How to get started on an action plan?
Evaluate your financial options and design a checklist covering all grounds from business loans to managing working payment terms while making sure your company operates efficiently. Below are the focuses we would suggest you consider.
Cash flow Forecast and Working Capital
Cash inflows are essential for a company’s survival. To ensure you are in safe waters, construct a new rolling 13-week cashflow forecast based on conservative assumptions.
What working capital do you have at your disposal? It might be time to consider an invoice finance facility.
Clients and Debtors
You should be talking to every one of your clients. Confirm your ability to continue providing service to them and seek their commitment to the payment of every invoice on time. Perhaps even seek early payment at a discount as a once off.
This is the time to review your client database and look to develop a marketing strategy to attract new business. You want to broaden your current client base rather than depend too heavily on a few large clients. Spread the risks and start thinking about alternative markets. Being dependent on few income sources is unwise.
You should be talking to your suppliers about their ongoing supply to you and the amounts owing to them. Negotiation of payment of their invoices for a longer period could be possible or better rates.
Alternative channels of supply should be investigated as a contingency. You cannot be cautious enough with international shipments being slowed down, businesses scaling down overseas and even closing down.
Businesses with equipment finance in place should be talking to the financiers. Negotiations are often possible as finance companies fear having to liquidate assets under contract. The returns are often at a loss for them, which is not in their interest. Showing faith to customers can pay big dividends when clients come back in the future. Showing you have a plan to turnaround can go a long way with them.
Depending on the size of your workforce, a high-level conversation about plans to be put in place with your team would be ideal. You will be relying on the team to deliver through some tight times and trust building is important.
In small business, the team sees and feels when things are going wrong and they may become fearful for their jobs. Consider your options.
The tax office has been open to discuss proposals for repayment of tax debt, especially in the current era when there are a number of extenuating circumstances.
The response was very fast last year where they effectively delayed payment of all tax until September 2020. They recently provided extended periods for BAS lodgements due to the recent fires in certain regions and COPVID-19.
The tax office may require you to produce financial statements and have an understanding of what you can afford to pay if you need instalment payments to be agreed. A strong plan with a list of actions to undertake is essential. We can help you with a Debt Restructuring Process.
You may need to approach your bank about your financial situation at some point particularly if you consider an extension of lending or you are considering an invoice finance plan.
What are the main solutions to the coronavirus impact on businesses?
Resolution from various stakeholder conversations
There will be nuance to each of the above conversations with clients, creditors, the Australian Tax Office, and employees, however the best result for you is to receive payments when due and extend payments to be made to you in the short term. There is likely to be a mixture of results which you can input into your cashflow forecast.
Future aims and actions to take
In the longer term, new clients, different supply chains and new sources of working capital may turn disruption into opportunity. The business world is changing fast and while COVID-19 had us holding our breath the world did not stop turning.
These conditions are when a turnaround strategy and/or safe harbour protection are critical. Advice from a specialist is recommended.
Should you be interested in how your business shapes up right now, we have an obligation free consultation offer that could provide you with the answers you need. Call or fill the form to chat about cash flow forecasting or working capital management within your business.
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