While many businesses are opening again, it may not be “business as usual” for a while. The end of June is approaching and it’s a good time to make a plan for the new financial year so your business can survive and thrive post COVID-19. Coronavirus has had a huge impact on cash flow for many businesses and while Government assistance has provided a relief, it is ending in September. Now is a good time to look at the long-term future of your business and get on the road to recovery. Here are some tips to get your COIVID-19 recovery plan in order.
Make sure your financials are up to date
In the current climate, decisions need to be made quickly and this is difficult if you don’t have accurate and up-to-date financial information. Knowing your cash position is crucial. In addition to this, entitlement to Government stimulus payments depend on knowing your numbers and having your BAS lodged as quickly as possible.
You also can gain a lot of information about the health of your business from several Key Indicators. If you can identify these Key Indicators and monitor them daily, this can provide a quick check on how your business is tracking. Examples of Key Indicators that should be monitored include: cash balance, daily sales, outstanding debtors balance or upcoming orders.
Review your costs
It’s time to have a good look at overheads. This is a task that is often overlooked when business is going well. Now is an excellent time to look at your expenses and cut unnecessary costs. Key overheads that need a review are:
Rent
Rent is often one of the highest overheads of your business. If you have been affected by COVID-19, you may be able to talk to your landlord about renegotiating your rent. The Government announced a range of measures for Commercial Tenancies such as a hold on evictions and rent reductions. Further information relevant to your state can be found here.
Phone
Working from home is becoming the new norm. In these situations, communication with employees and clients is critical. Have you thought about a cloud-based phone system? These systems allow you to make and receive calls via a mobile app. You can still have a landline phone number on your mobile device and take calls from anywhere. Review your current plan and see whether you can get a better deal.
Subscriptions
If you are paying subscriptions for software or other services, consider whether you are still getting value from the service. It may be possible to cancel or downgrade your subscription. If you are paying on a per-user basis, review the number of users you are paying for. If this hasn’t been updated for a while, you may be able to reduce the number of users and save on subscription fees.
Electricity
Review your current plan and see if you can reduce your bills. The Australian Government has a website called Energy Made Easy that allows you to make a comparison to get the best deal.
In addition to these main items, you should delay unnecessary expenditure where possible. While there are currently Government incentives for asset purchases, keep in mind the cash outlay involved before you buy.
Adapt your business
“Pivot” is the new buzz word at the moment. You may not have to drastically change the way you do business, but take a look at how consumer behavior has changed during this period. Are there any opportunities that have come up as a result of the crisis?
If you have a workforce that is able to work remotely, do you have the right technology and processes in place to manage? If you have had challenges working remotely over the past few months, what can you do to fix this?
Prepare a Business Plan
While there is a lot of uncertainty, it may seem counterproductive to put a plan in writing. However, a good plan helps you look at different scenarios. You can review worst-case scenario vs consistent growth and make choices that are in line with your values. If you have a plan for the worst-case scenario, you won’t be tempted to panic and make bad decisions when things get tough.
If you already have a plan, it’s a good time to review and make adjustments. If you don’t have one, now is the time to start. A business plan is a living document and needs to be adjusted regularly as circumstances change. Businesses that plan are able to grow and thrive.
Prepare a Cash Flow Forecast
A good cash flow forecast is a three-way model of profit and loss and balance sheet and cash implications. Preparing a cash flow forecast allows you to have a look at different scenarios and their impact on the cash balance for your business. So you can look at different “what-if” situations. Cash is critical to survival in this climate. In a situation where you are forced to shut down or reduce operations for months, a cash flow forecast allows you to see the worst-case scenario ahead of time. You can get an idea for when you might run out of cash and need help from your bank.
If you prepare a cash flow forecast and identify that you will need assistance, talk to your bank. Communicating with your bank is important but it is made easier if you have a financial forecast. It shows that you are proactive and on top of your business.
In times of crisis, it may be necessary to monitor your cash flow forecast on a weekly basis. You can also make adjustments based on tactics to pivot your business and see the impact on the cash balance.
Bring Forward Cash Flow
I have seen some really great solutions to bring cash forward in the last few months. When my hairdresser was forced to shut down, they reached out to me and asked if I would like to make weekly payments in advance for my next haircut. It was a great idea and by helping them out with cash flow, they gave me priority treatment when they opened again.
Some other tips to bring cash forward:
Invoice ASAP
Invoice as soon as you can for any finished work.
Sell unused assets
Review your assets and sell anything that is no longer needed.
Review orders and stock
Review upcoming orders to determine likely cash coming in and stock required. Reduce orders for stock that is in low demand and increase promotion for those in high demand. Can you package low demand items with high demand items to bring in extra cash? Don’t discount high demand items.
Review trade debtors
If you are having trouble getting payment from debtors, contact them to see if they are able to make part payment or weekly payments. Make sure that payments are updated in your accounting system daily so that you can produce an up-to-date report on any amounts outstanding and follow up overdue amounts.
Contactless payment
Make sure you have the right technology to take payment over the phone, online or contactless if in-store.
Take advantage of government assistance
Whether it’s the Cash Boost, JobKeeper or getting a payment deferral with the ATO, find out what assistance you are entitled to. Government assistance measures usually require that you are up to date with ATO lodgements, so if this is not in order, get on top of it straight away. Contact us if you need any assistance with this.
Communicate with your employees
Uncertain times like this increase stress levels, but this is heightened when you don’t communicate. Try to remain positive but also be open and honest. If you have no choice but to lay off employees, make sure you have procedures in place to manage the situation. Get some advice from a HR expert if you are not sure.
This is also a good time to look at the structure of your team. Are there any employees with critical skills that could not be easily replaced? Consider which employees could learn those skills or whether this could be outsourced. You want to make sure your business can keep running if a critical employee leaves.
Communicate with your suppliers
You want to make sure that your suppliers can still deliver to you during a crisis. It’s recommended that you work with key suppliers to ensure that your customers are not impacted. Identify alternative suppliers and contact them as early as possible. Depending on the type of business, if your suppliers are struggling, consider getting a deposit from the customer to pass on to your supplier to secure the order.
If you are having difficulty paying your suppliers and can’t make credit terms, communicate with them and arrange an extension or payment arrangement. Reduce orders if necessary.
Monitor your mental health
Don’t forget to look after yourself during this time. Financial stress can impact your physical and mental health. Try to make sure that you and your team are eating well, sleeping and exercising. Crisis support organisations such as LifeLine Australia or Beyond Blue are available to help where necessary.
Need assistance with your COVID-19 Recovery Plan?
If you need help getting a COVID-19 Recovery Plan in place or getting your financials in order, please contact us. We can help with an audit of your expenses, cash flow forecasts, monthly management reports, KPI monitoring and BAS lodgements. Now is a great time to look at the health of your business and you should seek advice early. If you are proactive, you will be in a better financial position for the future.
Passion business advisors are here to help you plan, grow and thrive. We are 100% virtual. However, if you would prefer an onsite visit, we are located in the beautiful Riverina region and service the areas of Albury, Wodonga, Griffith, Leeton and Narrandera.