How Small Businesses Can Survive and Recover Post-COVID-19 Restrictions?
Since the COVID-19 pandemic started, we’ve all learned how far-reaching and all-encompassing its effects are. Currently, there are already over 5.9 million COVID-19 cases worldwide. And although the long-term economic consequences of the pandemic remain uncertain, we have already been experiencing the negative short-term outcomes of this health crisis.
Many businesses struggle to continue operating, whilst others have been able to transition successfully to and implement work-from-home (WFH) policies. Some businesses have found ways to deliver products and or services to their customers in the midst of social distancing and community quarantine guidelines, whilst others have, sadly, folded.
For some Australian small businesses, the challenges brought on by this pandemic have forced them to develop agility and taught them to innovate or be creative and proactive. But what happens next? How can small businesses survive and recover once COVID-19-related restrictions ease?
1. Ensure all financial statements are updated
Knowing exactly where your business stands financially helps to not only keep you updated on your most recent financial data; it will also play a critical role in your future financial decisions. To avoid rushing and unnecessary stress, make sure all your financial statements are in order.
2. Assess the impact of COVID-19 on your business
Get all stakeholders — your staff, key vendors, business partners (if any), and customers — together to conduct an honest review of your business and how it has been impacted by COVID-19. You can do this now via teleconferencing i.e. zoom meetings.
Focus on the following:
- Finance: Examine how the crisis has affected cash flow, as well as the cash reserves of your business
- Sales: Although this is self-explanatory, check whether having an online presence has favourably impacted your business.
- Supply chain: Check to see if you’ve lost any business opportunities due to problems with suppliers in badly affected parts of the world.
- Availability of staff: Evaluate how government-imposed limitations or restrictions have affected staff mobility, especially in situations where working from home is not a viable option.
By conducting these assessments, you’ll have an opportunity to quantify how the pandemic has affected your business, as well as find ways to address or mitigate those impacts.
3. Get the financial health of your business checked
With the help of your accountant or finance manager, have your financial statements analysed through financial ratios. Knowing the financial status of your business is critical to whatever decisions you will make to ensure your business stays in the best position as it sails through this crisis.
4. Review and revise your budgets based on unknown scenarios
The suddenness of the spread of COVID-19 has caught the world unawares — a scenario never before imagined by anyone to have an impact of such a scale on people’s health and the world economy. In view of this, enlist the assistance of your accountant in redirecting funds or allocating budgets for worst-case scenarios and planning for any such changes. Check how these can impact your cash flow, too.
5. Work on improving cash flow now
Once you are done revising budgets and getting an objective assessment of the financial health of your business, you may find that you’re already struggling or likely to struggle with cash flow soon. Thus, being proactive about this is key to preventing a disaster.
Prepare a cash flow forecast and regularly update it — preferably weekly — and try to implement the following tips to improve cash flow:
- Focus on promoting stock items that won’t last 3 to 6 months.
- Increase your online presence and engage with your customers on social media.
- Get in touch with debtors and offer incentives if they pay before the due date.
- Negotiate regular payments with debtors undergoing cash difficulties even in just small sums.
- Issue invoices the moment goods are delivered.
- Negotiate payment extensions with suppliers.
- Reduce spending where you can.
- See if you can reduce staff costs by making a few changes or arrangements.
- Seek government assistance available to small businesses.
- Find ways to inject more cash into your business (investors or your personal cash).
There are other things you can do to improve your cash reserves, but the ones listed should be a good start. Once done, your business should be in a better position to navigate the new business landscape successfully, post-COVID-19 restrictions.
August 1, 2020 at 6:17 am
Thanks for sharing such an informative blog