Battling Through COVID-19: Finance Tips for Business Survival
We’ve heard this before: the COVID-19 pandemic is an unprecedented global health and financial crisis that has caught many off guard. While the threats to human life are very real, the damage to the health of businesses is really just starting to show.
The seriousness of the disease and the lack of a vaccine (at the time of writing this) have prompted governments around the world to impose strict measures to contain the virus. These restrictions in people’s movements and the temporary shutting down of non-essential services have definitely taken a toll on businesses.
While there has been a lot of talk on how to avoid contracting the virus and how businesses can operate safely to adapt to the current conditions, this article will focus on helping you manage the financial aspects of your business to survive COVID-19. Read on for our tips on cushioning the impact on your business.
Update your financial records.
The first step in planning your course of action in such a difficult environment is getting a crystal clear understanding of the financial position of your business– this means updating your financial records and keeping them in order. Knowing things such as your cash position and assets that can be sold quickly will go a long way in helping you make informed business decisions. Good records build a solid foundation for a successful business. They’re also really important when applying for government grants.
We like our clients to use Xero accounting software. not only does it simplify bookkeeping, billing and receipt management but used well you can have a clear view of your position at any given time.
Examine the financial health of your business.
When you know your books are up to date and correct, it is important to get a good grasp of your business’ current financial health through a careful analysis of your books and statements. By looking at key financial figures, you will get an idea of how your business is doing. You can see fundamental factors such as the liquidity and solvency of your business which will help you decide on the best steps forward as you deal with the crisis and the aftermath.
Many businesses request our quarterly reporting service have found the detailed information particularly helpful during this volatile period. This is done in consultation with your accountant so you know where you are at and where you are headed based on correct records and up to date information.
Improve your cash flow.
A lot of businesses across the world are facing cash flow problems at the moment. The key here is to not let the problem get worse.
Preparing a cash flow forecast should give you some forewarning before issues even arise and will allow you to address them early on. By quantifying your forward bookings, forward orders, and work in progress, you will get to identify future cash flow and plan accordingly.
We do have a cashflow scenario planning kit you can download, however we have to advise that no cashflow plan is that simple and often requires a discussion. The scenario planner is a good start to get you analysing your business cashflow and where it might be if business goes up, down or stays the same.
You can also take the following measures to boost your cash flow:
- Identify demand for your products or services, so you’ll know where to focus and where you might otherwise reduce stock orders
- Cut back on unnecessary expenses
- Urge your debtors to pay and ideally on time – negotiate a payment scheme that will work for both of you
- Seek payment extensions or restructure debt. We do recommend you seek advice for this before sliding into a debt funnel you can’t manage. If you feel like this, please book an appointment online or call us on 0864360900.
- Invoice as soon as you deliver the product or service. If you are not on XERO, get on it now! You will wonder why it ever took you so long to get on board. XERO is a life changer for business and on the spot billing.
- Seek external investors or lenders. This may seem like an easy fix but it could also be disastrous. Please get advice before jumping into a major company restructure or partnership arrangement.
- Take advantage of financial support from government subsidies available to you. If you are not sure, give us a call.
Increase online sales where possible.
With the government implementing stricter restrictions to prevent the further spread of the virus in the Eastern States, find ways to move your products and services online and continue to serve existing and new clients. Now is the time people are becoming more accustomed to and reliant upon online services. Geographical location is no longer relevant if you can share your product or service nationally or even internationally. The situation that we are in is forcing business owners to re-imagine their businesses and re-evaluate business models. Businesses that adapt and are resilient are the ones that will survive.
Manage Your Financials
It’s safe to say not many of us factored a global pandemic into our 2020 business plans but we have been in it six months now so there is no excuse for dragging your tail. Although there is no foolproof strategy to get through what’s proving to be a turbulent 2020, getting a clear picture of your finances, your business strengths and weaknesses and seeking opportunities to maximise your relevance will help minimise risk.
If you plan on making any dramatic changes to your business structure, finances or marketplace do so with accounting and business advice, financial understanding and a strategic plan. This is not the time for experimental decision making.