The next few months will prove difficult for many business owners who are trying to stay afloat amid the coronavirus pandemic. While there are a number of government initiatives in place to support businesses during this challenging time, it’s still going to be a matter of fighting for survival. Businesses are going to have to be strategic and smart with their money. To support businesses during this unprecedented event, Shoebox provides the following advice for business and financial management. For a bit of guidance on how to tackle the next few months, consider these following steps.
1. Ensure the Health and Safety of Staff
Right now, the most important thing for your business is the health of yourself and your staff. The last thing you want or need is someone within your business being struck down with any sickness, coronavirus aside. Take the necessary precautions to ensure your business practice is safe and follows health advice given by the Department of Health
Some businesses have completely changed the way they operate to put customers at ease. For example, check out Domino’s new ‘zero contact
’ policy. Some easy ways to optimise health and safety including bumping up cleaning efforts, encouraging staff to work from home where possible, limit customer contact, and providing hand sanitiser to customers and staff members. For more information on maintaining a hygienic workplace during covid-19, check out some of these helpful resources
. After consulting the linked checklists, it’s a good idea to inform your staff of any new plans or routines.
2. Consolidate Any Debts
Building a business involves getting into a little (or a lot of) debt sometimes. Right now, however, isn’t a great time to be spread thin over multiple loans. Some businesses may find it beneficial to consolidate their debt, meaning to roll it into one manageable account. Consolidating debt can help you combine any outstanding debts into one that is more convenient and easier to pay as you can negotiate a lower interest rate.
The first thing you should do is gather information about all of your outstanding debts and work out how much you can afford to pay each month. After procuring this information, speak to a financial advisor at a bank to talk you through their options. This is an especially good idea if you’re in a position where you need to take out a loan to keep your business afloat during coronavirus.
3. Review Your Business Performance
It’s probably the last thing you want to do as a business owner, but assessing the damage sustained to your business is important towards factoring in what steps to take next. Our advice is to just rip off the bandaid; look at your cashflow for the previous month. Based on trends, what is the forecast for the coming week or months looking like?
Other aspects to assess:
- Working capital: how has this changed and why? Compare this to the industry norm. Is there a way for you to source additional capital?
- Cost base: Are your costs covered in your sale price? Will you be able to cover this base cost with a sudden drop in sales? Can you lower the base cost by switching up operations?
- Borrowing: Do you have any lines of credit or loans? Will you be able to stay on top of these in the immediate future? Are there more appropriate or cheaper forms of finance you could use?
- Growth: Have you managed to procure any growth over the past year that can be utilised during this time? Should you downscale? Can you adapt your financing to accommodate your business' changing needs and growth?
While it’s easy to feel hopeless and defeated during this pandemic, many businesses also see this time as an opportunity for growth. It’s a unique situation where many businesses are forced to adapt to the new needs of customers. So, it’s the perfect time to pause, conduct a market analysis, and review and redefine your goals. Go back to basics with the following models for strategic analysis.
- SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
- STEEPLE Analysis (examining Social, Technological, Economic, Environmental, Political, Legal and Ethical stakeholders)
- The Five Forces (examining the factors that influence the development of markets: potential entrants, existing competitors, buyers, suppliers and alternative products/services)
OR use a model of your choosing. You know how to do this. Afterall, you were once at this very step.
4. After Analysing Business Performance, Come up With a New Plan.
Start by looking at your core activities. What has made them successful? And how can they be adapted to suit the times while providing your customers with the essence of your business? Are there any complementary products or services you can provide?
Make a new plan for how you plan to respond to the following factors.
- Your premises. Will you need to temporarily shut down? How can you operate from your premises while maintaining health and safety guidelines?
- Supply chain. Will your supply chain be affected by any restrictions put in place? How can you make adjustments to your supply chain to keep your business running?
- IT and Communications. How will you utilise communication channels to maintain customer and stakeholder relationships?
- Your team. Do you have the right people on your team? How will you support your employees while keeping your business afloat?
- Your finances. What government initiatives can you utilise to support your business? Don’t know about any government initiatives? Read all about them in our previous article.
5. Consider Getting A Low Interest Loan
With many of the government’s cashflow packages being paid upon the submission of BASs, or in a ‘back-pay’ method, many businesses are being forced to self-fund while awaiting financial support. In the meantime, they need to find funding quick. Talk to your financial institution about low interest loans with flexible payment options.
When you Need Financing – Line of Credit or Term Loan?
A line of credit works in a similar way to a credit card, where you have access to funds as you need them from a lender. This can be a valuable solution when needing to close the cash flow gap or when needing to resolve immediate financial issues. This line of credit can be kept unused, until needed.
Business term loans, on the other hand, are useful for financing longer duration projects and assets. For example, while waiting for the onset of government support packages. However, some term loans are relatively inflexible and contain high early repayment penalties if the financing is no longer needed. Shop around to find a low interest option during this time.
A potential option for struggling businesses is to turn towards finance brokerage firms instead of going to the banks for help, especially if you aren’t able to secure a loan through them. Loanezi is a finance brokerage firm
on the Gold Coast that supports small to medium businesses with loans to provide them with the confidence to achieve their goals. Particularly during this time, Loanezi is able to help small businesses explore cash flow gap solutions so they are able to consolidate their finances, plan ahead and be ready to bounce back when trading goes back to normal.
Freeze Your Mortgage Payments
Many banks are also offering a freeze on mortgage repayments for up to six months. This time is either added to the remainder of your term or you can increase your monthly payments, if you’re in a position to do so. Is your bank providing this option? Check here
6. Invest in an Accountant, Bookkeeper, or Elite Accounting Software.
Hiring a bookkeeper or accountant is a great way to get realistic and helpful advice on managing the financial side of your business. While bookkeepers work closely with you to organise your accounts, keep records of everything, and provide financial statements, accountants can help you look at the bigger picture: the sustainability of your business. Both are valuable assets to your businesses, depending on the scale of your needs.
If you don’t have the time or money to invest towards these team members, however, then you might prefer to run things yourself using modern accounting software. In previous articles
we’ve explored two of the top accounting programs around, Xero and Myob. Have a quick read of how these accounting and bookkeeping programs can help you manage your business finances.
7. Communicate with Stakeholders
Throughout all of this, it’s important to communicate with the key stakeholders of your business, whether that be staff, executives, management, investors, shareholders, a board of directors, or customers. Your communication should include acknowledgement of the coronavirus pandemic and show empathy and care towards your key stakeholders. It’s also important to address any changes that will be made towards the operation of your business. In regards to which channels to use, email’s your best point of contact. Don’t forget to communicate at key messages on your social media and your website for maximum reach.
8. Talk to Your Landlord to Negotiate About Rent
On the 29th of March, the Prime Minister Scott Morrison announced that the States and Territories
have agreed to a 6 month moratorium on evictions over the next six months for commercial and residential tenancies in financial distress who are unable to meet their commitments due to the impact of coronavirus. This means that landlords are prohibited from evicting tenants who cannot pay rent as a result of financial hardship caused by coronavirus. That being said, just because you won’t get kicked out doesn’t mean it’s not good practicing paying when you can, if you’re in a position to do so. If you’re going to be behind or short on rent, make a negotiation with your landlord on how you can work together to both find an amicable solution.
9. If You’re a Sole Trader – Access Some of Your Super
It’s not an ideal option, but for some it’s the only viable option. As part of the Coronavirus Economic Response Package Omnibus Bill 2020
, the Australian government has allowed eligible employees, including sole traders, to access funds of up to $10,000 from their superannuation account
(within this and the next financial year). This is to counteract financial hardship caused by negative economic conditions resulting from the coronavirus pandemic. This money will not accrue any fees for early release, nor will it be taxed as taxable income. For sole traders, this money can provide the lifeline needed to keep their business afloat.
10. Talk to Someone
While sourcing financial support might be front-of-mind for you right now, it’s also important to ensure your headspace is clear and in-check. Remember to build a strong support network, whether it be made up of friends, family, or other business owners. There are many people in the same boat right now. Get in touch with others and support them too. Small businesses need to stick together right now – figuratively of course. We’re not telling you to flout any social distancing rules.
Shoebox Books is working closely with small businesses during this difficult time to provide relevant and realistic financial advice. Talk to one of our experienced bookkeeping professionals today on 1300 653 583 to see how we can help.