Surviving In Difficult Times
Small businesses and medium-sized enterprises are experiencing very different and challenging conditions all over Australia. Obviously, some are in a worse predicament than others – primarily SME operators in Victoria, but in other States there are also significant problems that have been caused by COVID-19 Coronavirus. Business survival is just not one thing; it does require a business to review a whole range of activities and make small changes or introduce staff training or leadership development activities to improve responses to customers, monitor suppliers, supply the information that the Federal government requires for a continuation of payments such as JobKeeper and an awareness of government grants that have been offered by the Australian, State and Territory governments for which your business might be eligible to apply.
If you require any input from us on the financial, business, corporate governance matters, business plan, budget, cashflow forecasts, funding or business reconstruction, please do not hesitate to contact us.
SME Fitness Review
Some of the activities that could be conducted to assist you to guide your business to survive these difficult times, include:
- Review costs – can any of the costs of your business be reduced or eliminated?
- Review labour productivity.
- Review shrinkage/waste control in your business.
- Review management of cashflow – are your invoices being processed promptly and emailed to your customers?
- What is your debtors' days outstanding? – If you are still producing debtors' statements, are they being promptly emailed to your customers in the first couple of days of the next month?
- What is the investment in Stock/Inventory within your business? Do you need to reduce this?
- Are your financial accounts up-to-date?
- Are you preparing Key Performance Indicators on all business operational areas within your business?
- Can you review your "unique selling proposition" – are there changes that you can make to improve this?
- What is happening in your industry? Can you write down the positive items and determine whether your business is fully prepared, based on what is happening within your industry?
- In difficult times, it is best to stick with your core business competencies. Have you prepared a Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis on your business?
- You may have some people, or most of your people, working at home at present. Are you conducting a daily "huddle" via Zoom to get input from people on the business issues that they are encountering in their dealings with customers and suppliers?
There is certainly a lot of uncertainty at present in the Australian economy because of the problems caused by COVID-19. What can you do about it in your business? One of the key series of planning documentation that you can prepare for your business is taking some quality time to think through what is likely to occur in your business over the next 2 years (unfortunately some key small business advisors believe that the difficult trading conditions that we currently have will continue over the next 2 years).
Discuss with your leadership team the likely scenarios for your business and prepare some information for Budgets and contact us with the documentation of the various scenarios into Budgets so that you can review these forecasts to decide whether you can "live with them". The decisions that you have made in the Budgets can then be reflected into your Cashflow Forecasts. You need to be realistic in the development of your Cashflow Forecast to record your potential investment in debtors which is likely to increase because of the difficult business conditions and you will need to analyse how much money you need to tie up in Stock and Work in Progress for your business to operate.
Does the Cashflow Forecast indicate that you can continue to trade with or without JobKeeper support which, the government has indicated, will continue on a reduced basis to 31st March 2021?
If the Cashflow Forecast indicates that there is going to be a requirement to have an injection of external funding into your business, from where are you going to try to get that money?
Unfortunately, many financial commentators believe that it is going to be very difficult for small businesses and medium-sized enterprises to be able to raise loan funds from banks from October onwards.
If your bank is going to be unresponsive to your approaches for additional financial support to whom can you turn?
You could give consideration to seeking to raise capital as a Crowd Sourced Funding Equity Raising company if your turnover is under $25 million per annum and annual gross assets are valued at less than $25 million.
Now is the time for thinking about these items so that they can be reflected within your forward planning relative to Budgets and Cashflow Forecasts.
The planning process is completed by the preparation of a Projected Balance Sheet, which is an attempt to project what your Balance Sheet will look like at the end of the time period that you are considering, which we are suggesting would be 2 years.
If you would like to discuss with us any aspect of your forward planning, please don't hesitate to contact us.
Insolvency Relief Extended Until the End of the Year
The Australian government has extended the insolvent trading relief initiative, introduced as part of the COVID-19 Coronavirus strategies, until the end of the year in a bid to prevent further job losses and avoid another massive hit to the economy.
This decision enables the increased thresholds, at which creditors can issue a demand on a company and/or initiate bankruptcy proceedings, to be extended until 31st December 2020.
Relief for directors from personal liability when a company is trading whilst insolvent will also be maintained until 31st December 2020.
It has been reported that voluntary administrations across Australia have fallen 60% as compared to the same time last year due to the temporary insolvency protections that the government has introduced.
If you would like to clarify what these rules mean to your business, please do not hesitate to contact us.
Some of your team members will have high anxiety levels at present about their jobs and where your business is headed. This is a very challenging time for all of us.
Communication is one of the key aspects of maintaining team morale, especially if you have team members working from home. Many businesses have instigated the concept of a daily meeting with team members directly responsible for a business unit, with the meeting being conducted by Zoom or Skype, so that the leader can see that people are up and about and encourage input from the team members on the feedback that they're obtaining from customers and suppliers that relate to your business operations. Some businesses are conducting longer business review meetings, again using Zoom or Skype, to enable full participation in these discussions.