There is no doubt that COVID-19 continues to keep many business owners up at night.
South Australia’s infection rate might be relatively low and the relaxation of restrictions in some shape of form looms closer every day but the cost to the state’s economy is undoubtedly significant even if we have avoided the widescale effects the pandemic is having in other countries.
These remain uncertain times. If we see a spike in infections or even if the current restrictions cannot be safely lifted further for months to come, it could push many local businesses, of all shapes and sizes who might have been weathering the storm well thus far, over the edge.
This is a time when businesses need to take the bull by the horns and crunch the numbers.
It’s extremely important that businesses are proactive in their approach. Businesses that fail are often like ostriches that have stuck their head in the sand. We strongly advise business owners to take a good look at the company’s cashflow situation from now to the end of the year, no matter how painful it might be.
Don’t wing it. Practice responsible accounting. Look at the cashflow situation and create performance indicators to give management an idea when they are about to get into trouble and look at what expenses can be reduced.
If the financial position is particularly tough, there should be no delay in talking with a business accountant or even an administrator to prepare a strategy to make sure the business can continue trading.
Businesses that operate in sectors such as food, entertainment, retail and hospitality, which rely on onsite service to customers, should develop break-even budgets for a variety of possible restriction scenarios to support modified operating times to ensure that doors stay open in the immediate and long term.
Business owners should also continue to look for opportunities to change systems to lower business costs, communicate with suppliers as required and see what can be done to maximise the chances of the business surviving.
All businesses under threat should, at the very least, have a dot-pointed risk management plan that should serve as a guide to all directors and management.
Get your tech right
There is also no better time to embrace technology. Remote working technology like Microsoft Teams, Zoom, Asana and other cloud-based systems allow staff to work from home, but they can also be applied to enable continued collaboration with clients without the risk.
While older Australians are most at risk to the physical effects of the virus, it could also be said that many of our many Boomer-led businesses are not as tech-savvy as they could be and there is no better time to remedy this than now.
Understanding how automation can make your business more resilient to risk, for example, is the first important step to take.
It’s important to note that this is not about reducing the number of employees but about using their time in a more advantageous way by automating mundane manual processes. Many SME business owners are unaware of automation services that are readily available to them and that can be implemented with minimal fuss.
Ask for help
There is no shame in being under pressure given how long it has been since our economy was operating normally.
Accept that you are one of many, many businesses taking strain and that very few people know how to claw their way out of a hole like this.
There is no playbook or study you can do to prepare for the collapse of demand and restriction of supply. This scenario is unprecedented.
Business owners should never be afraid to seek advice. In severe loss of funding cases, a holding strategy pending recovery would be worth considering.
If you have to make hard decisions as a business owner, get it right, and make those decisions earlier rather than later. Hard calls get no easier the longer you leave them to fester. Immediate action that can be taken includes cutting variable costs and slashing fixed costs to match sustainable revenue.
One of the most important things businesses should do is to keep lines of communication open.
We strongly advise businesses to keep close to their funders, bank, customers and suppliers as we approach a return to normal trading conditions. More than likely, they are in the same position as you and agreements could be reached that will see both parties through.
Customers can be particularly supportive under the right circumstances. We saw this first- hand when (Austin) was the voluntary administrator for Spring Gully Foods during their financial crisis in 2013.
The same applies with the ATO.
Reach out to them if you can’t meet your tax obligations. They are used to flexing their response to ATO debt recovery brought about by changes in the economy and they are governed by government policy on debt recovery issues.
Chris Overton is manager partner at Bartley Partners and Austin Taylor, an insolvency expert, is managing partner at Meertens.
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