Corona Pandemic is not only taking toll on health & lives but also economy, So how can Small and Medium scale businesses prepare themselves rather than panicking, here is what they can do to prepare.
Starting from checking your Fund reserves to brainstorming with your team, here are few
practical measures you can Perform to manage, this rapidly evolving Covid-19 Crisis situation.
These guidelines will help you to overcome your front lines of the impact.
Current Financial Health Check – It’s very essential to make informed decisions about your
business based on your current financial or balance sheet.
Check Possible Business Impacts – The impacts on business will likely be most significant in the
following area: reduction in sales, staff availability, supply chain challenges & low cash reserves.
Rework your Budgets – Whatever assumptions you may have used to Plan your budget are
most likely no longer relevant. So, take the list of possible impacts of COVID-19 you have
developed and re-do your budgets. In addition, carefully consider how those scenarios impacts
your cash flow.
IMPROVING CASH FLOW
After re-working your budgets and determining the current financial health of your business, you must act. The first step to improving cash flow is to prepare a cash flow forecast and update that forecast throughout the crisis on weekly basis.
The following tips to improve your cash flow may appear unconventional and some of them we
would not fit for your business or be recommended in a normal situation. This is just a possible guideline summarized for you to act upon, based on your line of business.
1.Customer Management: Reach & request your Customers to pay you earlier, even if before
the due date. If your customer is experiencing cash flow difficulties, negotiate periodic
payments and make sure they stick to their deal. In conjunction, review sales contracts to
determine under what conditions customers can cancel orders. If necessary, update those
contracts to limit the ability to cancel orders.
2.Supplier Management: Ask for payment extensions, even temporarily to your credit terms
with suppliers. Review your supply agreements to determine under what conditions you can
cancel orders if necessary, or at least delay delivery. Request and negotiate tax installments with tax authorities
3.Stock Management: Direct your efforts towards to increases in sales, especially for products
that may not last longer and focus your promotions towards these Products. On the other side, reduce stock orders for low demand products at this time. Start increase the purchases of Products that will be in high demand, during this crisis.
4.Spending Management: Stop spending on what you believe is unnecessary in a crisis, an
example of this would be capital expenditure. Plan to reduce staff costs by reviewing staffing
arrangements such as reducing employee count, using contractor or reduced working hours,
and implementing a recruitment freeze. Reduce withdrawals from the business during this
Crisis if possible.
5.Cash Support: Reach out to Bank and lenders about increasing your overdraft facility. Check
your own personal funds position to see if you can more inject cash into your business. Seek for
other investors to see if they can Invest into your business.
6.Other Plans: As a change in your business model – Increase your investment in selling online
channels. If you are not selling online, you should prioritize consider going online. Research and
seek different ways to deliver your products or services to your customers during this time.
CEO & Co-Founder
Expert Solution Technologies Canada Inc
Accounting Technology solutions & services.