Small businesses need to have a plan to deal with the continued fallout from the virus which includes a drop in customer and sales numbers, disruption to supply chains and ultimately cash flow shortages.
Here are 10 tips to manage the risks of the virus:
1. Understand your supply chains – many business owners may not realise that their product or service relies on parts or components from overseas, so understanding your supply chain is a critical step.
2. Explore alternative supply chains – If your business relies on a supplier from an affected overseas country, now is the time to seek alternative suppliers.
3. Develop a contingency plan - have a plan to deal with disruptions to the supply of your products and services - you may need to scale back production for some parts and stock - rethink your marketing strategy and how you can change customer behaviour until the crisis passes - consider ways to diversify your customer base particularly where you reply on customers from countries most affected by the virus.
4. Review cash flow budgets – you need to know in advance what impact a slowdown will have on cash flow. For example, review and adjust your cash flow forecasts to determine what affect a reduction in sales will have on your ability to pay suppliers and repay debt.
5. Timely financial reporting – ensure that your financials are kept up-to-date so that you monitor profitability, stock levels, and debtors and creditors balances on a timely basis.
6. Communicate with all key stakeholders - timely and honest communication with your customers and suppliers is important - customers need to be made aware of any issues with the delivery of your products and services and what contingency plans you have in place - renegotiate payment terms with suppliers if necessary and talk to your bank if you are unable to meet your loan commitments - review your debtors and if necessary offer discounts for early payment - seek extensions from your landlord if unable to pay the rent on time - enter into payment plans with the ATO for BAS and tax debts.
7. Review business continuity insurance – check with your broker or insurance company if you can make a claim on your business continuity policy for any financial losses suffered.
8. Train staff – in case of prolonged staff absences, cross-train your key staff so that your business can continue to function at all times.
9. Slash overheads – look at all the costs of your business and reduce discretionary and non-essential expenses. Fixed costs such as wages, rent, utilities, financing costs and tax liabilities are not affected by a decline in sales and need to be properly managed.
10. Seek professional advice today – it’s very important for small businesses already impacted to seek timely professional advice – don’t sit back and hope this will all go away soon.