The coronavirus or COVID-19 presents a significant threat not only to human health but also to business. For many businesses, likely moves by governments to contain the public health risk may result in a sudden fall in demand for your products or services, labour shortages and supply disruptions.
Businesses must assume that health authorities will ask people to stay home to contain the spread of COVID-19, or that large numbers of your local population will voluntarily stay home. This will result in people consuming less and purchasing in different ways. It will also impact staff availability, especially for businesses where employees cannot work from home.
It is also likely that your operations will be impacted by supply disruptions as your suppliers’ cope with the same issues.
In short, COVID-19 will be a shock to many businesses that could place their immediate future in serious jeopardy, and there is no way of knowing how long this pending crisis will last.
As part of a comprehensive risk management strategy there are a range of actions you should consider taking now to prepare your business for COVID-19, to place it in the best possible position to not only navigate through the crisis but to also be better prepared to take advantage of the recovery.
Fundamental to your preparations is keeping up to date with official information on COVID-19 and any directions public health authorities may issue. It is therefore important to follow the website of your local health authority.
Tips for small business to prepare for the business implications of COVID-19
IDENTIFY KEY RISKS
You will need to determine where the greatest risks in your business lie. The impacts on a business are most likely to be in the following areas:
- Clients, demand, sales – if your business is unable to supply your product or service to customers, what other ways can you sustain workflow?
- Staff – if your staff are isolated or confined, how will they continue to work if options to work from home are limited or not feasible?
- Suppliers – especially if you rely on imports from foreign countries impacted significantly by the virus
- Cashflow – especially if your cash balance is low
If you can, make assumptions about the likely impacts on your business and quantify them. You will need to develop realistic strategies to ease the impacts of the crisis and a timeline for their implementation.
CREATE A CONTINGENCY PLAN
Your contingency planning will need to consider staff, suppliers and clients and what to do if an actual case is reported in your business or your staff’s immediate network.
Follow this link to Arabon’s contingency plan that you are welcome to modify for your small business.
GET YOUR ACCOUNTS UP TO DATE
To allow your business to make informed decisions under challenging conditions, you need to have a clear and ongoing understanding and visibility of your business position. We recommend you get your accounts up to date so you have full insight into the financial health of your business.
RE-DO YOUR BUDGETS
In a challenging environment, you will need to review your budgets to ensure they reflect the current circumstances you are operating in. Your accountant will work with the key risks you have identified and update your budgets in line with these. It may be confronting but taking the worst-case scenario and applying it to your budget will allow you to consider all possibilities and the impacts on your cashflow.
LOOK AT ALTERNATE WAYS TO GROW SALES AND BOOST DEMAND
If advice from the government is to stay home and isolate, your customers may be more likely to order online. If you don’t already have an online function, this may be an opportune time to make this service available.
If your service is delivered face to face to customers, you should investigate if you can do this digitally to reduce the need for human contact. Subsequently, you may choose to close physical locations.
STRATEGIES TO IMPROVE CASH FLOW
After updating your budgets and gaining a better understanding of the financial health of your business, including cash in the bank, you may discover that you will struggle with near-future cashflow.
The first step is to prepare a cash flow forecast and continually update your forecast during these challenging times so you can pre-empt any predicted cash flow issues. Keep an eye open for changes in the environment so that you can return to normal business operations quickly.
SEEK GOVERNMENT ASSISTANCE WHERE AVAILABLE
Contact us to assist with applying for any government support grants that your business may be eligible to receive.
CONTINUALLY MEASURE AND ADJUST
Keep daily records of sales, cash balance, debtors and creditors and the value of future orders and adjust your budgets in line with market conditions as they happen.