Business owners should start taking action to best shield their business and minimise the risks of the coronavirus. Businesses need to have a plan to deal with the fallout from the virus which includes a possible drop in customer and sales numbers, disruptions to supply chains, and cash flow shortages.
Here are Armada’s tips to manage the risks of Coronavirus to your business.
IDENTIFY THE POTENTIAL ISSUES FOR YOUR BUSINESS
- Do you have any staff who have been, or could be, exposed to Coronavirus?
- Do you have appropriate policies to protect the health and wellbeing of your staff?
- Are your sales likely to reduce? What strategies can be put in place to minimise this impact? E.g. Can you focus on selling lower-priced items with a higher turnover?
UNDERSTAND YOUR SUPPLY CHAIN
- Do any of your products or services rely on parts/components/inventory from China/Italy or other parts of the world where productivity has been affected by Coronavirus?
- Explore alternative supply chains: Check costs, freight, exchange rates, quality, time of delivery, credit terms, ongoing service, warranties etc.
DEVELOP A CONTINGENCY PLAN
- Have a plan to deal with disruptions to the supply of your products and services.
- Do you need to scale back production?
- How can you change customer behaviour until the crisis passes? E.g. can they do orders online? E.g. Can your staff, customers, and suppliers use phone/skype/FaceTime/zoom meetings?
REVIEW CASH FLOW BUDGETS
- How much cash do you currently have?
- Review your current debtors and trade terms. Can you offer a discount for early payment?
- Review and adjust your cash flow forecasts to determine how a cash flow reduction in sales will affect your ability to pay suppliers, wages and debt.
- Reassess and confirm banking/finance arrangements and payment terms.
Your trusted advisor at ARMADA has in-depth knowledge and expertise with cash flow budgets: don’t hesitate to contact us if you would like assistance.
TIMELY FINANCIAL REPORTING
- Ensure your financials are kept up-to-date so that you monitor profitability, stock levels, debtors, creditors, and cash levels on a timely basis.
- Contact your trusted advisor at ARMADA if you would like our pro-active expert assistance.
COMMUNICATE WITH ALL KEY STAKEHOLDERS
- Timely and honest communications with your customers, suppliers, and equity holders is important.
- Customers to be made aware of supply issues with your products/services, and what contingency plans you have.
- Renegotiate supplier and finance payment terms if necessary.
- Negotiate with your landlord re-rent?
- Instigate social distancing.
REVIEW YOUR BUSINESS CONTINUITY INSURANCE
- Can you make a claim for any financial loss suffered? Contact your broker.
- Notify your insurer.
- Cross-train your staff so if any staff member is unwell or absent, that someone else can do their job.
- Have a coronavirus policy that staff all know and in what circumstances they must self-isolate.
- Can your staff work at home?
- Have you reviewed whether absences will affect their leave entitlements.
- If your business is under financial duress, you may need to consider some short term arrangements for your staff around:
- 4 day weeks
- 9 day fortnights
- Reduced hours
- And as a last resort, redundancies
- Should you be reducing discretionary and non-essential expenses?
- Fixed costs (wages, rent, utilities, financing costs) need to be properly managed.
- Don’t cut costs that help your business. You need help from the experts so embrace them more than ever.
SEEK PROFESSIONAL ADVICE
- Seek timely advice ASAP. Don’t sit back and hope this will go away soon.
- Advice includes bookkeeping, accounting, legal, financial planning, HR.
Contact your trusted advisor at ARMADA – we are experienced advisors with the expertise to help your business through this.
We acknowledge that this is a difficult time for many individuals and businesses. Business owners are encouraged to be pro-active in their actions in response to the Coronavirus pandemic, so you can reduce the impact as much as possible to you and your business.
Please don’t hesitate to contact your trusted advisor at ARMADA if you would like more information or to discuss any specific issues you may have.
For more professional advice you can contact our office on (08) 6165 4000
By: Robyn Crombie | Associate Director of Tax and Accounting
T: (08) 6165 4000