We’ve heard this before: the COVID-19 pandemic is an unprecedented global health and financial crisis that has caught many off guard. While the threats to human life are very real, the damage to the health of businesses is really just starting to show.
The seriousness of the disease and the lack of a vaccine have prompted governments around the world to impose strict measures to contain the virus. These restrictions in people’s movements and the temporary shutting down of non-essential services have definitely taken a toll on businesses.
While there has been a lot of talk on how to avoid contracting the virus and how businesses can operate safely to adapt to the current conditions, this article will focus on helping you manage the financial aspects of your business to survive COVID-19. Read on for our tips on cushioning the impact on your business.
Update your financial records.
The first step in planning your course of action in such a difficult environment is getting a crystal clear understanding of the financial position of your business. This means updating your financial records and keeping them in order. Knowing things such as your cash position, future outgoings and assets that can be sold quickly will go a long way in helping you make informed business decisions. Good records build a solid foundation for a successful business. They’re also really important when applying for government grants.
Examine the financial health of your business.
Following on from the first item, it is important to get a good grasp of your business’ current financial health through a careful analysis of your books and statements. By looking at key financial figures, you will get an idea of how your business is doing. You can see fundamental factors such as the liquidity and solvency of your business which will help you decide on the best steps forward as you deal with the crisis and the aftermath. Chat to us for help with these financial pieces.
Improve your cash flow.
A lot of businesses across the world are facing cash flow problems at the moment. You are certainly not alone. However, the key here is not letting the problem worsen.
Preparing a cash flow forecast should give you some forewarning before issues even arise and will allow you to address them early on. By quantifying your forward bookings, forward orders, and work in progress, you will get to identify future cash flow and plan accordingly.
You can also take the following measures to boost your cash flow:
- Identifying the demand for your products or services, so you’ll know where to focus on and where you can reduce stock orders
- Cutting back on unnecessary expenses
- Urging your debtors to pay you, negotiating on a payment scheme that will work for both of you
- Seeking payment extensions or debt re-structuring
- Invoicing as soon as you deliver the product or service
- Seeking external investors or lenders
- Taking advantage of financial support from your government
Increase online sales where possible.
With the government implementing stricter restrictions to prevent the further spread of the virus, you should find ways to move your products and services online – if you can – and continue to serve existing and new clients. The situation that we are in is forcing business owners to reimagine their business and re-evaluate their business models. You’ve got to adapt and be resilient. It’s those businesses that will survive.
Have a plan to manage debt
Many businesses may have had to borrow to survive coronavirus. Can your business afford to make the repayments? It is imperative you plan ahead working with your accountant to understand what the impact of borrowing means for your business.
If loans are used for working capital this can affect profits available for dividend distribution. Therefore this may have a knock-on effect into your personal finances.
Survive 2020 by Managing Your Financials
It’s safe to say not many of us factored a global pandemic into our 2020 business plans. Although there is no foolproof strategy to get through what’s proving to be a turbulent 2020, the finance tips shared here should be able to give you some guidance on minimising the risks on your small business.
Want some more help? Our team of retail accountants in Newcastle love to help businesses. We’ll help you develop a plan to weather the headwinds of the coming months while saving you time and money along the way. Contact us today and we’ll work through it together.