Top 5 COVID-19 Business Survival Tactics

- Covid 19

You need a ‘clear headed’ plan to cope with this situation and come out the other side intact. Obviously there will be many businesses that won’t make it, however many will come through this if they employ a sensible survival strategy and maintain a high level of determination.

Download our free checklist ‘Top 5 COVID-19 Business Survival Tactics’ to review our top strategies for navigating this challenging time.

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If you’d like to talk about how to implement these strategies for your business, please feel free to call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation.

Your Top Two Business ‘Plan of Attack’ Tools for COVID-19

- Covid 19

COVID-Attack-Tools

As the initial shock impact of restrictions on your business operations sink in…

After you’ve dealt with staff, customers, suppliers, landlords, bankers/lenders etc., now is a good time to take stock of the situation and plot out in black and white the potential impact on profit and cash flow going forward.

Now, more than ever, ‘number crunching’ is a vital tool in the armoury of savvy business owners to plan their way out of a downturn to achieve a profitable future.

Usually the first tool utilised in ‘number crunching’ is a budget to determine profitability.  Perhaps in this situation it’s best to start with a Cash Flow Forecast.

As the old saying goes: ‘Sales are Vanity, Profit is Sanity, But Cash is King!’

1. Cash Flow Forecast

You’ve probably seen lots of promotion of various Cash Flow Forecasting tools and templates around COVID19.  This is a great starting point, however the real skill is in using these tools and performing ‘What If’ scenarios.  Because the situation is changing and various opportunities are available, it’s extremely valuable to really ‘work’ the Cash Flow Forecast, rather than seeing it as your future without options for change.

You need to consider various angles when ‘working’ a Cash Flow Forecast.  For example:

  • If revenue drops by say 30%, how long can we sustain our current overheads level?
  • How quickly do we need to make changes to avoid losses and negative cash flow?
  • How much leeway do we have with suppliers to renegotiate payment terms?
  • What impact would it have on cash flow if we could extend terms by 10 or 20 days?
  • What incentives could we offer customers to pay more quickly and what impact would that have on profitability?
  • What would it cost us to ‘hibernate’ a project for a while to comply with restrictions?
  • How can we otherwise utilise those resources or ask staff to take leave?
  • How much can we expect to receive from government assistance and how can we manage cash flow until that arrives?
  • What level of cash injection might we need from other sources e.g. lenders, shareholders etc?

The key to getting maximum value from a Cash Flow Forecast is in how you use it to improve and change your situation. Working with someone who really understands the impact of changes on cash flow is vital to ensure you’re making decisions based on good quality information. Someone who has been through ‘change’ situations before is extremely valuable. They know how to, not just change the numbers in the spreadsheet, but how to implement the changes required to achieve the desired outcome. More importantly they’re able to make creative suggestions for change and help to implement them.

A bookkeeper is quite capable of putting the initial data into a spreadsheet, however they aren’t always adept at thinking outside the box when it comes to planning actions to create a better outcome.

One more point regarding spreadsheets is the capacity for mistakes in them.  A recent article by Oracle comments that as many as 90% of spreadsheets contain mistakes. If you’re basing decisions on spreadsheets you need to be very sure they are accurate. It may be better to use a dedicated budget and cash flow forecasting tool that eliminates capacity for mistakes.

2. Budget

A budget as a financial management tool, is proving to be more valuable now than at any other time.  It’s surprising how many business owners operate without one and wonder why they feel unconfident about their financial situation.  A budget is like a ‘financial roadmap’ to plot out your expected sales, costs and overheads and how much profit/loss you plan to make.

Now, more than ever, it’s vital to plot it out in black and white…what your situation is likely to be for the next 12 months.  A budget will help you to determine what your future sales will be and therefore what level of costs and overheads the business can sustain in order to avoid losses. At the moment a break-even situation might be a good outcome, compared to the alternative. It’s helpful to do various scenarios e.g. best, worst and most probable, so that you can plan around them.

A budget should be a ‘stretch goal’ that challenges the status quo and moves you to a better business position.  It is then very important to know what levers to pull to manage and even beat your budget.

Having access to someone with a logical and pragmatic approach to the situation is worth its weight in gold.  Emotions are running high and fear can cause us to make rash decisions we might regret down the track.

Taking a deep breath, taking stock calmly and perhaps even using the situation to reengineer things to be a more agile and cost effective business in the future, is an opportunity at the moment.

Commercially experienced CFOs have had dealings with vendors, customers, banks, landlords etc. and know what’s possible and how far to push and leverage.  They have ‘best practice’ toolkits for Accounts Receivable, Inventory and Accounts Payable management.

Our CFOs have moved businesses to great success and our recent experience showed a 51% profit improvement.

 

The Upside of A Dowturn

- Cash Flow Management and Forecasting

By Sue Hirst, Co-Founder CFO On-Call

If you can ‘keep your cool’ when all around is panic and mayhem you could set up your business for not just survival, but greater profit and cash flow when things improve.

It’s all over the  news that business and consumer confidence is low and that Australia and other western economies are experiencing tough times. Money is tight and many business sales are falling. This is not good news for many small to medium enterprises, but it can present a chance to take stock and even get the ‘edge’ over competitors who don’t treat the situation as an opportunity.

Business owners need to show leadership and retain the confidence of staff and other stakeholders.  Staff morale can be extremely sensitive in tough times, so it’s important to focus on managing the business as well as possible and be honest with staff. In my experience good staff members can be your best ally in troubled times, if you trust them and get their help in decision making.

SMEs often have an advantage over larger businesses, in that they are able to act more quickly and decisively.  Larger businesses often have office politics and various departments trying to protect their own ‘turf’, whereas SMEs are more ‘down to earth’. Having said this though, it can be detrimental to employ ‘slash and burn’ tactics to survive a downturn. By ‘slash and burn’ tactics I mean indiscriminately cutting costs without really thinking about it strategically and how this might impact on the future of the business.

The best place to begin handling a downturn is to work towards where you want to be when things pick up again.

Ask yourself these questions:
  • How do you want to be running your business? e.g. in the traditional way you have in the past, or in some other way, perhaps taking advantage of technology or the changing market.
  • Is it the right ‘business model’ i.e. are there better ways to structure the business?
  • What type of customers do you want to work with?
  • How will you market your product or service?
  • How will you sell your product or service?
  • What resources will you need to deliver products and services and how will you deliver them? Resources includes human as well as equipment.
  • Where will you operate your business from?
  • What price and cost structure will exist?
  • How will your business be funded? Will external funding be required or will it be self funding?

Once you have a picture of your ideal business you can begin to look at the cost of running such a business.  A great place to start is with a serious review of your Profit and Loss Statement.

When times are good most business owners spend little time worrying about every cent that gets spent.  When sales start to fall though, this is the very best place to start.

Begin by looking at direct costs e.g. cost of products for sale and labour costs.  Are their alternatives or better methods of delivering your product or service?  How are other businesses doing it.  Perhaps do some research on the internet to see how overseas businesses are doing things.

How we saved $250,000 per annum

Next, work your way through every line item on the Profit and Loss Statement. Some time put aside to focus on this issue, can be some of the most profitable time you will spend in your business. It may seem tedious, but when every cent is coming out of your pocket as a business owner, believe me, it’s worthwhile. I went through this exercise myself a couple of years ago and came up with approximately $250,000 per annum worth of savings.  I looked at every single item and thought “How can we do this better, more efficiently and more cost effectively?”.  Lots of self discipline is necessary and a little sensible ruthlessness as well.

One terrific example is telephone and communication costs. I discovered we were paying eight different service providers. During analysis I discovered there was a lot of wastage and unnecessary phone lines being paid for. I did some investigation and found a better and cheaper method of communication through an ‘IP’ phone system. We needed only a small amount of new equipment costing approximately $700 and the savings have been approximately $1,000 per month!

We did have to shed some staff and this caused a little rockiness for a short while amongst the remaining staff.  The staff soon realised though, we were serious about the future survival and profitability of the business. I know they prefer to work for a profitable business rather than one that is struggling to pay it’s way with unmotivated management.

The important point to realise in relation to cost savings is that every dollar saved is a dollar straight onto the bottom line.  Whereas every dollar of extra sales may only be a matter of cents onto the bottom line, because a sale carries with it direct costs and overheads.

Cash flow also needs serious attention during a downturn. When sales fall it can take a little while for the effects to be felt i.e. if a business is slow to collect payment from customers normally, the effect of  reduced sales may not be felt until actual payment is received. Stock needs to be more closely managed to ensure only the stock that is required is purchased. If you are purchasing stock on credit terms you could get a double whammy of reduced sales and collections at the same time as paying for stock that is taking longer to sell.

All of the above may sound like doomsday stuff, but if you can be realistic and take the tough decisions now, your business will be in a much better position when the downturn ends. Your business will also be in a much better position than competitors who haven’t properly managed the downturn or indeed survived it.  When the upturn arrives your business could be even more profitable and valuable.

 

NSW Businesses – Apply for the small business COVID-19 support grant

- Covid 19

The NSW Government is offering grants of up to $10,000 to support SMEs who meet certain criteria.

Grants will cover expenses such as (but not limited to):

  • utilities
  • council rates
  • telecommunication charges
  • insurance payments
  • professional advice
  • wages for an employee not eligible for JobKeeper payments
  • franchise fees
  • paying creditors, if your business is closing.

To find out more visit the Service NSW website here.

Need advice? CFO On-Call is happy to assist with applying for the grant. Click here to arrange a time to discuss your eligibility and assistance with your application.

 

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A ‘Financial Co-Pilot’ to Help You Navigate the Current Turbulence

- Cash Flow Management and Forecasting

You would be forgiven for being a bit bamboozled by all of the assistance available to businesses right now. We’ve put together a very short and simple summary of what’s needed to successfully navigate these turbulent times.

1. Updated cash flow forecasts:

Cash flow management will be one of the keys enabling companies to survive the Coronavirus crises. These forecasts should be updated monthly (or weekly) due to the rapidly changing conditions facing businesses.

2. BAS returns:

These must be completed correctly to ensure you receive maximum benefits.

3. JobKeeper & Stimulus Package Relief:

An understanding of what’s available to ensure maximum benefit is received, without exposing your business to future penalties and interest.

4. Assistance with Government supported $250,000 loan applications:

Banks need up to date and accurate information. It’s useful to talk to your bank, even if you don’t need the funds immediately.

5. Managing ATO payments:

Cash flow deferrals are available. PAYG cash booster payments and refunds are available.

6. Debt repayment deferrals:

Negotiation with banks, lease companies and other creditors on deferral of payments and how that will impact future cash flows.

7. Reviewing all expenditure:

Improving cash flow by reducing or eliminating unnecessary expenses. Knowing which ones to reduce or eliminate is the key to ensuring your business can continue and be ready to ramp up again when the crisis is over.

8. Premises Rental:

Calculation of available reductions. Assistance with negotiations.

 

Tips from the Trenches in the Business War Against COVID-19

- Covid 19

Whilst some business owners are still like a ‘Deer in the Headlights’, some are already overcoming the shock of COVID-19 and using the opportunity to get creative and strategic. That is, not just coping with the crisis, but coming out of it in better shape than before. It’s not all doom and gloom!

In our free eBook, we’re sharing ‘real-time’ stories about what businesses are doing practically to cope around Australia and New Zealand.

Click here to download this free resource.

If you’d like to talk about how to implement these strategies for your business, please feel free to call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation.

Tips from the Trenches in the Business War Against COVID-19

- Complimentary E-Books

Whilst some business owners are still like a ‘Deer in the Headlights’, some are already overcoming the shock of COVID-19 and using the opportunity to get creative and strategic. That is, not just coping with the crisis, but coming out of it in better shape than before. It’s not all doom and gloom!

In our free eBook, we’re sharing ‘real-time’ stories about what businesses are doing practically to cope around Australia and New Zealand.

  • Read or download this resource now
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JobKeeper Payment – Information for Employers

- Covid 19

On Monday 30 March 2020, Australian Prime Minister Scott Morrison announced further government assistance to employers in the form of a ‘JobKeeper Payment’.  The support is designed to help businesses keep on current or recently ‘stood down’ employees.

The amount payable is $1500 per fortnight per employee.

Key points for employers:

  • Business revenue must have declined by at least 30% during a period (at least a month) this year, compared to the same period last year
  • For business with turnover of less than $1 bn
  • Reimbursement will be tracked via Single Touch Payroll system
  • Payments begin from 30th March 2020, although legislation hasn’t passed yet as at 31st March 2020
  • No superannuation guarantee levy on payment
  • Available to full and part time workers and where casuals – those who have been with their employer for 12 months or more

If you need help navigating all the assistance available to businesses, including bank loans, rent relief, instant asset write off, cash flow boost and temporary relief for financially distressed businesses, please book to arrange a complimentary call, where we can answer your questions and discuss your best options.

Download an Australian Government Fact Sheet on the JobKeeper payment for more details.

CFO On-Call Develops COVID-19 Survival Guide for Australian Businesses

- Media Releases

The world’s social and economic landscape has been turned upside down by the COVID-19 crisis and the impact on Australian businesses has been nothing short of devastating.

Unfortunately, it will only get worse for Australian business owners as the government continues to tighten up on movements business activity and self-isolation.

Sue Hirst, Co-Founder of CFO On-Call, says that the key to keeping your business afloat in a time of crisis is proactivity.

“No amount of planning could have prepared a business for this. By now, most business owners have likely thrown out any forecasts for the year and are wondering what their next move is financially,” said Sue.

“While SMEs are largely quite well versed in flexibility and moving quickly, now – more than ever – it’s important for them to be prepared to shift their way of thinking and anticipate what’s next.

“Our main objective needs to be to keep the business in shape to survive this period (forget thriving unless you’re lucky enough to be in the toilet paper business!).

“Additional to that and hopefully a consequence of it, will be that as few people as possible lose their jobs. As business owners we need to consider not just our small business, but the wider community and recognise our part in it. We all need to share the pain a bit!” she added.

While it is clear that certain businesses will not survive this crisis, Sue firmly believes that many can pull through if they employ a sensible survival strategy and maintain a high level of determination.

“There are a number of strategies that business owners should be implementing right now to help get them through the coming months,” continued Sue.

“From prioritizing cash flow to making the most of government entitlements and negotiating with suppliers, quick action is required in order to prime your business for survival,” she added.

To support business owners, CFO On-Call has created a free COVID-19 survival guide for Australian business owners, which outlines five key strategies to help businesses get through this challenging time.

The guide provides an easy to understand breakdown of how to best prepare your business to survive the COVID-19 pandemic. Interested business owners can download it for free here: https://bit.ly/3bvsgno

“Our goal is simple: we want as many businesses to get through this difficult time as possible,” said Sue.

“We hope that business owners will be able to take something valuable from this resource as they navigate this difficult landscape,” she added.

To learn more about CFO On-Call and how it can support your business, visit www.cfooncall.com.au.

Government Stimulus: Summary Information (23/3/20)

- Covid 19

To help business owners and individuals better understand the Australian Government’s Stimulus support in response to the COVID-19 Crisis, CFO On-Call has created a summary overview of the various supports that will be available to Australian businesses and individuals over the coming months.

If you need help working out exactly what this means for your business, please feel free to call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation. We are very keen to ensure that as many businesses as possible survive the situation and as few people as possible lose their jobs.

BUSINESSES – Aggregated Turnover of Less Than $500 Million

Instant Asset Write-off – the instant asset write-off threshold for asset purchases has been increased from $30,000 to $150,000 from 12 March 2020 until 30 June 2020.

    • Assets acquired must have a cost less than $150,000
    • At this stage cars that are subject to the depreciation cost limit do not benefit from the $150,000 limit uplift (but this may change)

Accelerated Depreciation – a 50% immediate deduction for the costs of eligible new assets upon installation, with existing depreciation rules applying to the balance of the asset’s cost, until 30 June 2021.

    • The instant asset write-off takes precedence over this measure where it applies
EMPLOYERS – Small and Medium Sized Businesses (Aggregated Turnover of Less Than $50 Million and Not-For-Profits (including Charities)

Tax-free payment –

    • Equal to 100% of tax withheld on salary and wages up to $100,000 (minimum payment $20,000).
    • The ‘payment’ is up to a maximum of $100,000 and is not a guaranteed $100,000
    • The turnover test is based on the turnover for the 2019 financial year
    • It is for businesses that employ to help keep people in a job
    • It is payable in two stages (March to June and then July to October 2020 Activity statements) – with the maximum limit of $50,000 and minimum limit of $10,000 applying to each stage
    • Employers will need to be registered as employers and form part of the PAYGW system and still need to withhold tax from employee remuneration – even if that is a nil withholding required for a period – and they needed to be established and registered as of 12 March 2020
    • On lodgement of the activity statements, a credit will be generated equal to the greater of 100% of the tax reported as being withheld from employee wages or the minimum benefit amount
    • The timing of the relief depends on whether monthly or quarterly activity statements are lodged – with some timing benefits for monthly lodgers that allow for early credits for expected withholding in later months
    • So rather than being an actual payment received for withholding above the minimum $10,000 benefit, the measure will allow businesses that qualify to not pay over the tax withheld from employee wages – so in effect the cash remains in the business each time wages are paid and amounts are withheld
    • The employees will still receive a credit for the tax withheld against their tax obligations
    • This will be automatically calculated by the Australian Taxation Office with no requirement to apply. The BAS/IAS just needs to be lodged. So, employers need to remain active to claim the maximum entitlements. A refund BAS will be paid within 14 days of lodgement.

Loans – the government is providing a 50% guarantee on new short-term unsecured loans of up to $250,000 to SMEs (must have an aggregated annual turnover of less than $50 million).

      • The loans will be for up to 3 years with an initial 6 month repayment holiday and are unsecured
      • There will still be lender credit assessment processes that apply
      • The loans will commence in April 2020 and be available for loans made by participating lenders until 30 September 2020
TEMPORARY RELIEF for Financially Distressed Businesses
  • The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.
        • The minimum demand threshold for statutory demands for payment has been increased from $2,000 to $20,000
        • The timeframe for a company to respond has been increased form 21 days to 6 months
        • These changed thresholds will apply for 6 months only
  • The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
  • The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
EMPLOYERS OF APPRENTICES AND TRAINEES with less than 20 full-time employees
  • Tax-free payment – For the period 1 January 2020 to 30 September 2020, eligible employers can claim a wage subsidy of 50% of an apprentice or trainee’s wages to a maximum of $21,000 per apprentice or trainee for the defined period ($7,000 per quarter).
  • Employers must register and be assessed with registration starting in April 2020 and final claims must be lodged by 31 December 2020
SUPERANNUATION
  • Early withdrawal – Tax free payment of up to $10,000 per year for FY19/20 and FY20/21, available to those that are unemployed, eligible for job seeker and other specified payments, have been made redundant after 1 January 2020 or had working hours reduced by more than 20% after 1 January 2020, sole traders whose businesses are suspended or there is a reduction in turnover of more than 20%.
  • Applications are made through mygov.
  • Greater flexibility for retirees – there will be a reduction in the minimum drawdown requirements for account-based pensions and similar products by 50% for FY19/20 and FY20/21.
INDIVIDUALS
  • Tax-free payment – Two $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payments will commence automatically from 31 March 2020 and the second payment from 13 July 2020.
  • Tax free payment – $1,100 per fortnight additional payment for some income support recipients.
DEPARTMENT OF SOCIAL SERVICES

Expanding Eligibility and Qualification for Payments

From 27 April 2020, the Government has also put expanded eligibility and qualification criteria in place for six months.

Eligibility for JobSeeker Payment and Youth Allowance for jobseekers will also be expanded to assist:

  • sole traders and self-employed people. They will be able to meet mutual obligation requirements by continuing to operate their businesses.
  • people caring for someone infected or in isolation as a result of contact with Coronavirus.

Click here for more details.

Please get in touch with CFO On-Call if you need help working out exactly what this means for your business. We are here to help. You can call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation.

COVID-19 Business Help

- Covid 19

On Sunday 23 March 2020, the Australian Government announced further help for businesses to cope with COVID19 situation.

Here’s a link summarising the various packages to help: https://treasury.gov.au/coronavirus/businesses

We’ve also sourced some documents setting out more details on each package and how to access them (click the name to download):

The first thing to do is to digest what this means for your business and reset your budget and cash flow forecast, to ensure you will be able to survive the impact.

If you need help working out exactly what this means for your business, please feel free to call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation.

We are very keen to ensure that as many businesses as possible survive the situation and as few people as possible lose their jobs.

More on COVID-19 Business support from CFO On-Call:

How CFO On-Call got Fiedler Brothers running ‘leaner and smarter’

- Media Releases

Fielder Plumbing Brothers

Like many small businesses, Todd Fiedler says his plumbing business was always doing okay.

“As long as there was money in the bank, we were happy,” he laughed.

As the Director of Fiedler Brothers Plumbing, Todd was a very hands-on boss – he was constantly on the tools and looking out for his team on the job.

He could do it all. Except, by his own admission, crunch the numbers.

So around four years ago, when it was becoming clear that things weren’t quite adding up, he decided to make a change.

“We didn’t have much of a clue how it all worked, we just knew we were doing a bucket load of work and not really earning a profit,” Todd continued.

“It was ludicrous really. Everyone was so busy, it didn’t make any sense, but we didn’t have the time to look into it ourselves.

“That’s when we brought Scott in, someone to look at it from a different point of view. He immediately gave us another dimension.”

Scott Goffage is a Partner of CFO On-Call, a company which connects small and medium business owners with experienced Chief Financial Officers to help manage and improve their business numbers.

Based in Queensland, Scott specialises in taking the time to understand the businesses he works with and tailoring his approach to the specific issues he finds.

“He’s a wiz on a spreadsheet, too,” said Todd.

“His whole reporting process really – all of a sudden we had a whole new view of our business.

“He gave us a better picture of how money was coming and going and recording numbers we didn’t really consider, making it easy for us to alter things to maximise profit or minimise spend. He got us running leaner and smarter.

“Then to top it off he’s a genuine good guy. Always has best intentions at heart.”

While Scott has now set up Fielder Brothers Plumbing to be self-sufficient when it comes to their finances, Todd knows the first number he’ll be calling when he next needs financial assistance.

“Before Scott we were just getting through,” Todd said.

“Over the last four years he’s helped us to grow the business to a point where we are generating a reasonable income, which is what it should have been.

“The whole concept [of CFO On-Call] is incredible. If we were to bring in a full-time staff member that would have come at a reasonable cost.

“The flexibility of doing it this way, where you can get an experienced partner to come straight in, take you by the scruff of the neck and show you the way forward, it’s a great way to operate.”

To learn more about CFO On-Call and how it can support your business, visit www.cfooncall.com.au. 

Free Business Coaching for COVID-19 Crisis

- Covid 19

In light of the current economic conditions, CFO On-call would like to offer free of charge coaching calls to help you during this unstable and difficult time.

No doubt we are all under pressure one way or another. We at CFO On-Call are also finding it difficult to navigate, but we have been through multiple challenging market conditions in the past and understand how stressful it can be, and how helpless it can make you feel with no one to talk to.

We can offer valuable insight into how you can strengthen your business profits, balance sheet and working capital, and at minimum, act as a sounding board to go over business questions and stresses.

It is very important to become proactive, resilient and adaptable to change, but more important to act quickly when there is a sudden change.

There are no sales pitches attached. We have half hour sessions available in the coming weeks for businesses of any size. Please contact heatherl@cfooncall.com.au or call us on 1300 36 24 36 (Aus) or 0800 180 400 (NZ) to book a free 30 minute coaching call.

Promo code: “COVID19HELP”

What Can We Do to Survive the Business Impact of COVID-19?

- Covid 19

Whilst all around sounds like chaos and mayhem (if you read the news, whether it be mainstream or social media), I’d like to share some thoughts on how we can best cope as business owners in this situation.

Our main objective needs to be to keep the business in shape to survive this period (forget thriving unless you’re lucky enough to be in the toilet paper business!). Additional to that and hopefully a consequence of it, will be that as few people as possible lose their jobs. As business owners we need to consider not just our small business, but the wider community and recognise our part in it (SMEs employ around 44%* of the workforce). We all need to share the pain a bit!

Wages are often the biggest expense for small businesses, so we need to consider how to conserve the cash to pay the wages, whilst we ride out this storm. The government is providing some relief in the form of PAYG discount, which will help somewhat. The balance will have to come from creative thought and actions by resourceful businesses.

When it comes to cash flow, two of the key aspects are:

  • The time it takes us to get paid by customers, if we offer terms to pay
  • The time it takes us to pay our suppliers, if they give us terms to pay

The gap between these two affects the amount of cash we have available to pay vital costs like wages.

There’s one word that encapsulates what we need to do here and that’s Negotiate. We need to negotiate and work with our customers to seek payment from them. It may be that they can’t pay all the amount owed, however if they can pay a small amount, that’s better than nothing.  Remember they’re probably in the same boat as you.

Negotiating with suppliers is the flip side. If you can negotiate longer payment terms or pay a percentage of what’s owed, that’s better than nothing, and should help keep your supplies coming.

For example, if you have the following scenario:

Full amount owing Negotiated payments
Customers that owe you $100,000 $20,000
Suppliers that you owe $  50,000 $10,000
A monthly wages bill of $  30,000 $30,000

There will also be the discounted PAYG to help ease the situation, as well as hopefully help from lenders to ease the pain.

This may seem a bit simplistic, and I realise that all businesses are different, however I think if we can all bear this in mind and work together, we will have a good chance of emerging intact on the other side.

If you have other issues that you’d like to discuss with a commercially experienced financial person, please don’t hesitate to contact CFO On Call on 1300 36 24 36.  We’re happy to offer a free ear and advice to get you through this.

For more information on how to loosen the cash flow squeeze gap, download our free eBook, ‘How to Get Customers to Pay On-time‘ by clicking here.

*Australian Small Business and Family Enterprise Ombudsman – Small Business Counts 2019

Free Business Coaching for COVID-19 Crisis

In light of the current economic conditions, CFO On-call would like to offer free of charge coaching calls to help you during this unstable and difficult time.

No doubt we are all under pressure one way or another. We at CFO On-Call are also finding it difficult to navigate, but we have been through multiple challenging market conditions in the past and understand how stressful it can be, and how helpless it can make you feel with no one to talk to.

We can offer valuable insight into how you can strengthen your business profits, balance sheet and working capital, and at minimum, act as a sounding board to go over business questions and stresses.

It is very important to become proactive, resilient and adaptable to change, but more important to act quickly when there is a sudden change.

There are no sales pitches attached. We have half hour sessions available in the coming weeks for businesses of any size. Please contact heatherl@cfooncall.com.au or call us on 1300 36 24 36 (Aus) or 0800 180 400 (NZ) to book a free 30 minute coaching call.

Promo code: “COVID19HELP”