It is a challenging time for all due to the COVID-19 pandemic. As a business owner, you have to look at things differently, as the business environment has changed significantly and most part of it is not under your control. Still there are things which you can do and which will help you to continue your business.
Disclaimer – This article, we will try to touch problems we feel going to face by the business’s owners. It is not our intention to diminish the seriousness of the situation with COVID-19, nor to morbidly capitalize on the fear. Our duty is to prepare businesses for real problems they may face and help them to overcome the problems.
1. Understand your financial position
This is very important to know your numbers as of now. This is the key to assess your ability to continue and know your problems. Unfortunately, many SME’s does not give importance to keep up to date financial records. This will lead to many uncertain situations and if you have not updated your numbers, please do so. You may need a help of a chartered accountant to present your numbers and obtain the service if you are not an expert in financial numbers.
Once you have financial reports, (Balance sheet, income statements and your cash flow statement) you will be able to understand how healthy your business is in terms of continuity. Today all big firms have issued guidelines to their staff to look into the ongoing concerned issues with other parameters to evaluate the going concern issues due to COVID-19 when concluding audits as of 31st December 2019. Hence, when preparing your financial statements as of 31st December 2019 or as of today, you need to consider and plan for the future with the economic downturn.
In this current situation, look at the working capital requirement and not for its profit. Sometimes your business record may have a good profit or revenue does not help at this time as now all businesses needs to consider how much they are strong in terms of working capital requirements to continue the business. Working capital reveals a great deal about the financial condition, or at least the short-term liquidity position of a business.
Working capital is more reliable than almost any other financial ratio or balance sheet calculation because it tells you what would remain if a company took all its short-term resources and used them to pay off all its short-term liabilities. All being equal, the more working capital a company has on hand, the less financial strain it experiences.
Working capital = Current assets – Current liabilities
If you are in a negative position, you are already in a problem and it will make further difficulties in future due to the downturn of the business activities. You need to improve the same.
If you are in a positive position, try to make it even stronger.
Let us consider what can improve your working capital position and what can you do regarding it.
a). Try to convert all your current assets to money. First thing you need to do is get the list of trade receivables and try to get the money from your trade debtors. This is challenging as all the businesses are now trying to do the same thing. At least you need to get a confirmed date that your customer will pay your outstanding invoices, so you can predict your cash flow. Second, selling your inventory and analyze your products and make a plan to sell as much as possible to genuine customers, even with good discounts at this time. It will make you better position.
b). Obtain a list of payables and make a plan to pay. If you have good working capital conditions, please pay your suppliers on time as usual and that is the best thing you can do to help business community at this difficult time. If you are not in good position, talk to them and agree on the time frame so that they can expect money in a particular time frame and you also will be able to manage till that time. In this way, you have some predictions on the time frame of money coming in and going out.
c). Look for working capital funding. You need to start early as possible as if your current working capital position is negative, and above a) and b) is not working then you need to find a way to pump money into the business for a minimum 3 months and better to have a plan for 6 months, as nobody can predict exactly how much time it will take to have a normal business environment. You need to predict your monthly working capital requirements and try to fund the gap. This includes securing bank loan, obtain credit card loan, obtain mortgage loan, selling your unwanted fixed assets and investor funding (Talk to your partners now, explain to them the current situation and expectations) is some of the options available.
2. Diversify your Service or Product Offering
Due to the COVID-19 impact, general public has to comply with health authority guidelines and instructions. This will create new opportunities to business communities to change the way that businesses are operating now. E-commerce will become more important than any other time in the history. Current conditions will create new avenues to do the business and look around your business and change the channels to meet the customers’ requirement.
Think on the requirements which are newly created by the current environment and customers’ needs and apply to your business line. Some of examples,
- If you are a distance higher educational institute, increase your marketing.
- If you are in operating grocery or restaurant, increase delivery services with the approval of the relevant authority.
- If you are an advertising agency and want to help a broader customer base, offer pre–recorded online training courses to help shore up your clients marketing and advertising skills.
- If you offer low cost graphic design services, offer a premium service for more mature businesses.
- If you are an operational efficiency expert, offer a subscription for the tool you built and use to document processes.
Spend some time thinking about what you can do to minimize your risk by creating new revenue streams.
3. Make a plan to work from home
Work from home is actually performing in many countries and many people have a private office in their home. It only needs a computer or a laptop an internet connection for many employees. Due to the current situation of COVID-19, some managed to understand the problems, predict the situations properly and spend money on the training staff to work from home. Most of them built the setup and is currently running the show from home to a satisfactory level. Unfortunately, some of the employees are not able to access the records where they need to perform the tasks due to not having required devices. Hence planning for the same is very important and it will help you to run the operation with minimum disruption.
Before you grow a remote team, it is important to put a few things in place:
Write clearly defined policies – We Creavty, put all in places and have clearly communicated to all our staff in Sri Lanka and UAE to follow the guidelines.
Employ the best technology – When we first allowed our team to work remotely, we need to put right technology available with the team. We as a digital firm, Crevaty use below tools for the work.
- Accounting: Xero
- Project Management: Bitrx 24
- Internal Communication: Skype for business / Zoom
- Data Sharing; Western Digital my cloud
While this list might not work for everyone, it has served us very well. We no longer have to be in an office with a dedicated server for our accounting software, because we use a cloud-based accounting software. We don’t have to use emails or spreadsheets to track projects, because Bitrix 24 does it all. All of our chats are in one spot, rather than hiding in Google or other systems.
Finally, we want you all to prepare for the future with the challenges and we believe together we can overcome this current situation. We will be again with our loved families, friends and business communities as normal once this pandemic is over.
If you need any help on planning your business to face upcoming challenges, we can assist you. Please visit our website to know more about our services www.creavty.com