The COVID-19 is now top of mind for everyone and while businesses ramp up their efforts to stop the spread of the novel coronavirus entrepreneurs are also burdened with having to think fast to ensure business continuity. While governments commit to safeguard against downside financial risks the situation itself and it’s rapid pace of escalation is so unprecedented that it obviously impacts the mental state of all business owners. This is an event that none of us have experienced before and considering the difficult and dramatic business decisions required to date, it is to be expected that difficult and dramatic financial decisions will also be necessary in order to ensure business continuity.
Here are some practical first steps small and medium sized business leaders can do to prepare financially for the impact of COVID-19.
1. Review you’re A/R (outstanding invoices).
Assign focus on collecting any outstanding receivables immediately to continue to ensure cash is flowing in. In times of uncertainty people will hoard cash and you may experience delays in collecting on your outstanding Invoices.
2. Review your billings forecast.
Review your billings forecast with a COVID-19 consideration to identify the relative risks in the short and medium term. Some industries and sectors will be impacted dramatically faster than others and now is not the time to overlook the obvious reality that even the most enthusiastic prospect may now hit pause on engaging with your company. Be realistic and very conservative with revenue forecasting.
3. Review buying decisions surrounding Costs of Goods Sold.
Now is the time to consider various scenarios to ensure you are not tying up cash maintaining overly optimistic resource and inventory levels. If you anticipate a 30% drop in revenues subsequent drops in associated costs should be expected. Familiarize yourself with your current inventory utilization levels so you know how long you can defer future restocking orders to preserve cash.
4. Review your budget.
Review your budget (spending plan) to separate essential and non-essential spend and then review again to separate out deferrable from non-deferrable spend. Whether you feel you need to make cuts right now or not, you’ll want to be ready to be ready. Having a list of cash saving decisions ready to go will increase our feelings of control.
5. Review hiring plans.
Employment is a long-term engagement and given the unprecedented and dramatic impact of COVID-19 to date it is reasonable to reconsider making such commitments at this time.
6. Consider the additional costs resulting from COVID-19.
As companies look to employ work-from-home policies, additional costs need to be planned for. Additional software and hardware tools may be required, increased sanitization costs, and reduced productivity are all likely to factor in. Plan adequately for additional COVID-19 costs.
7. Begin preparing for government financial assistance.
BDC is receiving federal support to be deployed to businesses that are impacted by COVID-19. Be ready by ensuring your bookkeeping is up to date and a 24 month financial forecast is ready to be submitted so that you can get in the cue early.
There is so much uncertainty today, and the economic impact is yet to be understood. There is much we can still control today, like preparing for decisions that may be required tomorrow.
If you need additional help navigating the financial impacts of COVID-19 please email us at info@numbercrunch.ca – we’re here to help you strategize and properly plan.
