While some businesses will prosper in unexpected ways as a result of the pandemic, others will need to plot their course very carefully to survive. Here are the two key questions for business owners and managers to address from a financial perspective in order to plan their way forward in uncharted territory.
As we all try to come to terms with the sudden pandemic and what ‘lockdown’ means to us personally and financially, it is very clear that at least for the foreseeable future, life – both business and personal – will be very different. How we emerge through the other side of this ordeal will be dependent on our ingenuity, creativity, flexibility and agility. And our resolve. We must be willing to challenge past paradigms and be open to new ways.
We all know the old English proverb “necessity is the mother of invention”. Some will see the opportunity in finding new ways of living and conducting business. Others, unfortunately, will not. Those involved in gold mining understand the stimulus this epidemic has provided to their business activity already, while online businesses are expecting unprecedented growth and long-standing fundamental changes in consumer behaviour for their benefit. Traditional business models will be challenged.
So – what can you do to plot your path through the next 6 months? How well equipped are you to deal with significant changes in your business – both positive and negative?
Very few business owners considered a worldwide epidemic when they plotted scenarios in their business continuity, risk and contingency planning. While most of us look at planning as an activity we think most about in times of growth and prosperity, careful consideration of the future is perhaps more important in times of need and uncertainty…as well as opportunity.
Well, challenges are usually best addressed one step at a time, so let’s start with:
Q1: Where am I now?
Q2: Where am I going?
To address the first question, at least from a financial perspective, you need to have a good understanding of the resources you have available to draw on, and what obligations you’re faced with. In accounting terms, this means your balance sheet. Do you have high stock inventory balances, strong cash reserves, an overdraft or line of credit you can call upon? How long will it last? Is there any relief available to defer any liabilities? How much leave do your employees have available?
As you start to work through your current and foreseeable trading conditions, current orders, future sales forecasts, and opportunities or restrictions in your service and product delivery methods, you will be able to identify those areas that you need to address, and those that may provide your pathway through.
At this point, you should soon have an answer to the question “where am I going?” Developing a trading and cashflow forecast specifically targeting the difficult period ahead will help you to consider and understand potential impacts on sales, fixed and variable costs, and ultimately cashflow. And what other options are available? Have you considered the tax relief initiatives recently announced? There will be things you can do. Yes, some will be challenging, and some will present opportunity.
How we can help you right now
Virtual CFO Group Australia is currently undertaking scenario planning for many clients to enable them to test a range of responses to the new conditions. This allows clients to make informed decisions on how to manage the business through this crisis period.
We have standard, yet flexible reporting, analytics and forecasting capabilities that can align with most accounting and ERP systems. Reporting tools can be implemented quickly, and standard, in-depth reports made available to produce a range of financial reports. Make the choice to take control and plan your way forward.