For many businesses, the events of 2019 and 2020, including drought, fires, floods, COVID-19 and market fluctuations may result in a sudden fall in demand for products or services, labour shortages and supply disruptions. In short, these unknown times will be a shock to many businesses and place their immediate future in serious jeopardy.
As part of a comprehensive risk management strategy, there is a range of actions you should consider taking now to prepare your business.
To make the best possible decisions under challenging environments, you will need access to the most up-to-date information on your business and your finances. Work with your accountant or adviser to make sure all your accounts and financial statements are updated.
Talk with staff, suppliers, and even customers on what there impacts maybe and work on how they may affect your business. Think of areas such as:
Knowledge of the financial health of your business is fundamental to assist in deciding what you can and should do now to place your business in the best possible position to navigate through the crisis.
Working with your accountant reviewing the financial statements and current performance can be invaluable. Additionally, look at reviewing other areas such as structure and succession planning to be better prepared for the long-term direction.
The assumptions you may have used to produce your budget are most likely no longer relevant because of the crisis. When working with your Accountant or adviser, take the list of possible impacts you have developed and re-do your budgets. Include a range of possibilities previously unthinkable scenarios, such as a 50 to 80 per cent decline in sales over three to six months, or a supplier is unable to supply you an essential item for six weeks. It’s essential to carefully consider how each of those scenarios impacts your cashflow.
After re-doing your budgets and determining the financial health of your business, including your cash reserves, you are likely to find your business will struggle with cash flow in the near future. You must, therefore, act now to improve cash flows.
Look at areas such:
Jane Purnell, General Manager, Holzworth Partners