With COVID-19 negatively impacting two-thirds of businesses across all sectors, 2020 has been one of the unprecedented challenges for small businesses. Many businesses face similar key challenges, including retaining business and customers and managing costs to remain financially solvent.
Now, more than ever, in light of COVID-19, the new financial year is the time for small business owners to conduct a critical review of their business. This review will aid in trading successfully throughout the present and ongoing economic downturn. The following areas should be critically assessed.
1. Review product and customer profitability
Complete a thorough assessment of product and customer profitability. Seek to clarify why products and customers may not be providing desired returns and why they are not aiding the growth of the business. Consider whether products and customers are strategically aligned. The new financial year provides an ideal opportunity to transition any underperforming products or clients out of the business.
2. Conduct an asset review
It’s important to conduct an asset review to determine whether you hold a surplus or identify any underperforming assets which can be sold to provide additional cashflow.
3. Evaluate employees
Carefully evaluate each employee’s role and their responsibilities. Remove any roles or tasks that are not considered essential in the current environment. Consider adapting and making incremental changes by using updated technology to streamline your processes. E-commerce platforms can help to track customer uses of your product and Customer Relationship Management (CRM) software can enable you to track profitability and automate some business processes.
4. Analyse expenditure
Do a detailed analysis of all expenditure and cease all non-essential spending. You may need to be ruthless with cutting down expenditures, yet this may be the reason your business can survive the economic downturn. You can also assess the business’ finance by creating a strategic budget. It’s a useful tool to use as it predicts the financial implications for the upcoming year and may present new opportunities for business growth. The budget should include financial forecasts including profit and loss, balance sheet and cashflow statements.
5. Utilise a sustainable cashflow option
For small businesses wrestling with cashflow, consideration should be given to options accommodating both immediate and long-term support. UnLock is a business-to-business ‘Buy Now Pay Later’ method that enables small businesses to improve their working capital to have financial flexibility. UnLock extends payment terms on invoices and supplier are paid upfront or vice versa. Suppliers can give themselves extended terms with their providers. The payment gateway extends supplier terms from 30, 60 to 90 days for a small premium. This solution will free up a business’ cashflow to be redirected towards staff wages, equipment or stock. Businesses can use UnLock funds, starting from $50,000 facility, immediately rather than dipping into their accounts before sales are acquired.
6. Check risk management policies
Ensure your business has a number of risk management policies in place, in particular for managing the business in response to COVID-19. Always consider the potential impacts that your business decisions or the economic environment may have on your varying stakeholders. Always assess the level of risk surrounding a business decision and check against risk controls that are currently in place.
During this uncertain economic period, companies that can configure their business activities to reflect the current conditions and give consideration to the above will be well-positioned to grow in the long-term as current conditions improve.
Leo Tyndall, Founder and CEO, Marketlend