COVID-19 is devastating the Australian economy, with its full impact still unknown. Many businesses across the country continue to suffer trade restrictions with some industries at a complete standstill. The tourism industry as we know it and businesses that rely on overseas visitation have changed forever.
The Department of Education, Skills and Employment’s Impact of COVID-19 on Businesses report found that the COVID-19 crisis has majorly affected 58% of businesses, with another 22% reporting their company has been somewhat affected.
The most commonly reported impacts of the COVID-19 pandemic were a lower demand for goods and services (67%), cashflow issues (37%) and having to change business practices (33%).
While many businesses may be surviving for now, it’s important to consider what recovery will look like post-COVID-19 – and how the end of Government support will affect you. Lecturer in Marketing at the University of Tasmania, Dr Louise Grimmer, told ABC News that the winding up of Government support could spell the end for many companies.
Empire Post owner, Nicole Manns, says “all of them coming to a halt at the same time is just going to be like an entire economy hitting a wall.”
If your company is currently relying on Government stimulus, it’s vital to follow the below 5 steps to rebuild your business and ensure it returns and remains profitable post-COVID-19.
1. Focus on Cashlow
The first step in rebuilding your business finances post-COVID-19 is to focus on cashflow. Cash is king and your key focus should be staying cash positive and using all of your available resources to do so. Without cash available to pay your company’s debts when they fall due, you may be in danger of trading insolvent and at risk of becoming personally liable for company debts.
In order to increase cashflow, you need to determine just how deeply your company has been affected by the crisis. Analyse your company’s financials, including balance sheets, profit and loss statements and prepare a new cashflow forecast that takes into account the current situation.
Cashflow prediction is extremely important. It helps you understand if your company will survive in the short-term and be viable to continue trading in the long-term.
Forecasting your cash needs may seem difficult during this time of continued economic fragility and uncertainty. However, it’s important you make your best assumptions over the coming weeks and months to highlight any significant shortfalls. It also gives you the time you need to implement a strategy if your cashflow takes a hit.
The Government’s stimulus initiative was focused on assisting Australian businesses affected by COVID-19 to get through these challenging times. Although the $130 Billion JobKeeper assistance package has been widely welcomed, the payment will decrease in September and continue decreasing until it finishes at the end of March, 2021. As a company director, you need to be prepared to make key decisions to ensure your business will survive.
2. Informal Negotiations with Suppliers
While working through your cashflow forecast and implementing strategies to rebuild your business post-COVID-19, communication is essential.
Get in touch with your bank, suppliers, landlords and creditors and inform them of your company’s financial position. At times like this, everyone is motivated to see strong businesses get through this crisis and still be there as a good customer on the other side. As long as you have a plan in place, all stakeholders will be supportive on how you are addressing the downturn in your company.
Take this opportunity to sit down with your financial advisor or accountant and go through every expense on the profit and loss statement. In doing this, you can determine which debts may need to be prioritised during this time and which debts you may be able to defer or negotiate to repay through a payment arrangement.
Due to the current economic climate, the banks and the Australian Taxation Office (ATO) are very understanding of businesses who need to negotiate repayment methods to keep them afloat.
3. Adapt to the Current Environment
COVID-19 has drastically changed the way businesses operate around the world. Your business model may have worked perfectly before COVID-19, but you need to adapt to the current environment in order to stay viable and continue to trade once the crisis has passed.
Queensland University of Technology (QUT) Business School Professor, Gary Mortimer, told RACQ Living that there would be businesses forever transformed by COVID-19.
“These are challenging times and it would seem easier to simply close the doors, but businesses need to really look at how they can adapt, innovate and face the challenge head-on.”
A great example of business adaptability to COVID-19 is distilleries like Bundaberg Rum who are now making and selling hand sanitiser to combat the spread of the virus.
If your business model isn’t currently viable due to the current environment, you may need to consider:
- Changing your business model
- Downsizing your business
- Exploring new sales channels
- Discovering new operational methods
4. Consider Additional Finance to Fund Cashflow, Growth or a Restructure
Another essential step to rebuilding your business finances after COVID-19 is exploring finance options. If your cashflow is suffering, you may need some working capital to jump-start your business operations.
State Governments are currently providing financial support to help ease the pressures on small businesses due to COVID-19. You can find out more information based on the state your company is operating in online.
Aside from these Government initiatives, you can consider taking out:
- Secured or unsecured business loan
- Business overdraft
- Business line of credit
- Equipment, inventory, purchase order or accounts receivable financing
- Credit cards
- Merchant cash advances
The type of finance that may be best for your company will depend on its individual circumstances.
5. Obtain Professional Advice to Deal with Accumulated Debt
If informal negotiations with suppliers, creditors and the ATO have not resulted in a positive outcome and you believe your company may not survive in the long-term due to too much debt, obtaining professional advice from a qualified insolvency professional early will give your company its best chance to survive.
Your company’s financial position will determine the best way forward. A formal insolvency appointment may be appropriate, resulting in the appointment of a Voluntary Administrator allowing you to avoid Liquidation by securing a Deed of Company Arrangement (DOCA). A DOCA:
- Binds creditors into a formal repayment arrangement
- Avoids further legal action from creditor debt recovery action
- Creates affordable debt repayments
- Allows the company to continue trading
- Retains employees
- Allows creditors to receive most of their debt
- Is completed in as little as 4-5 weeks
Seek Assistance Early
If your company is struggling financially and the COVID-19 pandemic has caused your business debts to worsen, taking action early will increase the likelihood that your company will be able to get through these challenging times and continue trading into the future. Get in touch with our qualified, professional team today on 1800 531 510 for a free, no-obligation consultation.