COVID-19 is primarily a health crisis, but nobody can deny that the effects of COVID-19 on most businesses is going to be significant. Today, almost all business owners worldwide are scrambling to formulate plans with one aim in mind: Survival. It is now time for business owners to put aside the ambitious plans and dreams. None of this matters if you do not survive.
Just a few weeks/months in, some businesses are already at breaking point. Other businesses may be surviving for the time being, but serious contingency planning is becoming more important every day.
At Mint Finance, we are supporting our clients and assisting them so that we can get through this storm together.
Below are some useful tips to keep in mind during these difficult times:
1. Cash Flow Forecasting – 1-5 year cash flow plans are now irrelevant and worth absolutely nothing. Prepare weekly cash flows and determine how far you can go at the current level of operations. Ideally, prepare more than one cash flow plan to cater for optimistic scenarios, moderate or realistic scenarios and absolute worst case scenario. The latter is vital. If everything goes wrong, what are the consequences?
When preparing your cash flow forecasts, identify your fixed costs. These are the costs which you absolutely cannot eliminate from your business. In your worst case scenario, in which income is practically nil, these should be the only costs left. How long can your cash reserves last with these fixed costs? This is vital.
Always remember the basics – cash is king. It is important that businesses put in an early plan of action to conserve cash. Businesses that are critically hit will probably need to be aggressive in this plan. The biggest concern with COVID-19 is that we have no idea how long this will last and how long it will take for our economies to bounce back.
Many businesses also have high levels of debtor balances which probably were not a major source of concern a few weeks ago, when life was “good”. These balances are now crucial and may be the difference between survival and failure. Get in touch with them early on and push for settlement, possibly offering additional free services in an attempt to get paid.
2. Obtaining finance/extending lines of credit – start understanding what options are available to you, Do not wait for things to get really bad. Get in touch with your bank relationship manager now and understand what is available to you.
3. Government grants/financial aid – get in touch with your financial advisors and understand what grants/aid are available to you. Factor these into your cash flow forecasts. Keep in mind that circumstances may change, so make sure that you are aware of any developments and updates.
4. Be creative – this is the right time to introduce new service lines and products. Now may be the right time to pivot. There will always be more opportunities out there, so look for them. Do not give up now. Your business can get through this and bounce back stronger.
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