There’s no denying that we’re in unprecedented times and the future of businesses, new and more established, big and small, are facing hurdles that are relatively unforeseen, particularly so quickly. Although the advice is to have a financial safety net for these kinds of events, there are factors that go into play that make this not possible, or at least not wide enough. These can include being in the start up phase and still working toward a consistent profit, the longevity of the COVID-19 effect being more than your contingency plan allowed, or a greater loss of business than expected. However, even with such a foggy horizon, it needn’t be all doom and gloom. There are small strategies you can work with to keep your head above water during the COVID-19 pandemic.
Try to remain in business, even if not business as normal
Do you need to pivot your offering? Or migrate it to a remote-friendly model? It’s time to make significant alterations to your service offering strategy so you don’t rest on pause too long, if at all. Reach out to your customers and let them know you are still in business and be transparent about how you are going forward to help them, and retain your business flow as much as possible. Revenue is required, and doing what you can to continue that will be in your best interest to get through this time.
Be aware of your incoming and outgoing bills and debts
Retain consistent communication with those you owe, and those who owe you. While it’s important to be empathetic and understanding in these times (if for nothing else, you want your clients to continue business, so that they continue business with you down the track), cash flow is going to get you through. Start communications now if you haven’t already and create a clear and concise understanding of what you owe, when you owe it, and what and when you are owed. And remember, your bills include outgoings such as commercial rent, which also has the scope for negotiations.
Take advantage of Government safety nets
The Federal Government has implemented the COVID contingency of the Safe Harbour service offering. This includes a six month temporary prohibition on payments owed for debts incurred through the normal trading of businesses. The minimum debt has been increased from $2,000 to $20,000 and the moratorium period has extended from 21 days, and debts need to have been appointed before the involvement of an administrator or liquidator. This offers directors time to renavigate how they trade, retain staff, organised debts and come up with a strategy to ensure payments are met after the six month period.
Take care of your internal team
While we do strongly suggest recon on your staffing to ensure you aren’t making any unnecessary payments, it’s also important to not make staffing cuts from a knee jerk reaction to short-term financial strain. A strong team will help get you through this time if you can afford to keep them. And, think longer term, not just immediate outputs. You can also negotiate part-time for those who are able and apply for the JobKeeper Payment stimulus package. If you’re eligible, this package can help retain your team at or above their usual pay rate, and you may only be required to contribute the difference where applicable. You want to keep the staff as dedicated to ensuring the business makes it through as you are.
Fully understand your options
If you’re still confused about what is available to you, your true financial position or your projected position and the options you have moving forward, consult our professional and skilled team to help navigate you through this process. It’s important that your knowledge of your realistic and true position is in order so that your strategy for staying afloat through the COVID-19 pandemic is one that works now, and for you and your business in the future.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.