The South African Supplier Diversity Council (SASDC) compiled some tips to help ease your financial concerns during the COVID 19 lockdown period; herewith some considerations:
1. KNOW YOUR EXPENSES; BUT CLEAR DISTINCTION BETWEEN BUSINESS AND PERSONAL
Now is the time to get a clear view of your monthly expenses and spending habits and how these may need to change.
2. APPLY FOR HELP
Losing any part of your income is frightening; losing half or more can be downright terrifying. However, turn your worry into action. Research what you qualify for and submit your applications promptly. Processing times may become longer than normal due to an overwhelming number of assistance applications combined with potentially reduced staff due to the virus. South African Supplier Diversity Council are working on an initiative to assist you in accessing financial support; so WATCH THIS SPACE. In the meantime……………………………
3. CREATE A NEW, ADJUSTED BUSINESS AND PERSONAL BUDGET.
- Download your bank statements, separate business and personal and understand your monthly expense categories.
- On the business front, review your expense and revenue categories; what is spent on staff, entertainment, raw materials, equipment etc to understand your cost drivers. Consider which cost drivers could be curtailed and where do you see some waste. Cut all wasteful expenses immediately. Where do I get most of my income, which customers, what is the margin – is it enough, who owes me money??
- Expense management is likely to be one of the first things that you have considered in the lead up to the lockdown and you might have already cut back expenses where you could. If not, start by using your bank statements, invoices, and receipts to draw up a list of your expenses.
- Sort your expenses into three categories: fixed, variable and periodical to help you manage your budget effectively.
- Look back over the last 3 months of business expenses, and create average costs per month for each of these items. This will help you forecast what your upcoming expenses might look like.
- Once you have a forecast, you will be able to calculate shortfalls and begin making expenses adjustments where possible. At the end of this, you want to cut your business expenses down to be as lean as possible. You might find more unnecessary spending than you think!
- Revenue management might seem complicated but as a business owner, it’s likely that you’ve been doing it all along. Your revenue management strategy helps you keep the right product or service on the shelves/on offer at the right price. The more familiar you become with the context in which you operate, your customers and competitors, the more this becomes a natural skill.
- However, the outbreak of COVID-19 and the nationwide lockdown will mean relooking this strategy to ensure that your business has the best restart possible. The next few weeks are a good time to start thinking of ways in which you can increase your business’s revenue and explore new revenue sources.
- Try to imagine the future your business will exist in. Does it still make sense? What will customers want most and can you provide it? You can lean on past experiences, talk to other business owners around you, and be creative, and you might find unexpected ways to unlock more revenue.
- You can also use this time to go through your business processes and find ways to improve your product cost to profit ratio. Or, you can think of ways to improve or better your product so that a re-opening drives better traffic – real or online; you will need to continue this step until trading gets back to normal.
- Your business will be losing money over the next few weeks, so looking at your costs and revenue will help you determine profits and hopefully find a way to rebalance the books.
- Before we jump into any numbers start with a little research into the effects of COVID-19 on your industry. If you’re a within an essential service class this will affect you differently compared to businesses forced to close for lockdown. What has the pandemic meant for your industry? In this context, evaluate your business profit margin and operating costs.
- This is the part that will be especially difficult because it’s from here that you may have to take serious and devastating decisions. If the numbers and industry point to it, you may have to restart your business from scratch once the outbreak is contained. No matter what, try to look to the future positively, with the same entrepreneurial spirit that made you start your business.
A few questions to consider:
- What does your financial future look like? Can you knuckle down and get through the lockdown or are you out of funding?
- Can you make financial cutbacks in your business to remain afloat, even on lean terms?
- Do you have an alternative source of income to help you finance or fund your business through this time? Can you seek formal funding?
- Do you have any private relief solutions from your banks, suppliers, or landlords?
Cash flow forecasting
Now that you have control of your expenses, you know your profitability, and you have some ideas about how to move forward, it’s time to forecast for the future.
- Implement expense cuts where you can.
- Start conversations with your suppliers, investors, and other partners.
- Try to negotiate relief on your bond, rent, and debt by letting institutions know that COVID-19 has impacted your business and ability to make repayments
- Start researching funding opportunities applicable to you.
- Remember, SASDC is working on an initiative to help with your funding application, so stay in touch.
4. NEW WAY OF DOING BUSINESS
While coronavirus lockdown might look as a burden to many, risk management expert Hersh Shah, CEO, GLECO, Institute of Risk Management (UK) India Affiliate believes it can be looked at as beneficial, a game changer. Covid-19 will accelerate digital transformation for businesses. Elaborating on the same he points out:
- Video & Zoom Calls: Transactions, university lectures, job interviews, and all business activities have already moved online via video conferencing/Zoom/Google Meet or Hangout/WhatsApp video calls and many more. Managing customer relations through video-conferencing and maintaining the personal touch will earn brownie points.
- A Communication Chain: While following efficient work from home policy, it is important to develop a robust communication chain in your organization to avoid loopholes to ensure an integrated response both internally and externally.
- Data Theft: In the race for being digitally equipped amidst the global change in the way, businesses will function, make sure to have a system in place to combat internal threats such as data leaks and external ones such as cyber hacks and re-architect the infrastructure to make technology and processes more resilient.
- Inform- Ensure your company regularly updates the anti-virus software, keep a 24-hour IT helpline so that no work is disrupted, educate all your stakeholders about potential phishing emails.