With a vaccine on the horizon, a post-COVID ‘new normal’ may just become a reality during 2021. This means Australian SMEs need to consider how they will adapt and do business from here on in.
Naturally, this includes developing strategies for managing cash flow and profitability – especially for businesses that have been supported by JobKeeper, which is due to end on March 28, 2021.
Here are some tips for post-COVID financial management.
1. Check your eligibility for the last few months of JobKeeper 2.0
JobKeeper has been extended to the end of March, with the second extension coming into effect on January 4th.
Even if your business didn’t qualify for the previous extension, you may be eligible for the second one. The main qualifying test for JobKeeper 2.0 is a 30% reduction in GST turnover (for most SMEs) relative to the same quarter in the previous year.
If you do qualify, it will help tide your business over for a few weeks at least, and give you time to consider strategies to ensure your business is prepared for when the program winds up.
2. Analyse and improve your cashflow
Cashflow is often described as the ‘lifeblood’ of a business and with good reason. Without a healthy cash flow, a business won’t be able to meet its debts and obligations, pay employee wages or undertake many of its activities.
Here are some ways to improve your business’s cash flow:
- Debtor management – ways to improve this include tightening up payment terms, chasing overdue invoices, offering incentives for early payments, charging upfront deposits and use of retainers or monthly payment plans. Good communication with your customers is essential for this.
- Creditor management – actions such as staggering payments, negotiating payment plans, and/or bulk ordering for a discounted price can all help smooth out bumps in the cashflow.
- Cut down on costs – this may include negotiating better deals on utilities, purchasing in bulk, and reducing or eliminating non-critical spending. You could also reduce office rent by increasing work-from-home options (see point 5 below).
- Review your finance – this might include checking out low-cost loans or leasing options on vehicles and equipment.
- Develop conservative forecasts and budgets – while things are on the unpredictable side right now, it’s still important to update your budgets and create cashflow forecasts. Doing so helps you avoid shocks to your business finances.
3. Create or strengthen your presence online
Due to an increase in online spending, operating over the internet has been helping many businesses survive during the pandemic.
If your business isn’t online already, now is the time to set it up. Commerce is unlikely to return to how it was pre-COVID.
4. Adapt to new technologies
Technology is likely to prove necessary for SMEs post-pandemic. It can help save on administration and operating costs, and provide connection points with customers and stakeholders.
For office businesses, some examples include cloud accounting, digital marketing, video communication platforms like Zoom or Skype, and automation of data entry and social media. Retail businesses may also benefit from online ordering platforms combined with courier delivery services.
5. Consider remote work where possible
Many employers have introduced work-from-home programs during the pandemic, and many employees like the flexibility and the reduced commuting.
Remote work can also allow employers to cut expenses on office rent and outgoings, adding to the financial benefits.
However, remote work also comes with risks, such as mental and physical health. Mitigation strategies for this include regular communication with workers, safe workstation set-ups, and training in safe work practices.
Overall - try to use the pandemic as an opportunity
One thing is clear – things are very unlikely to go back to how they were.
This means businesses that adapt will be the ones best positioned to thrive in the short and longer terms. So, use this time as an opportunity to re-set and strengthen your business, and improve efficiency.
HOW CAN RSM HELP?
For professional assistance in managing your business’s financial health during and after the pandemic, feel free to get in touch with us.