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The impacts of Covid-19 on the world and our economy is predicted to be long lasting and as business owners there is little doubt that having cash in your business is the life blood that will get it through! It is therefore more important than ever to monitor your finances and manage your cash flow! Here are some practical tips to consider in these volatile times to assist with your cash flow management:

Start with an Operational health check –

  • Prioritise & review your core business functions - Identify parts of your business which are critical such as people, technology, suppliers, plant & equipment (to name a few), and then make sure there is the necessary cash to support it.
  • Working capital management (debtors, creditors and inventory/work in progress) - Will need to be reviewed and adjusted for to make sure your cash flow cycle is adapting to the changing business landscape. This means chase and collect overdue debtors, try extend credit terms with some of your suppliers and tailor your inventory/WIP levels to adjust to the new business climate. Inventory is often one of the largest costs within a business, dead money until sold. Look at culling, selling off excess inventory at a discount to bring cash in.
  • Enhance credit control - Particularly with new clients/customers who have no existing credit history with you.
  • Overheads – Cut back on unnecessary costs such as entertainment, travel (government enforced already), non-essential staff training etc.
  • Delay making large asset purchases - Wait till when the economic climate improves, unless absolutely necessary for you to continue your core business operations.
  • Review your subcontractors and staffing requirements - If cut backs are necessary than make sure proper HR and legal advice is sought before doing so with your employees. Also take into consideration the Governments COVID-19 Wage subsidy package (discussed further below) before making any cut backs on staff.

Contact your banker –

  • Working capital facilities - Get in contact with your bank and enquire about a short term overdraft facility to assist.
  • Term loans – Ask about getting onto interest only or extending out term lending periods, which will reduce your financing obligations.
  • Hardship loans or repayment holidays - If you are in severe financial circumstances some banks offer these.
  • Covenants in place – If you have these then try get these put on hold and reinstated later once your business returns back to reasonable operation otherwise risk of the bank calling its loan could be a possibility if not discussed.

Call your insurance broker –

  • Depending on your insurance policies there may be an opportunity to claim for losses experienced as a result of COVID-19.

Speak with your accountant –

  • COVID-19 Business Continuity Package - If your business meets the eligibility requirements then you can qualify for a cash injection under the Wages Subsidy and leave payment. This is a one off lump sum payment of up to $150,000 depending on your particular business circumstances.
  • GST and provisional tax payments - If you are unable to make these payments on time due to financial hardship, we would recommend entering into an arrangement with the IRD prior to the due date. The IRD are allowing UOMI and late payment penalty relief for those businesses whom are eligible under COVID-19 impacts but there has to be an arrangement in place to do so. There is still a requirement to file your returns on time with the IRD.
  • Overpaid provisional tax - Re-estimating your default assessment down and getting your tax refunded may be applicable. If you have paid your taxes into a tax pooling solution then the same applies to this.

Premises while working remotely –

  • If your business is working remotely try and ensure your premises are using minimal energy and resources while you are absent. All unnecessary power should be off, reduction of cleaning services, waste removal, document destruction services and air conditioning turned off for example.

Talk with your landlord –

  • Entering into a discussion about the possibility of an arrangement for reducing the rental payments in the interim until business returns back to a level whereby you can pay the full amount as well as the arrears.

Opportunities in Change -

  • Revenue - Trying to diversify, look for other opportunities in this unique time or catering to the needs of customers at this time. Developing an online offering or delivery service (e.g. retail, restaurants etc.). Remember that a sale is only a sale when the cash is in the bank. 
  • Supply chain – There may be new and innovative supply chain collaboration opportunities and strategic alliances to take advantage of.
  • Process Improvement – Trialing new innovative ways of working and delivery within and external to the business.

If you require any support or have any questions with regards to the above, please contact your advisors at RSM so we can best assist.