new_promo_slide_1.png

When we pay for goods and services, the chain of spending starts. When economies are buoyant, this dollar can move extraordinarily fast. When the economy is down, the movement of that dollar slows. The speed at which this dollar moves is referred to as the velocity of money.

The Covid-19 lockdown means times become tough for businesses and consumers because neither can spend. As a result the velocity of money is reduced, and businesses then look to protect their cash flow.

There is also sentiment that withholding payments to creditors during this lockdown will be acceptable. Not only is this poor business practice but if it becomes widespread, it could lead to a significant downturn in the economy with businesses and ultimately households, suffering as a result.

Instead of applying a defensive approach, businesses should become pro-active with their financial planning.

Here are a few tips:

  • Be proactive with your suppliers and creditors.
    • Work out how best to support each other during these times.
    • Discuss and implement extended terms, pricing and on-demand ordering.
  • Be proactive with those that owe you money.
    • Understand the situation they might be in and come to an arrangement suitable for both parties.
  • Charge fairly for goods and services provided.
    • Avoid price gouging even when supply is limited.
  • Factor in slower debt collection and prioritise essential costs.
  • Identify areas of waste, slippage, inefficiency and make plans to address these.
  • Look to develop a specific marketing and sales plan for when your business re-opens.

It’s important for businesses to think short, medium and long-term. Identify strategies that will assist you during the lockdown, and be prepared to meet increasing demand as the velocity in the economy gradually picks up.

Out of every downturn there comes opportunity. Plan now to be the one to take advantage of it!