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Navigating through this financial crisis

Financial Crisis, COVID-19,

by Cate Peat, Finance Manager, TABMA Australia

 

As the economic impact of the pandemic continues to emerge,  its daunting to navigate a business through these very uncertain times.  Many businesses are experiencing a downturn in revenues but can’t reduce expenditure to the same level or as quickly and are left with a mounting debt problem which is difficult to manage and could be crippling to the future of the business.  It’s an old phrase but a true one in these times; Cash Is King; so here are a few tips on navigating through these times:

 

Understand your situation

  • Prepare a cash flow forecast.  Have a look at your debtor book and add in when you’re expecting your customers to pay you.  For expenditure, make a distinction between those suppliers that MUST be paid and on time and the remainder.  You’ll be able to see where you stand and identify any shortfalls and when they are likely to happen.

 

Maximise cash inflows

  • Keep in contact with your customers and get an understanding of their financial situation.  Will they be able to pay you on time?
  • Take a look at your inventory levels.  What can you turn into cash quickly?
  • Claim the Government and State business support initiatives.  There are many schemes aimed at different sectors of the business community which are summarised on the TABMA website in the Resource Centre.

 

Control cash outflows

  • Identify and cancel any spurious expenditure that you don’t need to keep your business going.
  • Control future expenditure by identifying and forestalling anything you have on order.
  • Negotiate with your bank to reduce or stretch out payments for mortgages or other loans.
  • Negotiate with your landlord to reduce or mitigate your rent payments.  Refer to the Relief for Commercial Tenants page area on the Resource Centre.  There’s a separate Code of Conduct issued by each State to govern negotiations around commercial rents.
  • Adjust your staffing levels.  Do you need to reduce hours or stand employees down? Can you ask your staff to take leave or a temporary pay cut? Bear in mind, though, that if you are enrolled in JobKeeper, the Fair Work Commission has issued guidelines to govern adjustments to arrangements (coronavirus.fairwork.gov.au).

 

Review

Review your cash flow forecast often and keep adjusting as time moves forward

 

>Get control with your cash flow forecast            >  Stay connected to your suppliers and customers          > Keep reviewing

 

And most importantly – look after yourself.  Businesses can’t recover if everyone is sick or stressed out…