We have been in a lock down stage for almost a month now and even if you are entitled to some government financial relief, it is likely that it is not anywhere near enough to cover the operating costs of your business. Further, the economy being in this "dormant" state is likely to be the normal for most businesses for the next months to come! It is important to do some planning for your business. Plan to survive the turnover loss and most importantly, be ready for the economic turnaround.
1. Update your forecasts/budgets
It's time to update your budgets and get some control from knowing what you can do. Businesses are usually getting their new financial year budgets ready at this time of the year anyway, so why not get started on it now and include May and June 2020.
a. Model what your revenue being less will do and
b. Remember to include home office expenses in your forecast.
c. Work out your minimum operating cost is for your business.
Knowing this will help you with understanding what your minimum revenue needs to be and what you need to cut from your expenses.
2. Invoice Insurance/Debtor Financing
There are two ways to guarantee payment of your invoices (a) invoice insurance is normally purchased by businesses who are invoicing customers for high value jobs e.g. builders or commercial contracting; (b) Debtor financing (also called factoring) is used by alot of businesses to keep cash flow going while customers are enjoying their trading terms.
Both of these facilities cost you money at about 2-3% of invoice value for insurance, and 10-20% of the invoice value for debtor financing depending on the provider). However, you will have the cash in your bank sooner (usually within 2-3 days) and your customers can be granted longer trading terms to help them pay you over a longer period of time. This could be very appealing to customers who still need services but cannot pay immediately.
Without a facility like the above, consider very carefully about extending credit for any of your customers during this time. Doing so will only make if harder for you to have the resources available continue supplying quality services. Remember, if your customers are taking longer to pay you than you are paying your suppliers, you will run out of money.
3. Negotiate With your Suppliers
You can do this through Extended trading terms, Rates reductions for your power, telephone, waste utilities. You may also contact your bank about loan interest rates and repayment holidays (check for interest costs or other charges). More so, try to shop around for suppliers offering great discounts and apply for all government relief measures you are eligible for.
4. Review all of Your Customers
If new business enquiry has slowed, then it is time to consider what you can offer to each of your existing customers. What Additional services you can Provide? We all can offer more to our existing client base and now is a great time to have a deeper look and what you can do for your customers that they will value more highly than the services that you are offering now.