As the world grapples with the exponential spread of coronavirus pandemic, business owners should be preparing for a potential economic downturn that could possible last for many months.
No one knows for sure how long the coronavirus pandemic outbreak will take to work its way around the world and subside.
In mainland China, for example, people are only now being allowed to leave quarantine and return to normal daily life – four months after the virus first occurred and two months after the economy was virtually shut down.
The rest of the world could be facing similar disruptive timelines as the virus’s spread hits the upward curve, so businesses need to be planning a significant reduction in volume over the next few months, assuming you are not completely shut down.
However, the first priority of every person, government and business, is the wellbeing of people and there are many resources available advising us on how to keep people safe, providing advice on social distancing, enhanced infection control and prevention.
While you’re prioritising keeping people safe, below, we have some practical tips to help you maintain business continuity during this testing time.
Your vendors and other stakeholders need to hear from you; so be the voice of reason and reassurance they can rely on.
Communicate often to reaffirm that, collectively, we can get through this together. Share your plans so they know you’ve thought about the way forward and can depend on you to keep on going as best you can in the circumstances.
Be empathetic by letting people know you understand how they’re feeling and have their best interests in mind but also show you’ve got the resolve and energy to deal with this situation head-on, through to the end.
Recognise your team’s hard work, make yourself available and encourage people to reach out – be caring, ask how they’ve been affected by the virus and how you can help.
Above all, remain patient – don’t stress about what you cannot control but focus on what you can control.
While peoples’ wellbeing should be everyone’s priority during this crisis, the harsh reality is that economies are dependent on the long-term survival and prosperity of business and, in business, cash is king.
If commercial activity slows down significantly or stops, cash flow won’t be far behind and if it dries up so will the business. Right now, it’s time to institute measures to protect cash flow and build your ‘war chest’. Take steps to:
- Aggressively collect outstanding payments – don’t wait until customers are in a cash crunch or be last in the long line of businesses chasing for payment.
- Identify and prioritise those you absolutely must or should pay in full and on time; those that supply critical goods and services to you and/or are most vulnerable if not paid quickly and fully.
- Ask your landlord for rent deferral now; perhaps for two to three months.
- Consider stripping cash from the business and holding it personally, until things improve later.
- Look closely at spending, consider cutting discretionary spending, deferring projects and large capital outlays and, potentially, reducing payroll.
While banks can be helpful when times are good, things can change when the going gets tough.
Predict your cashflow by keeping a running forecast of your projected cash position based on expected cash receipts and payments over the coming weeks and months so you know where you are and what’s coming in.
Monitor your lines of credit and the terms and conditions of your loans closely; know where you stand on the margins, keep a tab on how close you are to approaching limits and when you have to report and forecast your likely situation on the reporting dates.
Keep your bank informed on a timely basis – if forecasts show you’re going to hit your credit limit, or not make the margin or covenant requirements, the earlier you talk to your bank about it, the more likely they’ll waive limits and less likely to call in your loans.
Assess how severely individual customers will be affected by any instability, specifically in relation to the impact on their customers and supply chain. Establish who in your business will be authorized to extend credit, by how much and for how long.
Supply chain management
Plan for shortages now. Imports from China and other parts of Asia have already been affected by manufacturing shutdown due to the virus, and domestic and overseas suppliers may also become unable to fill orders.
Forecast sales by product, check your current inventory and calculate requirements for the coming months so you can plan production. Determine what ‘s required to meet the production schedule and source the relevant products now.
Assess which of your suppliers might face challenges in delivering products to your deadlines and search for possible alternatives.
Leverage your technology by encouraging employees to work remotely and set expectations about responsibilities and accountability through a remote work policy.
Hold regular virtual team meetings to keep employees engaged and informed and if you have a portal where clients and vendors can share information with you, tell them and use it. Remember to make sure your IT people remain vigilant on security at all times.
Human resource challenges
Mnging you rpaWhen business begins to slow dramatically, or you have to shut down due to quarantine orders, which might come, you will need to reduce employment costs, potentially creating hardship for employees.
To ease some of the pain consider:
- Relaxing vacation policies to allow employees to take their accrued vacation as paid time off.
- Reducing the working week (prior to a quarantine order) allowing flexible workdays, and/or dividing your workforce.
- More lenient ‘time off without pay’ policies.
- Temporary lay-offs (as a last resort).
Frequently communicate with all employees regarding return to work, ensuring they know how to get in touch.
Don’t forget to review your insurance cover and assess what you need to cover growing risks. Talk to your broker or insurance adviser to see if any existing policy covers loss of profits and the risk of non-payment of invoices for services and products due to a pandemic.
Businesses around the world are entering unchartered waters but by working smartly and sensibly we can get through this, together.
To review Zeifmans’ latest COVID-19 business-related updates, please visit their COVID-19 Resource Centre (www.zeifmans.ca/COVID-19).
For more information, contact:
T: +1 416 256 4000
Date: March 2020