Financial Considerations

• Cash is king       

  • Cash will be the most valuable resource because a widespread economic downturn is imminent, access to debt will be limited and contingency plans will need to be implemented swiftly.

  • Consider your cash resources and how many weeks your business may survive on those cash resources.

  • Consider how much cash you need to reserve to pay out your employee termination payments and leave entitlements should you need to reduce your workforce.

  • If you have investments in term deposits, speak to your financial institution to see whether you can access the cash early with minimal penalties.

  • Update your cashflow forecast immediately and consider worse case scenarios.

• Understand your supply chain

  • Consider your supply chain and procurement constraints and how they may have an impact on your ability to continue operating.

  • Look at alternative supply chain options.

• Update your business financial projections

  • Consider your break-even point (the point at which you start to loose money by staying open).

  • Consider how quickly you may run out of cash and what resources you have available (i.e. assets to sell).

  • If you have investments in stocks, bonds or funds, consider how a drop in values, dividends and other returns will have on your business projections.

• Have timely financial reporting

  • Ensure you know how your business is performing in real time so you can make timely decisions.

  • Understand your margins and if you are trading at a loss, know when to halt or stop operating.

• Review your accounts receivable

  • Assess which customers are at risk of failing to pay.

  • Reach out to your customers and offer discounts for early payment or payment plans.

• Review your accounts payable

  • Review your accounts payable and assess which payments you can defer.

  • Prioritise your accounts payable immediately.

  • Engage in discussion with your suppliers to push out payments or renegotiate payment terms.

• Determine your employee termination and leave entitlements

  • Tabulate all employee entitlements and the monetary values so you know how much cash you will need to reduce your workforce.

  • Termination entitlements will depend on your State or Federal employment regulations, how long the employee has been employed and their age.

  • Review your HR system to determine exactly how many hours of sick leave and annual leave each employee has available.

  • Annual leave entitlements are payable upon an employee’s termination so ensure you know how much will be payable.

  • Long service leave entitlements may also be owing to employees especially if they have been working for more than 7 continuous years.

• Review your fixed costs and slash overheads

  • Your business will have regular fixed costs that you will need to pay regardless of whether your business is trading.

  • For example: rent, utilities, insurance, software subscriptions, interest etc.

  • Make a list of all your fixed costs and make a plan to try and reduce them as soon as possible. This may involve engaging in negotiations with your landlord, bank, financier, insurer etc.

  • Remove all discretionary spend and communicate this to your employees.

• Review your contracts

  • If you have long term contracts in place, review them for termination and break clauses.

  • If you believe you will struggle to meet your contractual obligations, engage in discussions immediately to mitigate the consequences.

• Sell dormant and economically unviable assets

  • Don’t hold onto assets that are not generating income or do not add any value to your business.

  • Sell assets as soon as possible to recover cash that can be used to sustain your business in such times of need.

• Review your insurance coverage

  • Does your business insurance cover you for loss of profits. Refer to your insurance policies so you are clear on what you can and can’t claim.

  • Reduce your coverage is possible to reduce your premiums.

• Communicate with all key stakeholders

  • If coronavirus is affecting or threatens to affect the goods or services you deliver to customers, it is important to let them know as soon as possible about potential delays and manage their expectations.

  • Renegotiate payment terms or enter into payment plans.

• Be aware of fraud

  • When your attention is elsewhere, it is easy to become susceptible to fraudulent activity. Remind and educate your staff about fraudulent activity and scams.

• Prepare a strategic impact assessment plan

  • Consider the following broad areas of concern, the impact, stakeholders, action plan and accountability:

    • People and community: staff, customers, suppliers

    • Reputational damage: internal, product, staff

    • Financial loss: customers, insurance, finance

    • Legal and compliance: compliance, litigation, mandatory reporting

    • Operations and strategy: operations, customers, supply chain, viability