The new decade hasn’t got off to the best start. Terrible devastation and losses of life have become an unfortunate reality as a result of the large scale bushfires that ravaged significant portions of the Australian landscape. Just as the recovery efforts reached momentum, the global spread of COVID-19 – ‘Coronavirus’, has reared its ugly head across the globe, including Australia.
Neither of these severe developments has directly impacted the vast majority of the population. However, almost everyone has been affected in some way or another. These events have both threatened to derail the local and global economy, with the RBA expecting that the “coronavirus impacts on education and tourism alone have already slashed Australia’s economic growth for the year by as much as half a percentage point.” Globally, central banks have begun cutting interest rates and planning further fiscal stimulus measures.
While it’s difficult to say how prolonged this scenario will be, it is clear that these issues are starting to impact local businesses. Education, travel and tourism-related industries have been most affected, with flow-on effects sure to be felt. Small businesses are particularly vulnerable to external shocks due to their reliance on a lower number of customers and suppliers, as well as typically reduced access to working capital or external funding to help trade their way through tough times. In light of this, here are some of my tips for small businesses to help prepare and bounce back from this challenging period.
Bushfires. Don’t Let Your Business Burn.
Over the last few months, some of the most devastating bushfires ever seen in Australia have burnt through over 26 million acres, killing over 33 people and destroying more than 3,000 homes. While recently contained, helped by significant rainfall, the effects of the blaze have not subsided.
“Proactively communicate with your stakeholders if payment plans with suppliers or other creditors may be impacted”
The Australian Government has set up a dedicated Bushfire Assistance web page for businesses. The page covers topics such as grants, finances, business obligations, mental health and recovery advice to help bushfire affected entities get back to business. If you’re located in a bushfire affected community, urgent financial assistance has been made available, in addition to state-based responses. Importantly, small businesses may be eligible for recovery grants up to $50,000 and concessional loans for up to $500,000. If you think you may be entitled to either of these, it’s best to get the appropriate advice and consider applying immediately, as any assessment takes substantial time.
This week it has become clear that the process for getting these grants to eligible businesses is not up to the standard it should be, with only five out of one-hundred and four concessional loan grants being approved to date. Andrew Colvin, head of the National Bushfire Recovery Agency, believes this is due to proper care being taken around distributing public money, as well as the division of responsibility being split between the states and the Federal Government. Nonetheless, Scott Morrison has recognised the need to expedite the process and has promised a “repackaging of that small business program for bushfire assistance,” relaunching a more effective assistance policy.
Regardless of whether this is something your business can take advantage of, it’s an ample reminder to consider the impact a natural disaster could have on your cash flow and operations. Consider reviewing your business continuity insurance and make sure you’re covered if something like this happened to your business. In the event of an emergency, it’s imperative that you proactively manage your overheads, quickly cutting what you’re able, and communicating with your stakeholders if payment plans with suppliers or other creditors may be impacted.
Coronavirus. Don’t Panic. Take Sensible Steps To Sure Up Your Cash Flow.
You have no doubt heard about the global spread of Coronavirus, while the level of concern is up for speculation, it is having a significant influence on the population’s sentiment regarding travel, crowded areas and financial decisions. Unfortunately, this has already impacted many business’ supply chains (particularly those who procure substantial imports from China) and will continue to impact consumer spending.
“Ensure all financial reporting is kept up to date. Regularly assess your cash flow, profitability and stock on hand in a timely manner”
While the spread is ongoing, we’re just starting to see the effects globally, so it makes sense to prepare your small business in case things get worse. Here are some practical tips to consider implementing today:
- Make an effort to understand your supply chain and any risks attached to it. A lot of businesses may not realise how much they rely on China. If you are feeling the effect already, or anticipate a risk – seek alternative suppliers. Having a diverse range of suppliers on good terms may be beneficial for your operations moving forward, in addition to dealing with a short term threat.
- Start cross-training your staff to fill potential gaps. If key staff members are not able to work due to illness or other implications from the spread of the virus, it makes sense to have back-up measures in place. Consider how everyone in your organisation can play a role.
- Stay on top of your financials. Ensure all financial reporting is kept up to date. This action allows you to regularly assess your cash flow, profitability and stock on hand in a timely manner. Also, it’s essential to be aware of your debtor and creditor balances. Your customers may start feeling the strain and not be able to pay you as promptly. Keep this in mind and manage these relationships as best you can.
In response to the economic concerns raised by the spread of the virus, Josh Frydenberg (the Australian Treasurer) has promised to deliver a multibillion-dollar stimulus package. The package will primarily focus on infrastructure and an investment-allowance for business. There are also expectations for another rate cut in April, further reducing the cost of financing.
Need Assistance or Advice? Get In Touch
In uncertain times it pays to sure up your cash flow. An experienced finance broker is your best point of call to discuss your specific situation and financing options. Please give me a call anytime to find out more or to have an obligation-free chat about your businesses’ funding situation.