Small Business Resilience

These past 7 days have seen Australia go from relative normality in everyday life to a much more restrictive existence. 

This email is not intended to induce any panic or anxiety in small business owners (there is enough of that around with commercial media already).  It is merely a pre-emptive to get you to start thinking more seriously about the worst-case scenario and the steps you can start to put in place now to prepare for it.

We all obviously hope that things will not get any more restrictive than they currently are but we need to plan for the worst and hope in hind-sight that we all over-reacted.  Based on what we are seeing happen overseas though, I think it is reasonable to assume that business and everyday life will get more restrictive in the coming weeks.

Below is a list of areas to start considering in your business and things you need to be thinking about as small business owners:

1. Plan for the worst – this could be a 2-4 week shutdown (maybe longer) of the local economy where only essential services (such as supermarkets, chemists, medical centres etc) will remain open. Draw up a contingency plan now.  You will need to consider staff, perishable stock, cashflow, debt repayments, etc.
2. Cashflow is king – for the next 6 months at least, you need to monitor your cashflow very carefully.  Postpone any large capital outlays you may have been planning, restrict any non-essential business expenses and tighten personal budgets.  Further ideas below.
3. Income – start to think outside of the box for your industry.  Increased takeaway and delivery options for café’s and restaurants, more property virtual tours for real estate agents, opening an on-line store, a once-off ‘coronavirus’ discount or special.  What can you do to ensure your business continues to operate if “social distancing” starts to impact your turnover.
4. Income part 2 – do as much work as you possibly can now – this may mean working overtime or on weekends for a short period – the idea is to build up some excess cash now in case things get any worse and you can’t work for a period of time.  Hopefully this doesn’t occur and you can use this excess cash for a well deserved holiday!
5. Advertising – now is the time to boost your online presence as much as possible.  With more and more people having to work from home and spending time on facebook, twitter etc, there will be an opportunity for those businesses who can attract people to their online store or website and hopefully convert them into customers.
6. Stock – obviously there is a shortage of products already in the local community for some items, but where possible start to run your stock down to lower levels, particular on items that have a short shelf life.  Monitor your stock levels closely and if your holding slow moving stock now might be a time to have a sale to try and convert it into cash.
7. Rent – consider asking your landlord for a discount or at least a partial deferral of rent for 3-6 months just to give yourself some breathing room and retain some extra cash in the business for the short-term.  Most landlords don’t want their tenants to go bust, especially in Townsville, so you may find people receptive to this idea.
8. Staff – obviously you don’t want to let go of staff as this will only make the current situation worse, but as a small business owner you need to consider your family first and foremost.  If business starts to fall away, look at reducing your casual hours (but try and spread this across all your casual employees).  As business owners you may need to start working longer hours yourself (as if you weren’t working enough already!).  If there is a shut-down look at offering staff the option of unpaid leave vs annual leave or maybe spreading their annual leave of 2 weeks over 4 weeks with a combination of annual leave & unpaid leave.  Refer to Fair Work Australia for more information.
9. Banks – if things start to get tight with your cashflow, talk to your banks if you have upcoming loan or equipment finance repayments and find out what your options are if you wish to defer or reduce these payments for 3-6 months.  As this situation drags on it is likely that they will be more receptive to assisting you if they can.
10. Debtors – unfortunately if things get tougher, your debtors are going to delay in paying you.  Its important that if you have debtors that overdue that you contact them early and put in place a payment plan.  Many of these debtors will be in the same situation as you.
11. Suppliers – the same applies for businesses you owe money to.  Contact them early if you think you are going to have trouble paying them by the due date and enter into a payment plan with them – most will appreciate the contact and will do what they can to help.
12. ATO – the government has already announced some incentives for small business with more to come.  For employers there will be a credit for 50% of your PAYG Withholding obligation in the March and June quarter for up to a maximum of $25,000.  In these next few Business Activity Statements you should also look at amending your Income Tax Instalments to nil and entering into a payment arrangement with the ATO.  You will still need to pay your tax and BAS at some future time but again it’s just about allowing you to keep cash in the business until things return to some semblance of normality.
13. SUPPORT OTHER LOCAL BUSINESSES WHENEVER YOU CAN!

 
These are just a few ideas for small business owners to start considering.  As I said above, we all hope and pray that things don’t get much worse than they currently are, but its prudent to plan for it just in case.

If anybody comes across useful articles from other accountants or businesses or further government resources for small business, please send them through to me so that I can share them around with everyone.  I think its important that we share information and resources as much as possible with our networks so that we can all make informed decisions during this time.