Initial Cashflows
Can a business stay open and for how long, may be a key question facing a business owner? If the answer is yes, then immediate action and tough decisions may be required. These actions and decisions need to be based on analysing the businesses operating strategies and financial well-being.
A best case scenario might see a business impacted for 12 weeks. A business owner should prepare a 3 month cashflow to deal with immediate issues under a worst case scenario and consider what immediate measures are open to you to align costs with activity levels. This may extend to and include:
- Can I access a temporary working capital facility from my bankers and what do I need to do to arrange this?
- How susceptible is the debtor book to loss through bad debts and will my customers be able to remain open during this period?
- Can I avail of any of the recently announced Covid-19 Government supports?
- What stakeholders could be able to assist during the crisis, e.g. deferral arrangements from the Revenue Commissioners, rent holidays from the landlord, extended credit from suppliers?
Once a 3 month cashflow has been developed and supports maintaining the business in some shape, then progress to a 6 month cashflow to see how the business might look post the worst aspects of the pandemic. It is reasonable to assume that even if there is a recovery after say 2-3 months that there will be further negative business impact for a further 3 months at least. A business owner may need to make tough decisions now to survive the worst and benefit from the recovery.
Communication
It is essential that all communications are clear, concise, timely, accurate and don’t serve to create further panic around the crisis.
Employers should keep employees regularly informed of the latest developments and official advice from the Government and should have an open-door policy to address any concerns or questions from employees regarding the current situation.
Staff are the most valuable asset in most businesses. Business owners will be keen to ensure they can hold onto their teams until the inevitable recovery arrives in a few months. However, in some cases, it will not be financially feasible. Proactive and timely communication is critical.
Supply Chain
Global supply chains will be under strain from COVID-19. Business owners need to consider the following items in assessing supply issues:
- Orders may be delayed or partially filled, resulting in potential penalties with customers.
- Outsourced parts of an operation may be disrupted.
- Port/Airport authority issues/border closings may be considerations in the movement of goods and materials.
- Certain products may not be available or suppliers may be closed during the crisis.