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Firstly, acting now to slow down the spread of Covid-19 is the responsibility of every business. Protecting your community and your staff is uppermost in everyone’s mind. However, the economic impact is being felt by businesses across the country. Here are some steps which leadership teams should be considering right now in the knowledge that conserving cash in the short-term is a critical priority.
1. Speak to your bank now. Not enough businesses are communicating with their bank. Inform them of your situation and how you see this crisis playing out for your business in the short term. Put them on notice that you may need a loan holiday, you may need increased overdraft facilities or that you may need increased invoice discounting.
2. Examine State supports which may help you. Unsecured SBCI loans of up to €500,000 are available. Enterprise Ireland have a range of supports including a Rescue and Restructuring Scheme for vulnerable but viable firms that need to restructure or transform their business. See more here https://www.ifac.ie/news/covid-19-supports/.
3. Get in touch with Revenue. Keep your liabilities to Revenue under review and remember if you meet the criteria you will be able to enter into a phased payment arrangement in due course. At this moment, interest on late VAT payments is suspended for both January/February VAT and February and March PAYE liabilities.
4. Increase cash inflow where possible. Follow up on all debtors as a matter of priority. Make sure your invoice is top of their list.
5. Use as many ways as possible to reduce spend:
a. Consider pausing any capital investment.
b. Cut all discretionary spending now.
c. Ban travel even when opportunity to travel re-emerges- use video conferencing tools as an alternative.
d. Where possible lease equipment don’t buy.
e. Renegotiate payment terms with your suppliers.
f. Re-tender where possible.
g. Look for rent reduction.
h. Get your staff to think of more ways to save the business cash.
6. Reduce inventory – this will free up cash for the business.
7. Staffing decisions are the most difficult decisions for any business owner or manager. In the scenario where the business is under acute stress then there are some options which must be considered. Acting with integrity and fairness at this exceptionally difficult time is vital.
a. Reduce hours not salary. For example, 2 or 3 day weeks are a real option for a period of time.
b. If salary cuts are necessary senior staff should cut their salaries first.
c. If you have to reduce staff numbers try and do it once and not have the constant threat of staff redundancies. Your team will struggle with multiple restructures.
d. It is vital that you inform your team of the various Department of Social Welfare supports that are available to your employees.
8. Mind your best customers – add more value, don’t increase your cost to them.
9. While reducing marketing spend in the very short term will make sense for most businesses. Once the initial crisis passes your business will need to invest in marketing to start sales moving again. Ultimately sales will drive the business and without sales everything comes to a halt.
10. Create a new budget. The budget you did towards the end of your last financial year is no longer fit for purpose. A revised budget and cashflow with a new sales forecast is vital to help you manage through this period. Importantly, examine how much of the new forecast belongs to existing clients and how much of it relies on new client acquisition. Assume you will lose a significant amount of this forecasted new business. How does that impact your staffing decisions?
This is also a critical time for leaders to show real communication skills. Let your team know, in as far as possible, the current state of the business and the decisions you are taking. Work with your team to come up with solutions where possible. While easy to talk about positivity it is vital for leadership to remain as positive as possible.
Sadly, it’s not so long ago that we were in a similarly challenging business environment. The financial crisis of 2009 is still fresh in many business leaders’ minds. Taking clear and decisive action early to deal with this shock to your business is critical.
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