During a crisis like COVID-19, some businesses will fail, some will endure, and others will prosper. The businesses that are willing to reevaluate the way they do business and are open to change are more likely to thrive during a crisis. Change is inevitable, especially during troubling times. It’s necessary to reevaluate where your business is and where it needs to be to remain viable.
Currently, business as usual is not an option for long-term viability. Any business with employees needs to install safety procedures so employees feel both valued and protected.
Consumers are also looking for assurances that your business is protecting them. They need to feel that you are committed to providing your product or service with protections in place to safeguard their health. Consumers during COVID-19 are more cautious and more invested in which businesses they patronize. It’s important to work hard to retain their trust.
While COVID-19 represents a discouraging future for some businesses, it also offers opportunities to others. Here are some ways your business can take on challenges and turn them into opportunities.
Learn to Adapt for a Stronger Future
COVID-19 survival requires businesses to adapt. Keeping to the status quo increases your risk of failure. Take stock of your business and brainstorm ways to be innovative and strategic. Try new ideas, find ways to execute faster and more efficiently.
Your focus should be on protecting employees, understanding the risks to your business, managing supply chain disruption, and managing cash flow reduction caused by the efforts to contain the spread of COVID-19.
The full impact of this pandemic on businesses is still unknown. While your business adapts to new paradigms, be proactive, not reactive.
Put your employees first
If you are not already, you must put your employees first. Their health, safety and well being should be your top priority. One could argue all businesses should have been doing this anyway, but those who do and truly embrace this as a core fundamental will become an employer of choice for talent, retention, and professional development.
Prepared for Emergencies
If your business is unprepared or under-prepared for emergencies, such as a health crisis or natural catastrophe, it’s at high risk of failing. The key to surviving and thriving COVID-19 is to inject your business with flexibility and adaptability so it can weather any disaster and come out on top. This is good advice for other emergencies like recessions, technology crisis, or internal business crises.
It’s possible COVID-19 could be a game-changer for the way businesses conduct themselves in the future. It has already changed the way consumers make purchasing decisions. Those businesses that see potential new strength in pandemic and post-pandemic environments will be the ones who successfully emerge from the current pandemic stronger and more resilient.
Protect Your Cash Flow
The importance of cash flow is paramount in times like this. Companies should immediately develop a treasury plan for cash management as part of their overall business risk and continuity plans. In doing so, it is essential to take a full ecosystem and end-to-end supply chain perspective. The approaches you take to manage cash will have implications for not only your business but also for your customers. Consider the following strategies and practices to protect your cash flow:
Ensure Your Own Financing Remains Viable
Don’t assume the financing options you previously had available to you will continue to be available. Undertake scenario planning to better understand how much cash you’ll need and for how long. Use this opportunity to actively engage with your financing partners to ensure your available lines of credit remain available, and to explore new or additional options should you require them.
Have A Robust Framework for Managing Supply Chain Risk
Supply chain management is a complex challenge, and finance-related problems only add to the risk. Know if any of your customers are in trouble and might be unable to pay for the goods and services you deliver. Ensure your customer’s letters of credit from their prime banks are still viable. Being aware of the financial risks of your key trading partners, customers, and suppliers is a critical consideration in times of crises.
Focus on Cash-to-Cash Conversion Cycle
In the current abnormal business conditions, smart companies are shifting their focus from the income statement to the balance sheet. While supply chain executives tend to focus on inventory, during a crisis it’s important to apply a coordinated approach to the three primary elements of supply chain—payables, receivables, and inventory—to minimize working capital requirements during challenging times.
Revisit Your Variable Costs
Reducing your variable costs is often a quicker way to immediately reduce your cash outflows than focusing on your fixed costs. Of course, there are the typical variable cost-reduction levers, such as imposing travel bans and non-essential meeting restrictions (which might already be in place as a way to manage employee safety), imposing hiring freezes, and placing restrictions on discretionary spend like entertainment and training.
Being flexible, adapting quickly to change, putting your employees first, and protecting your cash flow is essential to surviving and thriving during this health crisis. For help protecting your cash flow, contact Allied Financial to see how we can help you.