COVID-19 is here and it is digging in. The necessary response brings a significant emotional and financial impact on communities and businesses everywhere. This will continue for some time yet, so let’s look into what actions your business can take to brighten the light at the end of the tunnel.
Looking after your employees should be your priority, they are key to your business and are vital to your ability to ramp things up once the storm clouds pass. Most businesses are likely to be negatively impacted by the tough decisions made by our Government and, unfortunately, not all have the ability to work from home.
If you are eligible, make sure you apply for the wage subsidy and leave assistance packages that are available. These are in place to help businesses continue to employ their team and ensure that we are as strong as possible on the other side. It’s $7,030 for each full time employee, and $4,200 for part-time employees.
Regardless of the extent of the change to your business, employers and employees must discuss in good faith the implications of COVID-19 on their working arrangements.
Start by drawing up a plan to support employees, keeping in mind that everyone will have different needs, feelings and priorities. Ensure that you have kept up to date with Ministry of Health and employment rules and guidelines and that you have covered off all risks and contingencies – but stick to your values and be authentic.
If you and your team are unable to work from home, consider whether you can still pay them their normal rate or whether it would be better to pay 80% of the standard rate. The rules around the subsidy state that it must be used to pay wages.
You may need to have new policies in place and a plan to allow your staff to be able to work from home. Good communication and planning is the key. As part of designing flexibility into our workplace at Connected Accountants we have found that running an online meeting at the beginning and end of each day has been very useful in terms of job management, accountability and in broadcasting key messages.
If you are not already using cloud based technology, then now could be a time to test it out – these tools are designed to support collaboration and remote work.
Some useful resources can be found on the Employment New Zealand Website which have specific advice around employer obligations and COVID-19 scenarios. Also, Humankind have prepared a really useful employer guide as a tool to assis twith your planning.
Stay in touch with your customers, regularly. Think of these events as a disruption. The challenge now is to innovate and find different ways to engage with your customer. We are all in this together and will all be feeling the pinch, so remember to be empathetic, to help if you can, and to consider the world from your customers point of view. The aim should be to support and to build long term relationships rather than drive for short term gains at the cost of your future sustainability.
Channels of communication – look at what areas make the most sense based on the profile of your customers.
Innovation tactic cards – This is a tool developed by Doblin to map out how business models are currently set up and to identify areas of innovation and opportunity.
Discount and pricing analysis – Understand at what prices we can sell at and still be profitable. Getting paid will take longer than usual, so consider offering a discounted pay up front service or asking for deposits before sending your goods.
Be online – Our businesses are closed, but many products and services can be sold or delivered online.
The key focus at the moment is to understand how your business is affected by the worldwide crisis and from there how it will affect your cash flow.
Here are some tips:
Make a list of all of your customers and identify where sales can be made. Are you able to map out a stream of revenue? Remember, your customer may be in the same boat so consider if you can position your product or service in a way that will help them through this time. An example here may be a restaurant offering online cooking lessons to regular customers.
While you are looking at customers, make sure you chase in any outstanding payments. Ideally, you would collect this cash now but if that isn’t possible you may be able to establish a payment plan.
If you carry stock or manufacture your product, then work out how long that stock will last you based on projected revenue. With the disruption in China through the start of the year, many have identified risks in their supply chain. As the World slows down, make sure you identify contingencies and factor in delays.
Now is the time to work through your expenses, supplier by supplier. A simple way to improve cash flow is to eliminate spending on items that are not essential, delay spending where you can, and renegotiate prices and terms on the remaining items.
Take the time to review your lease agreement. We had a chat with Keegan Toft of PwC Legal, and he confirmed that, if you’re on the Auckland District Law Society (ADLS) sixth edition 2012(5), there’s already provision for rent and outgoings to be reduced in the event of an emergency when you can’t access the office. Failing that, ask your landlord if they are prepared to do a deal.
You should create a budget and a cash forecast for the next year so that you can identify the points in time where you need to make changes. This document is great for planning and also useful for banks, so that they can understand your finance requirements. If you are asking for assistance from your bank, make sure your forecasts show how your business will recover over the next 6-9 months. Whilst the banks are keen to help, they are more likely to favour those who have planned well and can show how their business will thrive later.
If you are eligible for wage subsidies through the Government financial assistance package, then make sure you apply. If necessary, tougher decisions may need to be made around employees and if that is the case make sure you follow the proper process. You can also consider continued employment at a reduced salary cost and output – if this allows you to hold on to key people then you’ll have a better chance of scaling up later.
Your business is part of a community and will rely on that community for many years to come. More than that, we know that businesses with purposes are more likely to succeed – now is the time to demonstrate that purpose.
A great example that hit the news recently was Scottish brewer BrewDog shifting their operations from making beer to making hand sanitiser. The hand sanitiser that they made was given away for free to those that needed it – a great initiative that helped their community cope with a crisis.
An organisation we are involved with is the NZ Art Show. While the event has been cancelled for 2020, the team are working hard at getting an online gallery set up so the artists still have a venue to show and sell their work – watch this space!
How can Connected Accountants Help
We’re all still at work, even though the view out the window is now different. Please feel free to call us about any of your financial issues that are bothering you - a problem shared is a problem halved.
Some of the ways that we can help you through this emergency are:
Applications for Subsidies – We’re helping process subsidy applications for clients free of charge and see that it’s only taking a day or so for the cash to hit the bank account.
Budget & Cashflow modelling
We can help you put together a budget & cashflow model that enables you to test out different scenarios. Banks will be doing their best to fund businesses through this crisis, but they still want to know that they’ll get their money back. A robust budget will make it easier for the bank to assess your application.
We can enable you to develop your short term actions to ensure you are able to manage through these turbulent times and are well positioned to take advantage of opportunites that arise once the economy starts to recover.
Remote Working Solutions
The planning work we did around implementing our four-day work week and how to manage to remain accessible to clients has stood us in good stead. We’re using a number of software solutions to help us do our work remotely. If you are able to continue working remotely but want to improve the processes, give us a call. For all clients on an annual service package it’s already part and parcel of your unlimited queries.
We’re in the same boat as you and are going through the same experience. We have the benefit of talking to a number of other business owners and so we’re getting a good idea of some of the solutions people are using. If you need a sounding board to test out your ideas, then feel free to pick up the phone.
Liaison with IRD
Legislation will be passed shortly to give IRD the discretion to remit interest on late tax payments due after 14 February as a result of Covid-19 impacts. If you’re in that boat, then let us know so we can start the communications with IRD.
The first half of 2020 is about innovation for survival. Now is the time to shake up your business model and think differently. Don't be afraid to throw ideas our way over an e-coffee. Until then, stay safe and stay healthy.