Recent developments in Australia – and even New Zealand – have demonstrated that COVID-19 is going to be with us for quite a while yet. The businesses who survive, and come out the other end ready to accelerate, will do so because they were financially sustainable. But just how do you achieve financial sustainability?
Let's take a look.
Cut unnecessary costs
When revenue is flourishing, it’s easy to overlook expenses that don’t earn their keep. But when conditions become more challenging, sustainable businesses remove unnecessary liabilities.
Here are some cost-saving steps you can take:
Challenge suppliers’ proposed price increases.
Research other suppliers to get more competitive pricing.
Minimise freight costs by placing single monthly orders.
Switch to lower-cost ‘own brand’ products.
Transfer printed mail-outs to email.
Switch to digital record storage and eliminate printed paper storage costs.
Put entertainment costs on hold.
Plan travel well ahead for lower fares and accommodation prices.
Use hard-headed cash flow management
Although we’re many months into the crisis, we still don’t know when it will end, nor what the full impact will be on our overall health and the economy. Planning for the future is more difficult than it has ever been, so the only way forward is to prepare your cash flow for multiple outcomes. To make your cash flow as close to bulletproof as it’s currently possible to be, you should aim to:
Mitigate possible supply chain disruption, especially across state and national borders.
Request extended payment terms with suppliers and the ATO
Speed up the process of turning receivables into cash, by offering discounts for early payment or by factoring.
Trim inventory to free up working capital.
Sell unwanted assets, and finance any new assets.
Investigate alternative sales markets and low-cost marketing methods (such as social media).
Increase your selling prices where customers will comply.
Apply for government grants.
Assess your debt and loan situation
Maintain detailed records of amounts owed to suppliers, payroll costs, taxes payable, and any other short-term debt due for payment within the next 12 months.
You may be able to ease your short-term debt situation with a new business loan, by financing new assets instead of purchasing them outright, or by leasing back assets you already own.
Talk to your broker today about achieving financial stability. We’re ready to listen and give you the advice you need.
Original post by Bank of Queensland