- May 20, 2020
- Posted by: saenicsa
- Category: Business plans
Given the sudden onset of COVID-19 and its devasting effects it has had on economies the world over, herein we have provided a few tips to keep in mind and consider on how to make the best of this crisis. We hope that this information is beneficial to you.
Cash flow is the lifeblood of your business.
Every business survives and thrives on cash. The more cash that is available, the better. When confronting a crisis, it is important to know what your business’ cash flow is.
So, with the current global health crisis, what are you spending your revenues on? What are your cash needs for today, this week and the rest of the month? What do you need to get paid and by when do you need to pay it to allocate that cash and pay employees, suppliers and providers on time?
These are just some of the questions that you need to have the answer to.
Also, with this crisis everyone is being affected one way or another, therefore discuss with your providers and structure more favorable payment terms so that both can survive this crisis.
Another important figure that you must sit down and calculate very carefully is revenues and what these will look like for the immediate future. Many businesses have seen their revenues literally disappear from one day to the next. If this has happened to you, then it is time to rethink and re-innovate. Even in a pandemic there are needs that businesses can fill, the difficulty that we are all having is discovering and filling those needs.
Now, if your business is fortunate enough to still have client revenues due then make sure that those revenues are billed at the earliest possible time. Liquidity in this time of crisis is very unpredictable. Therefore, bill today so that by tomorrow, the next day or at the end of this month payment gets done.
Stay on the pulse of government assistance.
Throughout the world governments have had to step in and offer economic stimulus or payroll loan packages to keep the doors open at many businesses.
In Central America this has been true, for example El Salvador.
At this time, the government of Nicaragua has not announced any economic stimulus or loan programs to sustain the business community.
Nonetheless, given the current situation it would be advisable to stay informed of any possible programs since as seen in other countries the resources for these can quickly become exhausted.
SAENICSA will be staying on top of any programs that may be announced by the government. We invite you to subscribe to our newsletter so that you can receive immediate notification of such programs should they be announced.
Negotiate any tax debts.
No one likes taxes, especially when you owe tax – but what is worst is owing taxes and not having the money to pay.
Therefore, to avoid problems with the national or municipal tax authorities, if you owe taxes, renegotiate the tax debt and make payment arrangements that are more favorable to the cash flow of your business.
You most likely will not be able to differ a tax payment over a considerable period, but arrangements for the payment of a tax debt over the period of 2 or 3 months is feasible.
Reconsider allocation of disposable capital.
Profits from previous years or shareholder capital that has been infused into the business at one time may have been destined for capital improvements or expanding the business.
Unfortunately, as long as the straggles of COVID-19 will continue to be felt any available capital should be used in either sustaining the business or repurposing the current business model to be more adaptable to an economic downturn.
Revise current and future business plan.
What made your business successful? Surely when you started out initially a point by point plan was thoughtfully put down onto paper and put into practice. Then again maybe your business plan was not so methodic and instead decisions were made more emotionally than critically.
Either way, it really does not matter how you got to where you are today because anything and everything that you did before will not work anymore if you want to survive.
What needs to be done? Well start repurposing your business plan immediately for the short term, we are referring to the next 3 months. It is important that you put all your focus and detail into the next 3 months.
Then, after the initial 3 months evaluate what the results were. Try to understand where you were right and most importantly where you were wrong. Ask yourself, why was I wrong? What happened that I did not anticipate?
Prepare your plan again, but now for a period of 6 months. After 6 months repeat the evaluation as you did after the first 3 months. Continue this process until you can work out a plan for the next 1-2 years.
Consider what mitigation strategies to implement immediate.
No one really knew what to expect with COVID-19. In fact, we are still trying to understand what it is and how to contain it.
The onset of the virus was fast and with so many unknowns, many have not been able to prepare adequate mitigation strategies.
So, to avoid interruptions in your cash flow it is highly recommendable to take inventory of what mitigation strategies are available to you, such as:
- Reducing working hours.
- Reducing personnel.
- Outsourcing what currently is being done in-house.
- Sending employees on vacation.
- Suspending labor contracts.
Review insurance policies.
If you own property or movable property through a loan or a mortgage, we recommend that you review any insurance policies for these items.
The same goes for any coverage for civil liability, life or health insurance policies.
This is mainly because the coverage of said policies may either be insufficient or nonexistent considering the risks inherent to the virus and the declaration the current situation as a pandemic.
Legal review on contractual obligations.
Any contractual agreements that you may have with either clients or providers, due to COVID-19 may be adversely affected.
Therefore, it is recommendable to review as of today what those contractual obligations are and specifically what does each contract specify regarding non-performance or “force majeure”.
If not, then even though COVID-19 is a global pandemic, you may not be exempt from fulfilling certain contractual obligations.
We hope that this article has been beneficial to you. If you would like assistance with how you’re business may best survive this crisis or with other accounting and tax needs, contact us HERE.