Hayes Knight chairman Greg Hayes urged businesses to make a rigorous and detailed assessment of their financial position in the COVID crisis. In doing this they should understand where they fit in their customer supply chains. “It is not enough to know the position of your business sector you need to understand how your customers are likely to be affected by COVID.”
''It should cover the next 12 months and that planning should be completed by the end of this July. Ideally the assessment should be on a monthly basis but at the very least it needs to be an accurate picture of where you will be financially each quarter,'' said Mr Hayes.
With the now announced changes in JobKeeper, businesses must have a detailed understanding of their financial position. As the pandemic continues to impact the economy, businesses should analyse what could happen to their revenue and profitability.
''If sales for your business are say $200,000 a month or $1 million a month, consider what will happen if those sales fell by 10 per cent or 20 per cent,'' said Mr Hayes.
Costs need to be scrutinised as well. Wages, suppliers, insurances and other operating costs can be factored into the 12-month operating and cash flow plan.
What that 12-month assessment can reveal is when a business is likely to slip below its breakeven point in this COVID environment.
''Some businesses may decide from their review that that they need to adjust their cost structure.'' For others, the 12-month model may point to extra capital being required for the business, either from the owners or lenders.
Mr Hayes said banks should be told about funding needs as soon as possible.
''If you think you will need the money next February or March, go and see the bank now. You don't have to draw down the facility until you actually require the funds.
''But what disappoints lenders is when a business says they need the money for tomorrow's payroll.''
“The COVID pandemic means many industries and businesses will be operating in a changed world, where there is a new normal. That makes a 12-month plan essential,” said Mr Hayes.
If you need assistance in completing your business review please talk to us. Or if you have completed the assessment, it might be worth us checking it over to see if anything has been missed.
