Strategies for Australian businesses to survive COVID-19 financial challenges

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This year has seen businesses disrupted worldwide - many forced to temporarily close and many more forced to adapt to the environment with new processes and business models. While the pandemic continues to unfold and the full effect on businesses is yet to be understood, the state of uncertainty makes planning and forecasting difficult for even the most seasoned executives.

The first statistical glimpse into the scale of impact on Australian businesses has been revealed by two telephone surveys conducted by the federal government between 27th March and 24th April 2020.

The first survey revealed that 80% of businesses had been affected by the pandemic, reporting a lower demand for goods and services, cash flow issues, and having to change business practices (especially around hygiene, staff protection and social distancing) and reduce staff.

The second survey focused on sectors where the greatest impact was then being felt: hospitality and social assistance. Fewer problems were being experienced by the construction industry and by professional, technical and scientific services.

Data from the Australian Bureau of Statistics, released in April and June, confirmed that two-thirds of businesses reported reduced revenue or cash flow problems, while one-third had renegotiated leases and 25% had deferred loan repayments. Around 7% had paused trading completely as a result of COVID-19. The worst affected sectors by this stage were education and training, hospitality, media and telecommunications, arts and recreation, and admin and support services.

Yours may be one of this huge range of businesses adversely affected. It’s worth taking a look at the actions and resources that will help you survive.

Budget recast to face the new realities

Budgets made before coronavirus arrived may now be totally unrealistic. They need to be revisited, taking into account all possible impacts, including major hits to revenue and halts in production or operations as a result of supply shortages.

Cash flow forecast – a financial survival guide

Just doing a revised budget, however, is not enough. Businesses who hope to get through the crisis need to be able to predict their incoming and outgoing cash with some certainty, identifying times of peak strain and taking mitigation steps. That involves recognising exactly when every expense payment is due, talking to suppliers about extended terms, to lenders about repayment deferrals, and to customers about debts to you that are overdue. Keep that cash forecast up-to-date, revising it weekly if necessary.

Avoiding the financial crunch by negotiating with creditors

The government has announced temporary debt, bankruptcy and insolvency relief measures for individuals and businesses. But before you get to this critical stage, talk to your creditors. You may find that they will give you more time to pay, or will accept less than full settlement for prompt payment because they have cash flow problems of their own. If you have a debt to the ATO, ask for a payment arrangement.

Government grants to sustain small business

Small business is the lifeblood of the Australian economy, and state governments have recognised this with a series of grant programs specifically designed to help those severely impacted by coronavirus. Businesses may be eligible for a grant to meet operating costs, access digital technology, trade online, upskill staff and diversify. The federal government has compiled a state-by-state list of available grants.

We understand the impact COVID-19 can have on a business and we’re available to discuss the wide range of options available to you. Contact us to find out more.

 

Finance provided by BOQ Equipment Finance Limited ABN 78 008 492 582 (BOQEF). BOQEF is a wholly owned subsidiary of Bank of Queensland Limited ABN 32 009 656 740 (BOQ). BOQ does not guarantee or otherwise support the obligations or performance of BOQEF or the products it offers. This blog post is for general information purposes only and is not intended as financial, taxation or professional advice. It has not been prepared with reference to the financial circumstances of any particular person or business and should not be relied on as such. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article.