Is your small business coming or going since lockdown?

Right now, it is clear that small businesses are rubbing their hands in anticipation of a speedy recovery. Try to contact many of them and they are rushed off their feet.

How long before, in many cases, that sense of anticipation vanishes, to be replaced by a sense of new worry about whether or not you are have a good hold on what is going on and how you are being impacted.

Most people will say, ‘I’m not worried, just so long as I get some cash flow – bring it on!’

That may be fine for many, but I suspect that a nasty shock is awaiting some. After previous economic downturns, it has always been noted that many small businesses fail in the early stages of the recovery. And who’s to say that it won’t be the same after this mighty shutdown?

The reasons are pretty straightforward. Many businesses have cut back on stocks, staff, other costs, so that when the upturn comes, they are caught short.

What should you do?

Lots of wise words are being written about this, so how about a simple checklist, in no particular order.

  • How is your cash position? Can you withstand a sudden cash demand as you bring in new supplies, which need to be paid for now?
  • Can you negotiate extended payment dates on those supplies?
  • What is the average time it takes for customers to pay for the products/services they have bought from you?
  • Can you negotiate an earlier repayment schedule, the easier to satisfy their orders in a timely manner?
  • Buyers are likely to demand delivery ‘ASAP’ because they are in the same position as you probably are – avalanched with demand, and consequently cash-strapped? Maybe you can negotiated an extended delivery schedule? In other words, find out what customers actually mean when they say they want something urgently. How urgent is ‘Urgent’?

Don’t take on more than you can handle….

Small businesses do not win any prizes for over-promising and under-delivering. In the worst scenario, you could end up ordering in goods and services, which you can either not pay for in one hit, or which are in short supply anyway. So – one way or another – you will risk letting down your best customers. Not a good idea!

And, on top of that, the pressures that have built up on your company during COVID lockdowns will simply crack under the strain of an over-rapid, unplanned recovery.

In past recessions, and this has to be the worst for many decades, the number of businesses that collapse just at the point of recovery is at least as great as any that do so during the Big Squeeze caused by zero business coming in. So rather than just go hell for leather, charging off and chasing the fastest possible return to normal, this is the time to get advice from the professionals. Such as:

Talking to your bank

If you present them with a clear business case, which highlights where you might get a squeeze on cash flow, they will be more likely to consider what support they could offer. Of course, much would depend on your past cash management record as they see it on their screens, but they are likely to take note of your diligence in preparing your case and offering a perspective, which they can share in.

Talking to your accountant

Your business case to the bank will doubtless be strengthened by support from your accountant in demonstrating that you have negotiated prudently with suppliers and buyers to secure the best possible payment and settlement terms.

They can help you demonstrate to the bank that you have improved your prospects in terms of credit with your suppliers and earlier payments form your customers. If banks can perceive that you have done the hard yards in securing that additional support from elsewhere, they are likely to be a bit more supportive in helping you through your Recovery Plan.

Always remember…

It is on everyone’s interests to get this right, and a small amount of thoughtful planning on your part is likely to go a long way in helping you win big.

Coming or going?

You will gain immeasurably by not rushing into an unplanned recovery process. It does not take long to get it right. It takes no time at all to get it wrong!

Create your own ‘new normal’ – Start now!

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