5 Ways to harness sustainability amid Covid-19

The United States and United Kingdom have seen an unprecedented rise in unemployment with 38 million people filing jobless claims in the US alone. The continued decline in working hours means that 1.6 billion workers (nearly half of the global workforce) stand in immediate danger of having their livelihoods destroyed, according to the International Labour Organization.

In SA, many businesses were already facing financial strain before the pandemic, but the crisis has now laid bare their frailties. While it’s very easy to get sucked into a vortex of confusion and paralysis during these unprecedented times, businesses that don’t start moving forward with adjusted business plans will invariably topple. The questions is how do we plan ahead when so much remains uncertain and beyond our control?

Although we can’t tell what the future holds, we can share some universal approaches used to help structure the chaos. From listed entities to family-run enterprises, there are so many basic commonalities in business, complexity does not attach to the size of business. There may not be a silver bullet solution to tackling the challenges that Covid-19 presents, but there are some key strategies any business owner can consider.

Here are five proactive strategies to sustain your business amid Covid-19.

1. CASH FLOW GAP ANALYSIS

Understand your business from a historical perspective by benchmarking where you were prior to Covid-19. This will require you to analyse your profit and loss, balance sheets and cash flows of the past two years. Take the time to then assess various cost categories within your business and the impact on cash-flow due to lockdown restrictions. Establish what your working capital requirements are and where there is a cash gap. Based on this, consider renegotiating payment terms, interrogate debtors and assess their likelihood of recovery.

2. IDENTIFY YOUR STAKEHOLDERS

Accurately identify and proactively engage with your stakeholders. Generally, your employees, management, shareholders, suppliers and financial institutions make up your core stakeholders. In times of crisis, the natural tendency of many people is to hunker down and lay low but now is the time to foster trust and deepen relationships.

3. RELY ON TRUSTED ADVISORS

Bookkeepers and accountants see a lot of business in context and they can bring a wealth of experience to the table. They also bring with them an independent assessment of your business. Outsource to your advisors. Have your accountant fight with SARS so that you have time to run your business. If you have attorneys, ensure you consult them as early as possible especially if you are facing aggressive creditors. The earlier your advisors are brought in to assist you, the more value they are likely to add value to your business.

Only time will tell when this global pandemic will end, but for now, business owners should be proactive in gearing their companies, regardless of its size or situation, for the months ahead.

4. OPERATIONAL REVIEW

Be ruthless in your operational review. Assess items such as printing, debit orders and stationery bills, the size of rental premises (and rent) and their importance in your business operations. Ensure that there are synergies between different revenue streams and your service offerings and consider cutting streams that are making a loss. Make sure your staff support and understand the business’ current needs and why you have to cut costs.

5. KNOW WHERE YOU STAND

Stand back and get a holistic view of your business. Understand its strengths and weaknesses. Know where you stand in terms of the worst-case scenario and how you plan to move forward with the information you have at your disposal. Review this regularly, especially given the state of uncertainty we are experiencing. Develop an adaptable business continuity plan that can evolve and ensure you communicate this clearly to all stakeholders, particularly employees.

After 11 weeks of lockdown, many South African businesses might be at a point where these five strategies just aren’t enough. If you are at this point, there remain options at your disposal - depending on the circumstances, you could embark on a compromise with your creditors, formal business rescue proceedings or even liquidation. While considering formal steps in the wake of financial distress is stressful, if implemented correctly and at the right time, these options can offer business owners a myriad of possibilities. The key is to engage professional advice and guidance as soon as possible to facilitate the best possible chance of navigating the storm.

Only time will tell when this global pandemic will end, but for now, business owners should be proactive in gearing their companies, regardless of its size or situation, for the months ahead. Covid-19 doesn’t have to bring you or your business to a halt. When it feels like you can’t do anything - that’s exactly when you need to do something!

View the full webinar on Shaping sustainability amid Covid-19 here.

JUSTINE HOPPE

Director of Business Rescue and Restructuring 

justine.hoppe@mazars.co.za