COVID-19 has had a massive impact on businesses and the Australian economy. There are important financial lessons that businesses can learn from COVID-19 in order to recover as quickly as possible and to help ensure ongoing success.
1. Contingency planning is crucial
There is an old saying that ‘those who fail to plan, plan to fail’. COVID-19 has highlighted the need to plan for scenarios where your business will have restrictions on how it can operate or whether it can even operate at all. This is known as contingency planning.
It is crucial to have effective short, medium and long-term contingency plans in place to minimise the impact of business disruptions or changed market conditions as much as possible.
2. The importance of having alternative revenue streams and business models
Businesses that were able to create or switch their focus to alternative revenue streams or business models generally fared much better than those who couldn’t during the COVID-19 restrictions.
For example, businesses that could generate online revenue and/or implement ‘outside the box’ business models to enable them to continue operating. Resilient businesses tend to be adaptable and agile enough to cope with changed circumstances and market conditions.
If your business was not agile enough to adapt quickly to the COVID-19 environment, you should consider ways that you can make your business operations more flexible.
3. The need to have a financial buffer
Businesses that had a financial buffer (such as enough cash to survive for several months on no or restricted trading) have found it easier to survive during the COVID-19 restrictions than those businesses that did not. As another old saying goes, ‘it’s important to put money aside for a rainy day’.
It is also important to have a healthy cash flow that isn’t dependent on just one source. Ideally, your business should have multiple online and offline revenue sources. If one or more sources are disrupted, others may be able to compensate (at least to some extent).
4. The potential cost savings of having staff work remotely
Many businesses were forced to come up with ways to enable their staff to work productively from home for the first time. Although this is not a realistic option for some businesses and some staff, there can be business cost savings if systems and resources can be implemented to enable remote working to be done effectively.
For example, a business may not need to rent such large office premises if its staff can continue to work productively from home after COVID-19.
5. The need to adapt and implement technology
Businesses that were able to efficiently use technology and labour-saving automation generally managed better during the COVID-19 lockdown than those that did not. For example, a business that already had existing (or were able to implement):
- cloud infrastructure.
- online ecommerce sales and customer delivery systems.
- secure digital operating systems to enable remote working.
If you have a small business and you need to implement digital solutions, the Victorian government is offering a $1,200 rebate for you to implement new digital products. The rebate is available until March 31 for eligible businesses or until the $20 million funding for the program runs out. You can register for the program here.
The bottom line
Be proactive, not reactive. Do not wait to make a transformation, make the transformation now. It is important to continually develop and be responsive. If you have infrastructures in place, it will enable you to react quickly to deal with any sudden challenges or changes.
Make sure you review your business operations at regular intervals or whenever market circumstances change significantly like they have with COVID-19.
How we can help
Our experienced team of business accountants at Wilson Pateras in Richmond can provide your business with business advisory, tax planning and bookkeeping advice to help your business recover from COVID-19 and to emerge even stronger.
Contact us today for a complimentary, obligation-free consultation to find out how we can help your business!