Stuart Craig of TheSolvers.com.au believes that having the right conversations with the right people is a great way to help protect your business when a downturn strikes.
“The most important thing you can do is to plan the conversations you need to have with your suppliers, creditors, debtors and employees. You can then work out the message that each group needs to hear – in precise dollar and timing terms – which are clear and understandable.”
“By having conversations sooner rather than later, you have the best possible chance of finding support, agreeing on new terms of business or managing your debts and cash flow. But it’s important to have a cash flow plan in place and to understand your business position before you start.”
In Stuart’s opinion, the following audiences and messages are those that any business owner should be talking through with their advisors before opening a dialogue.
Business owners should be talking to every one of their clients, confirming their ability to continue to service them and seek their commitment to payment of every invoice on time. Perhaps even seek early payment at a discount as a one-off. This is the time to review client databases and look to develop marketing to attract new business from old business and broaden the current client base.
Organisations should be talking to their suppliers about their ongoing supply and the amounts owing. Negotiation of payment of invoices for a more extended period could be possible and alternative channels of supply should be investigated as a contingency.
Businesses with equipment finance in place should be talking to the financiers about a moratorium on payments (or interest only payments) for a short term of say three months. Finance companies fear having to liquidate assets under contract as the returns are often at a loss. Showing faith to customers can pay big dividends to them when the client comes back to them in the future.
Depending on the size of a business’s workforce, a high-level conversation about plans to be put in place with the team would be ideal. Directors will be relying on the team to deliver through some tight times. In small business, the team sees and feels when things are going wrong, and they may become fearful for their jobs, possibly leading to their decision to jump ship.
The tax office is open to discussing proposals for repayment of tax debt and has recently provided extended periods for lodgements due to the recent fires in certain regions and would likely be sympathetic to requests. The tax office will require a business to produce financial statements and have an understanding of what it can afford to pay if instalment payments are to be agreed.
Businesses can approach their bank about their financial situation at some point, particularly if they consider an extension of lending. Like us all, banks like to know what is happening and with up-to-date financial statements, a cash flow forecast and an operational plan, that conversation is likely to easier than if you do not have all the information at hand.
“You’ll need to think ahead because each conversation will be different, and some more successful than others. But once you’ve made the calls you’ll have a much more accurate cash flow forecast to help you stay out of trouble.”
“In the short term a business health check may be advisable. In the longer term, new clients, different supply chains and new sources of working capital from, say an invoice finance facility, might turn disruption into opportunity,” says Stuart.
If you need advice to help plan your next move and protect your business, we have experts in law, accounting, marketing, finance, planning and growth who are ready to work with you. For support, every step of the way, contact TheSolvers.com.au and start taking control of your destiny and your plan to survive and prosper.