Our philosophy: Be kind, be resourceful, be resilient. Let’s all help each other….
Day 8: We hope you’re still doing ok! We’ve passed the 31st March, traditionally the busiest day of our financial year. 31 March 2020 was no exception. Besides the fact that I lost my equilibrium at 5.00pm-ish when I realised how much was still to be done, we managed to maintain our record of 100% tax returns filed! (Last one was filed at 11pm – 31st March 2020). We’re aiming for less pressure on 31st March 2021!
Now that you have applied for the wage subsidies (& most of you have received them – if you haven’t, be patient, we’ve been advised that MSD is still working through a backlog of applications), you need to move on to the next phase – surviving the lockdown, and then surviving a slow recovery period.
WARNING: This is a difficult newsletter, & may contain some messages you don’t want to hear. Please don’t bury your head in the sand.
Maria & I attended a webinar this morning. Bill English was the guest speaker, and he gave his views on what we can expect from the next few weeks, months & years.
The salient points of his observations/reflections were:
- CASH IS KING:
- Subsidies buy Time;
- Understand your Costs;
- Review your cashflow every couple of days – at the minimum, weekly;
- Understand your business: what is the value in your business? what is it that you can sell, that others who have reduced capacity to buy, will want when the recovery begins;
- The recovery will be slow;
- Areas of the economy such as hospitality and tourism will be facing longer recovery periods;
- Interest Rates will rise – probably not for a couple of years, but they will rise;
- Directors of companies have a legal duty not to trade when the company is insolvent. Be aware of your financial position, and your duties if you are a director;
- Our borders will be closed for months, perhaps longer. This means no foreign tourism, no overseas students, no temporary overseas workers;
- Economic reality will set in about Week 3 of our isolation, when consequences of the situation dawn on the public, and the major announcements are over;
- The government will need to act aggressively to maintain control of the spread of the virus when Alert Level 4 ends. It’s likely we’ll be into Alert Level 3, and if that doesn’t work, back to Alert Level 4;
- This is not a puddle. It’s a bloody ocean of stickiness 🙁
The above is a huge wake-up call to us all. Now that the immediate response to safeguard jobs is over, and recognising that the thoughts Bill English shared will be our reality, our advice to you:
- CASH IS KING: As business people, this is something we all know, and MUST focus on. If your business is to survive the next few weeks & months, and if you haven’t already, please prepare a budget/cashflow/forecast now. It doesn’t matter what you call it – just do it;
- Understand all your costs: Know all your outgoings – how much do you need to spend just to survive in this hibernation period. Be sure you’re realistic with your spending over the next 12 months, and project your revenue (best guess is better than no guess). You may need to make some aggressive decisions to limit your outflows. If your business is to survive you must remain cash positive. If you need some help with your cashflow, email Prue email@example.com. She will get in touch with you as soon as she can.
- Speak with your Bank: If you haven’t already discussed your situation with your bank, call them and request a home mortgage holiday (the options offered by most banks are total payment holiday, but with interest still accruing, or reducing payments to interest only). If you won’t be able to meet your current business loan repayments, push for the best terms you can get – (every situation is different, and banks & bankers will have their own criteria to meet. Our advice is to be as politely pushy as you can be):
- Speak with your landlord: Have you made arrangements with your landlord to reduce the rent. Some of our clients have been given 100% rent holidays, while others have received 50% reductions, & others haven’t been given a rent reduction yet. Look at your cashflows. How long can you sustain paying the rent? You may need another conversation with your landlord;
- Speak with your other creditors: If you need to eke out payments to creditors, or you need to buy some time, talk to each one. If you need help with this, contact us: firstname.lastname@example.org;
- Limit your costs to bare minimum: Only spend what you need to. We are heading towards extremely difficult times, so every cent you save now will help you later on (business & personal);
- Be thoughtful about what you can offer when the economy begins to pick up: it will not be ‘business as usual’ when we emerge from our cocoons. The world will be a very different place. People won’t have as much disposable cash as they have had in the past. Their purchasing decisions will be different. What will you be offering? How can you prepare yourself to operate in the new world?
- Directors’ duties: We received a very good newsletter from Bell Gully lawyers concerning directors’ duties which we’re happy to share. Email email@example.com if you would like a copy;
- The economy will recover: But it will take time. Be sure you’re in a position to benefit from the recovery when the time comes.
Remember, those of us who are well prepared will weather the storm better than those of us who choose to bury our heads in the sand.
We are here for you.