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The UAE Business fraternity has welcomed measures to partially reopen offices. With the Dubai Economy laying out a set of safety guidelines for the same, the business world is slowly back to partial resumption.
For a number of businesses, likely government measures to minimize public health risk may result in a marked decline in demand for products or services accompanied by labor shortages and supply disruptions.
Businesses must assume that health authorities will ask people to stay home and may only continue to marginally allow staff attendance to contain the spread of COVID-19. It is presumed that large numbers of the working population will voluntarily stay home which will result in people consuming less and purchasing in different ways.
Staff availability will be a marked challenge especially for businesses where employees cannot work from home. Supply disruptions are highly likely as the business’ suppliers may face similar issues.
Social distancing measures were already put in place in offices across the UAE from early March 2020. However, the safety measures for employees continue to be a priority for all stakeholders.
The crisis was unforeseen and has impacted everyone alike – from corporates to private business owners.
It is understandable that it may take some time before the previous demand level in areas such as general corporate and commercial works is back to normal. The business fraternity will go through periods of adaptation as the world ventures further into unchartered territory
This could place the immediate future of even the most established businesses in serious jeopardy. What further adds to the woes of SME’s is that there is practically no way of knowing how long this pending crisis will last.
As part of a comprehensive risk management strategy, there is a range of actions one should consider taking now to prepare their businesses for COVID-19, in order to place them in the best possible position not only allowing them to navigate through the crisis but also assisting in better preparing to take advantage of the recovery.
It is imperative that in order to make the best possible decisions in a difficult environment, the key management requires access to the most up-to-date information on the state of their business finances. Therefore, we recommend bringing your financial statements up to date and perpetually updating them.
IDENTIFYING POTENTIAL IMPACTS ON THE BUSINESSES, KNOWING THEIR FINANCIAL LIMITATIONS, AND DEVELOPING MITIGATION STRATEGIES TO COUNTER THEM.
Assess and discuss the likely impact that COVID-19 may have on your business with your current staff and other key stakeholders; Especially, your suppliers and customers.
The areas most likely to suffer impacts within a business ( in no particular order of appearance) would be:
If your business is already impacted, start by listing what those impacts are. If you are not impacted yet, you should still be able to make some informed projections. In listing those possible impacts, attempt to quantify what those impacts will have on your business and identify possible strategies to mitigate those impacts.
PERFORM A FINANCIAL HEALTH CHECK ON YOUR BUSINESS
As discussed in Point 1, real-time information on the financial health of your business is fundamental in assisting you to decide what you can and should do now in order to help your business navigate through the crisis.
To start with, Financial Ratios carry a significant amount of information derived against the analysis of your financial statements which may serve as a good measure, to judge the financial health and performance of your business
RE-VISITING YOUR BUDGETS WITH REVISED ASSUMPTIONS
The assumptions you may have used to produce your budget are most likely no longer relevant as the crisis prolongs. Working with your Finance Department, you may be able to list the possible impacts of COVID-19 that may have developed against your assessments and re-do your budgets. You may want to include a range of possible previously highly unthinkable scenarios, that may range from projecting a 50 to 80 percent decline in sales over three to six months, or a supplier is unable to supply you a key item for six weeks. Carefully consider how each of these scenarios may impact your cash flows.
ADOPTING A PRO-ACTIVE APPROACH TOWARDS IMPROVING YOUR CASH FLOWS
Having re-visited your budgets and assessing the financial health of your business, including your cash reserves, you are likely to find your business will struggle with cash flow in the near future. You must therefore act now to improve cash flows.
The first step in this regard would be to prepare a cash flow forecast, regularly updating it throughout the crisis, on a rigorous basis, possibly even weekly. This is all likelihood may forewarn you of any cash flow problems allowing you to act early in order to address them
The following tips to improve your cash flow may appear unorthodox and extreme. Some of them are not recommendable solutions under normal circumstances, however, you may soon be operating in an environment you have never experienced:
REDUCING CASH OUTFLOWS
SEEK FINANCE TO FILL CASH SHORTFALLS
CHANGE YOUR BUSINESS MODEL
A few of these actions could also be detrimental to your corporation within the restoration stage. Hold a watch open for modifications within the surroundings so that you could return to regular enterprise operations shortly.
INCREASE ONLINE SALES
The put up COVID-19 expertise has proven that prospects are prone to keep dwelling (whether or not on the directions of well-being authorities or by selection), and due to this fact, buy extra on-line.
To stay viable, many small companies might want to start promoting on-line or no less than considerably improve their on-line gross sales. A key step in getting ready for the disaster is investigating via totally different on-line platforms to see which one finest serves you must promote your merchandise and cut back your reliance on your store entrance.
You also need to overview how finest to ship your merchandise to the shopper. Your accountant might be able to help you with these essential concerns.
Suppliers of companies ought to examine digital options to the supply of companies to cut back the necessity for head to head contact. Consequently, chances are you’ll select to shut a few of your bodily areas.
TALK TO KEY SUPPLIERS
Speak to your key suppliers about their means to ship items or companies reliably through the disaster. Take into account not solely their means to supply the inputs you want, but in addition, the transportation of the merchandise to you and hold to the agreed prices/costs. In case your suppliers are based mostly in a location most affected by COVID-19, their manufacturing might have severely suffered, and their means to get these provides to you is perhaps restricted. Consequently, this key provides take longer to reach.
If there are additional import restrictions based mostly on product origins, chances are you’ll assess the time spent at customs clearance factors earlier than you’ll be able to utilize the products. In such situations, you need to take into account organizing various suppliers, together with native suppliers even when dearer. You could need to supply them now and begin worth negotiations early
IDENTIFY EMPLOYEES WITH CRITICAL SKILLS FOR YOUR BUSINESS
Take into account which of your staff aren’t simply replaceable towards enterprise capabilities that must hold working regardless. Search for others who can study the duty. Outsourcing could also be another resolution. The place such staff can make money working from home, ensure that they take the gear (similar to a laptop computer) they should make money working from home, with them each night time in case it’s important to shut your premises quickly discover.
Take into account growing a particular roster in order that important workers are at all times accessible to maintain important enterprise programs and processes operating.
MEASURE, MEASURE, MEASURE
There is a selection of key indicators which is able to shortly let you know how your corporation is monitoring. They may very well be so simple as the worth of every day gross sales, or the money stability or the debtors’ stability, or the worth of orders and bookings. Create a graph exhibiting these key indicators and replace them every day or no less than weekly. It’ll shortly present you with any developments as they emerge.
DO A REALITY CHECK ON YOUR BUSINESS
Use the disaster as a possibility to replicate on your corporation, the way it was being run, how you want to it to run put up a disaster, and whether or not it’s nonetheless best for you. Inquiries to ask your self embrace:
IF YOU ARE IN FINANCIAL DIFFICULTY, SEEK PROFESSIONAL ADVICE EARLY
Throughout the disaster, repeatedly ask your self the next questions:
In the event you reply no to those questions, you need to instantly search for a skilled recommendation, as your organization could also be bankrupt or close to bankrupt.
There are dangers for those who proceed with your organization whereas it’s bankrupt. Getting a recommendation from a registered liquidator, or your accountant or lawyer to grasp the complexities of this space is essential. In case your small enterprise is in monetary problem, be very cautious of anybody cold-calling you, promising monetary salvation. Such folks might advise you to intentionally liquidate your organization to keep away from paying money owed and proceed with your corporation via a brand new firm.
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