It’s been a tough year. We know from talking to our clients and supporting them as they’ve dealt with the impacts of COVID-19 just how hard they have worked and how many challenges they have overcome.
Unfortunately, there are still more pressures on the way, as Government support like the furlough scheme draws to a close and the wider economic impacts of the pandemic take shape.
But there are also things to learn from what’s happened so far. By reflecting on how your business managed in the crisis, and using that information to build a plan for any future emergencies, you’ll be better prepared for whatever comes next.
Here, we’ve outlined three key areas to strengthen your resilience, with practical guidance to help your business thrive.
Create or review your continuity plan
If you haven’t got a business continuity plan, now is the time to make one – and if you have got one, you may find it helpful to review it.
Even if you’ve discussed how you might deal with a crisis with others in your business, be sure to formalise your plan in writing – that way, you’ll have complete clarity on what you need to do in the event of an emergency, and you’ll be able to take action swiftly.
To create your business continuity plan, start by assessing the risks your business might face.
Recovering from the effects of the pandemic may be the first thing on your mind right now, but your plan should take into account any other event that could have an impact on your business’s ability to operate in the future.
That could be anything from disruption due to natural causes like flooding, to problems in your supply chain, or the loss of a key employee.
It’s also important to consider what steps you might need to take in the event of a cyberattack, as well as tightening up your cybersecurity to reduce the risk.
Once you’ve considered the risks at hand, look at which parts of your business are critical and how long you could last without them, setting a specific time limit to get each function up and running again.
Then determine how you would maintain your operations and restore the affected parts of your business as quickly as possible.
Keep the cash flowing
Financial resilience is key to managing in a crisis. If your business is already facing cashflow problems, it’s much more vulnerable to disruption.
First of all, it’s important to have a clear picture of your own financial situation, and how cash is moving in and out of your business. Using online accounting software is a great way to get an up-to-date understanding of this, giving you accurate numbers on your business at any point in time.
From there, look at how you can increase efficiency. That doesn’t just mean cutting down on your spending – which we’ll cover next – but it’s also about eliminating any barriers to a healthy cashflow.
For example, if you find yourself frequently dealing with late payments, you could look at ways to improve your invoicing practices. Setting out clear payment terms to start with, then invoicing quickly and following up on any outstanding payments will help you to speed up the payment process. This is something else that online accounting can often help with.
You might also benefit from assessing things like stock management. Are you holding the right amount of the right kind of stock? And where does most of your profit come from?
Finally, think about the relationships that are most important to your business. Being able to maintain a strong relationship with good customers – those who are profitable, and who pay on time consistently – is essential for your cashflow over the long term.
Strengthening your relationship with suppliers could also give you the flexibility to negotiate longer payment terms or even discounts that could benefit you in the future.
And, of course, building loyalty within your team will help you to continue operating and remain productive throughout challenging periods.
So don’t forget, even in a time of crisis, to nurture those relationships and build long-lasting connections.
Cut down on costs
A study by McKinsey found that during the last financial crisis, resilient companies did three main things that gave them an advantage.
One of those three, alongside creating flexibility with a financial buffer and prioritising growth where they could, was cutting costs before other companies did.
The sooner you review your spending and eliminate any unnecessary costs, the better. At the same time, however, be careful not to cut back so much that it damages your ability to make sales, maintain relationships or incentivise your staff.
Here are a few areas you could consider:
- Travel: Lockdown restrictions have forced many business owners to adapt to remote working practices – but in future, could you save on travel costs by continuing to have meetings online?
- Subscriptions and licences: it’s easy to let auto-renewing payments sit untouched for years on end. Conduct a comprehensive review of fees you’re paying for software, publications and even things like pot plant maintenance.
- Technology: Are you getting value for money from the technology you pay for? In some cases, you may be able to swap several pieces of software for one package, or you could look at ways to automate tasks and save time.
- Tax-efficiency: Careful tax planning could help to lower your tax bill, and there are various reliefs available depending on the kind of business you run.
Get in touch for business advice.