Peter Prema is one of five directors at BetterCo Accounting & Advisory who specialise in growing SME’s across New Zealand. He offers his opinion on the new norm for business as a result of Covid-19, and how we can make our work and home life a better one.
Given the circumstances we have faced over the last eight weeks, most business owners (if not all) should have had at least one lengthy open and honest conversation with their accountant about what life is going to be like on the other side of this pandemic for them and their business.
Pre Covid-19 business owners were operating with confidence and reaping the fruits of their labour. Growth and investment were two words that we frequently used to summarise our business plans with clients and preparations were beginning for a big 2021 financial year.
So what was the last six weeks like as a Trusted Advisor to businesses of all sizes and across most industries including Hospitality, Tourism, Retail and Health & Beauty? It has been absolutely harrowing, uncertain, stressful and financially crippling. With the borders shut, no foot traffic,
and no other source of income for many clients, we have had to work double time to ensure we help each and every single person see out to level 2 in anticipation for when doors can open.
For us this has also included coming up to speed with the daily updates from the Government, banks and Inland Revenue and then relaying that on to our clients. Many of whom still did not quite understand what impact that had on their business. The wage subsidy has provided some relief but no where near close enough for some. The business finance scheme backed by the banks have not been as helpful but the temporary extensions to overdrafts and mortgage repayment options have helped. Inland Revenue have provided some vital tax changes such as the introduction of commercial building depreciation, increase to the provisional tax threshold and “tax back” scheme.
Taking into consideration all of the changes, the outlook for 2021 now looks very different. My key takeaways for any business to get through the next 6-12 months would be to get cashflow going again. Prepare a cashflow forecast that has been looked over by an accountant, make your business as lean as possible and cut any non-essential expenses. Take a good look at your gross profit margins to ensure they are adequate as low margins require higher turnover (work smarter not harder). Perhaps change your payment terms to seven days rather than the 20th of the month following. Prepare a Business Continuity Plan or Business Plan for the next 12 months with an advisor. This will give you the clarity and confidence to get your business up to speed again.
We have gone through an extraordinary period, we have been forced to shut down and many of us have used the time to reflect on ourselves and our businesses. The clock has reset, you now have a chance to restart your business with fresh thinking and more appreciation for why we went into business. This leads me to one last factor that business owners will need to thoroughly reflect on and improve no matter what their business is – and that’s customer experience.
Customer experience is essential for any business to connect themselves with their target market. This will also leave a lasting impression and hopefully lead to repeating customers. Remember, everyone is going to be competing for every dollar now, it is literally a matter of survival of the fittest.
In summary, I think the new ‘norm’ will be better. For those who have already done their best at pivoting, adopting new technology and becoming more efficient will get through this. I hope many of you have taken this time in lockdown to think about your purpose and why you’re in business. Think about the people you choose to do business with and be on the same journey as you. And of course, how to become more profitable so you can be better prepared if anything like this ever happens again.