As the country navigates COVID-19 restrictions, the nation’s SME community will again be thinking about how they can continue to adapt and survive in an unpredictable and economically challenging environment.

In the findings from our MYOB General Election Snapshot, we saw that ongoing uncertainty around COVID-19 was the leading concern of SME owners and decision-makers, followed by worries about maintaining levels of customer demand and consumer confidence, and fears about their ability to continue to operate.

While the survey was completed in late July, less than a fortnight later their concerns were realised when the country experienced a second surge of Coronavirus cases. Now, it’s clear that as we adjust to a life shaped by moving alert levels, that sense of uncertainty is likely to linger on for longer for small business owners.

The changeable ‘new normal’ we find ourselves in means that much of what influences consumer behaviour and ultimately informs business action, will continue to be difficult to predict. However, while I’ve no doubt it might be easier said than done, rather than thinking about those factors or issues that will remain uncertain for some time, SME owners and decision-makers must continue to direct their focus to the elements of their operations where they can have some control.

Manage for cash

Cashflow is the lifeblood of any business and from our latest MYOB data, we’ve seen that total invoicing activity since March is 20.5% below baseline, payroll expenditure is 9.2% below pre-COVID levels and total employees paid is 7.0% below the baseline. However, there are a range of actions SME owners can take to ease any cashflow burdens.

If late payments are putting finances under pressure, it pays to invoice as soon as your product or service has been delivered. Consider adjusting your payment terms such as moving from the 20th of each month or a monthly invoicing cycle, to seven days from the date on which you provide the service and communicate that clearly with customers before they purchase so they’re aware of these expectations.

I’d also encourage all business operators to systematically review aged debtors as this will allow you to identify slow-paying customers who need a follow up.

Through the experience of the first lockdown, we know business owners reviewed all the cost lines of their business, but ongoing vigilance is required here and it’s important to continue to make prudent purchasing decisions.

In the current environment, you may see suppliers offering great deals as they look to address their own cashflow concerns. It can be easy to get excited about a good deal, but keep an eye on the longer-term goal – for example, for peace of mind, you may be better off keeping the extra money in the bank given the uncertain climate.

If you need working capital to get you through, make sure you’ve taken advantage of all the Government support options for small business. Beyond the Wage Subsidy Scheme, there are still other options available like the Tax Loss Carry Back Scheme, Small Business Cashflow Loan Scheme, R&D grants, the new Tourism Loan Scheme, the Regional Business Partners Network business advisory grants, the increase in the low value asset threshold for depreciation and even depreciation deductions which can be claimed in your tax return for commercial and industrial buildings.

Ingrid Cronin-Knight NZ
Ingrid Cronin-Knight, Country Manager MYOB NZ.

Tweak operations

Our MYOB Tech Survey revealed that more than one-in-ten SMEs established an e-commerce site for the first time during the first lockdown, and almost two thirds of SMEs are now more likely to look at new opportunities to use technology in their business.

It was really pleasing to see how SME business owners stepped up to the challenge to tweak how they operate and as we all continue to refine how we do business, technology will continue to provide opportunities to do things smarter.

On the supply side, we may continue to see supply chain interruptions which means some small businesses won’t have the goods to meet demand. To keep one step ahead of this, it’s worth exercising caution – consistently review your stock levels of core products and stay in touch with your suppliers to understand their constraints.

Alternatively, if you have excess stock in certain areas, think about how you might promote it or if it’s worth attaching it to other orders. Keeping your stock turning over is crucial. There would be nothing worse than having to close your doors because your suppliers couldn’t provide you with your goods, as happened to my favourite local fish and chip shop down the road.

You can also use this time to review any non-performing revenue lines and exit them. If you are clear with customers about why you have phased them out, in the current climate most will be pretty understanding. The same thinking applies to labour and as we’ve seen, most business owners have already reduced any contract labour and are now redistributing this work to permanent staff within their business.

Ongoing vigilance around health and safety is also key. If your workplace is disrupted by COVID-19, that could be devastating for your business.

Part of our new normal means that operators should have their NZ COVID Tracer QR code posters in place, however ensuring social distancing guidelines are followed and extra sanitation processes are carried out as ongoing practice, is also a must. Keeping this top of mind for your team is critical too because it could be very easy to let these habits slip as time goes on.

Whatever the ways you decide to adapt your business, effectively responding to the changing market requires a true understanding of the new needs of the customer. There are several ways business owners can do this, including communicating with customers regularly to monitor changes in how they behave and respond to products or services. This could be through face-to-face interaction, online surveys, phone calls or through monitoring any social media conversations about the business.

To build on this, simple changes in communications methods like a few thoughtful check-ins by email, video conferencing chats or sharing engaging social media content, can also help foster positive engagement with your audience and keep your products or services top of mind.

Take care of you

It’s important for our SME owners to remember to be kind to themselves. The extraordinary circumstances we’re dealing with mean we will all likely experience feelings of uncertainty for some time.

For business owners, the pressure to make ends meet, navigating a range of ongoing decisions to ensure you can make payroll, meeting lending payments and keeping customers happy, is a real challenge. While business owners are known for bravery, boldness and resilience, anyone who is time poor and under pressure often ends up neglecting their own health and wellbeing.

There’s no doubt that financial performance and cashflow stresses can have a major impact on your home life.

While the safe harbour provisions provide company directors with a bit of extra time to make sound decisions, if you haven’t been able to negotiate relief on rent, get the finance you may desperately need, or sell your business, it could mean insolvency is the only option.

If that is the reality you are faced with, it can be a double-whammy if you have guaranteed your small business finances against the family home. A step into insolvency in this instance could place real strain on family relationships.

For advice around financial management and business continuity, check you’re eligible to use the Business Advisory Fund and arrange to speak with a local representative or a business advisor through the Regional Business Partner Network.

Now more than ever, we need to support our fellow entrepreneurs. Just knowing there is someone keen to listen, help and provide support through the tough times, can make all the difference.

Plus, sometimes through these discussions other solutions can surface. Off the back of COVID-19, for example, we have seen competing operations establish a new business in partnership to help keep costs down and leverage a joint advantage.

I’d encourage anyone running a business to also chat to their business community connections, a business mentor, their accountant, friends or whānau for advice.

Getting in touch and staying connected is important for our wellbeing. As well as your usual networks, there are also several helplines and supportive initiatives designed to be there for us in times like these, including the use of digital tools.

MYOB recently partnered with the team at Smiling Mind to develop a special small business program for the free-to-download app, with features and activities designed to support the mental, emotional and physical wellbeing of small business owners.

Alternatively, in those moments when workplace pressures feel as though they’re mounting, I’d recommend taking a break, getting some fresh air and exercise outdoors, and where possible, embrace what makes you laugh and feel good.

Unfortunately, this may well be a part of our ‘new normal’ for a while – we’ve seen that there are no easy answers to the current threat to our community and our economy. People say SMEs are the engine room of our economy, but I believe it’s the people who run them that are. We need you, your learnings, your ambition to help us navigate through these uncertain times and we’ve got your back.

Ingrid Cronin-Knight is Country Manager at MYOB NZ

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