There’s nothing as constant as change, and we don’t know about you, but we are fed up.
Fed up of not being able to visit our favourite places – parks, restaurants, sports stadiums. Tired of not being able to visit family and friends. Fed up of being fed up. And that’s only on a personal level.
On the work front, we are also fed up. Fed up of not having face-to-face contact with clients, partners and our team.
And we’re definitely fed up with the overuse of buzzwords like ‘unprecedented’, ‘the new normal’, ‘furlough’, ‘pivot’ and ‘social distancing’ to name a few.
Of course, we understand why we are making sacrifices. We understand that it’s a short-term plan for the longer-term health benefit of the population and in particular our families, our team and our clients.
The current situation is tough for many. Some have lost loved ones, some are finding it difficult to juggle home working, home-schooling and wellbeing. Some are seeing their businesses and finances suffer.
It’s tough. Very tough.
But in a few months, many of us will be looking back at the change that has been forced by the coronavirus pandemic and realise that it is necessary change. Change that you were procrastinating about for many reasons. Changes that you didn’t know how to implement. Change that means you will not go back to how you were.
In some cases, how you were before wasn’t good enough and so not going back there should be a blessing.
From speaking to clients, team members, partners and our network of contacts in recent weeks, we’ve identified the following as the main areas of business that for many, will change forever. This is not by any means an exhaustive list.
Bank Relationships
We have come to accept that in most cases, we cannot walk into a traditional high street bank and talk to the bank manager about our business needs. We have to ring a call centre and eventually speak to somebody we don’t have a relationship with who will make decisions about our banking needs by ticking boxes on a computer.
As our finances have been stretched, we’ve realised that talking to somebody who understands our business and can make informed decisions about how to support us is more important than ever.
Banking with a company that is available, flexible, understanding and can support our needs will be a must in the future. Some traditional banks will lose business to the ‘new kids on the block’ because we need relationships and not purely transactional support.
It is time for relationships to be rekindled or forged so that we have the support and understanding that we need.
Improved HR Support
It’s great to have a plan for growth, but for many companies, the inability to contract their business and quickly reduce costs in line with revenue loss, has caused substantial cash-flow challenges.
The rescue packages implemented by the government have been commendable. Unfortunately, the systems weren’t in place when they were announced, and this caused challenges such as over-furloughed teams and changes in wages as well as the associated SSP and holiday questions.
The Furlough scheme has now been extended but will require a contribution from the employer. It is all getting a little complex and can be a minefield to navigate.
Having a HR partner that understands and helps implement change quickly and legally, will be a future must for many that have struggled with making immediate and legal change.
Contracts
Not having robust contracts in place for the team, suppliers, associates and clients has left many companies exposed. Legal expenses are often seen as an unnecessary expenditure, but in many cases, this has proven to be a short-sighted view.
Whether you have customers cancelling their spend commitments, suppliers cancelling scheduled work, or difficulties with changing where, how and when your team works, it can be challenging to navigate without clear contracts.
As well as a need for improved HR support as mentioned previously, this situation will cause many to rethink their legal requirements when it comes to negotiating contracts in order to limit any exposure and present a more professional approach.
Cash Drivers and Reserves
‘Saving for a rainy day’ is a concept that we are all familiar with. Unfortunately, it’s not always one that people take too seriously. Whether surplus funds are being invested in growth or business owners are simply drawing more money from the business, the reality is that not enough companies have sufficient cash reserves to weather the current storm.
Taking payment holidays, accessing debt funding and deferring HMRC commitments will alleviate the immediate problems but will likely create bigger issues in the future when this debt needs to be serviced.
Understanding your cash drivers is critical to building up your reserves. This will give you more confidence that you can tackle a tough few months with reduced or no revenue.
Calculating how many weeks it will take before you run out of cash if you have zero sales can be sobering. It has forced many people to challenge their previous expenditure in an attempt to make that date further away. The further away that date is, the greater your ability to be able to overcome short term revenue or expenditure challenges.
If you have managed without expensive coffee four times a day, large travel bills and cancelled subscriptions, then surely you can manage in the future?
Have your marketing and networking activities been delivering a tangible return on investment?
What about employees that are now working effectively from home, and in many cases, are more productive? Perhaps adding in less travel, less working to the traditional 9-5 and having a better lifestyle means that those luxury offices that are expensive to run and maintain won’t be such sacred cows.
The last two months have proven that we can do a lot of face to face meetings remotely. Perhaps salespeople will not need those expensive cars in the future!
Reviewing your pricing levels, looking to exit low margin products and customers, and launching new offerings will all help drive increased cash.
For certain, a lot of traditional expenditure will be challenged as business owners now have a better idea of what impacts their cash-flow.
As the saying goes, “sales is vanity, profit is sanity, cash is reality”.
Credit Control
Following on from the point above, many will look to improve their future credit control.
Checking the suitability of new clients should be good practice as well as frequently checking that of your existing clients. Bad debt doesn’t help at all.
Implementing systems to automate invoice generation and linking up to direct debit software will improve your cash flow as well as reduce administration for you and your clients. Reviewing your creditor and debtor terms will help drive an improved cash situation that will provide more choice.
Cash will be more King in the future as businesses strive to increase their reserves for a rainy day, week or month.
Business Continuity Planning
Business continuity plans are for corporate organisations and are usually 2,000 pages long, right? Wrong!
We are certainly not advocating that every small business will have the time or the inclination for such a comprehensive continuity plan. However, having a documented summary of some of the basics will help you prepare for any future business interruption.
Some of the following should be considered:
- your commercial and domestic insurance cover
- your IT hardware and software systems
- WiFi connectivity
- HR contracts (as above) so all guidelines are clear
- communication systems with team, clients and partners
- risk assessments
- ensuring the wellbeing of your team – regular breaks, home office ergonomics
Having a simple and clear plan that can be implemented quickly by the whole team will enable businesses to minimise any interruptions to customer service, look after the team and protect the future of the business.
Business Planning
A business plan is like having a sat-nav for your business. If the road ahead is blocked with a traffic jam, it will help you identify the issue and find an alternative route forward.
If you don’t have a plan, understanding where you are heading, how and when you will get there, and what your options are when there is a problem makes success more difficult.
Business plans don’t need to be huge in-depth documents that take months to prepare and are out of date as soon as completed. Ours is on a single A3 page and has everything needed to track our success and focus our team. It is dynamic and agile enough to be updated quickly as issues and opportunities arise.
Business plans should also contain strategies to review and update your business model (how you commercialise your value). This would allow you to evaluate, how, when and where you go digital with your offering, what joint venture partnerships you develop and which type of clients you serve.
Such a business plan not only provides clarity for you and your team, it also helps align all of your stakeholders and is one of the key documents needed when looking to raise finance.
A sound business plan also identifies when you need funding and helps secure it. More small businesses will need to have a plan in place in the coming months.
Real-time Access to your Numbers
A good business plan will have a set of KPIs or BGIs (key performance indicators or business growth indicators) that you can use to track the success of your business, the focus of your team and your short-term strategies.
Unfortunately, many business owners don’t have clarity on their key measures or how they are performing against them.
Sometimes they are too busy to take a step back; often they are frightened because they don’t understand; sometimes they don’t have the systems to access the numbers.
Having clarity on your key measures and access to your performance daily, weekly or monthly will enable you to understand your current status, assess your next steps and make informed management decisions.
Your revenue, profit and cash generation would usually follow a Pareto law (80% of the benefit, comes from 20% of the activity). Understanding which products and customers to focus on to deliver better results will help with planning and growth.
Without understanding your key numbers and reviewing how you are tracking against them, you are living in hope and hope is not a strategy.
Improved Accountancy Support
We have heard numerous stories of accountants not stepping up to the plate in recent weeks. Whether it’s because they are not working in the cloud, so are unable to work from home, or maybe their fees do not allow for additional support. The fact is that many small business owners have been left high and dry in a time of need.
Because finance isn’t the core skill of most business owners, it’s essential to have somebody competent in your corner. Somebody who can hold your hand, advise on the systems you need and work with you to have a clear financial strategy and a cash flow plan to help you manage and grow (or retract) your business.
Accountancy should not be bought on the cheap – you get what you pay for.
A good accountant should pay for their fees many times over because of the value they add when they know you and your business in detail. Their black book will also allow you to access all the additional support you need from banks, funders, other professional services and business planning experts.
They will help you develop and understand your numbers. They will challenge you and hold you to account to ensure you are achieving your goals.
If you don’t have real-time access to your numbers, a clear financial plan or even an accountant to chat to when the going gets tough, perhaps it is time to change to a modern, forward-thinking practice that can support your business journey.
Or you can stay loyal to your accountant that has gone AWOL.
Staying Safe
Recent times have caused us all to evaluate some of the basics with hygiene. Whether it’s how we wash our hands, how clean our offices and workstations are or how we act around large groups of people, we will be a lot more mindful in the future about the precautions we need to take to stay safe.
This should always be our number one priority.
There are many other areas of business that will change for many of us forever, but the ten we have covered here are the key ones right now.
This blog has been written in conjunction with my client, 360 Chartered Accountants in Hull, after observations with our respective clients and key contacts.
As stated in section seven above, having a business plan is fundamental to navigating the way forward and implementing the changes you need.
Related resources:
You might have a lengthy business plan or maybe you have no plan at all. Many business owners don’t manage their company strategically, know what to focus on or measure daily, to have complete clarity and control.
If you would like to manage your business on a single page, access our tool here to get started: tendo-uk.com/plan
