During discussions in the past few days, it has become apparent that there are very few clients who will not suffer some negative financial consequence as a result of the current crisis.
Careful financial planning is going to be critical this year. Budgets, cash flows and up to date management accounts will be very important over the next couple of months.
It will only be to your benefit to be proactive. Here are some suggestions:
1: Have a very serious look at all your expenses.
Look for anything that is not essential, expenses that do not deliver value for money, obvious waste and/or anything that can be postponed or put on hold for later in the year.
Look at all your other debit orders, such as company vehicles etc., as there may be an opportunity to refinance over longer periods to reduce costs.
If you are paying off a bond, you could request a moratorium for a limited period, with an agreed recovery period starting later this year or next year.
Try not get locked into a cost cutting mind set. The goal is around control and value for money, not devastation.
2: Speak to your landlord about a rental “holiday”.
If you have paid a deposit, sometimes up to the equivalent of three months’ rent, this could that be utilized for the next three months installments and be paid back over the next 12 months.
3: Have a look at your current margins.
Is there an opportunity to offer support to your customer base to keep the business going by reducing prices? This may sound counter intuitive but your customers are also going to be looking for ways to cut costs and customer retention in the current environment is important.
Can you switch your salary to drawings on a loan account? You may have to pay your company interest but the saving on PAYE may well be worth it.
Can you consolidate debt to reduce payments? SA Home Loans is advertising a Bond/Debt consolidation package now. Could this benefit your company cashflow?
4: Look at your skills and resources.
Are there any new opportunities which you could explore or new services you could offer clients?
5: Plan for financial assistance.
Banks are going to be inundated with requests for additional credit. You need to plan ahead and if you believe you may require assistance later on this year should your current reserves become depleted; YOU WILL NEED TO APPLY NOW. It takes weeks to process applications.
6: Look at Investments.
Investments into Unit Trusts and other Equity linked products have lost a great deal of value. However, I have no doubt they will recover over time. Take note that this is a really bad time to sell as you will lock in your losses and should only be considered as a last resort. In many cases you could covert Unit Trust Portfolios to Endowment Policies against which you can borrow. A good way to borrow against Investments without paying interest.
7: Can we Contribute?
Applications to banks etc., are going to place a great deal of pressure on our current economic resources. We are currently preparing three applications which require completed financial statements for the 2020 year and/or up to date management accounts.
We have made sure that we are able to complete the 2020 financials rather earlier than usual and should any additional work be required, i.e. Budgets, cashflows etc., we will be able to assist.