The coronavirus or COVID-19 presents a significant threat not only to human health but also to business. For many
businesses, likely moves by governments to contain the public health risk may result in a sudden fall in demand for
your products or services, labour shortages and supply disruptions.
Businesses must assume that health authorities will ask people to stay home to contain the spread of COVID-19,
or that large numbers of your local population will voluntarily stay home. This will result in people consuming less
and purchasing in different ways. It will also impact staff availability, especially for businesses where employees
cannot work from home.
It is also likely that your operations will be impacted by supply disruptions as your suppliers’ grapple with the same
In short, COVID-19 will be a shock to many businesses that could place their immediate future in serious jeopardy,
and there is no way of knowing how long this pending crisis will last.
As part of a comprehensive risk management strategy there are a range of actions you should consider taking now
to prepare your business for COVID-19, to place it in the best possible position to not only navigate through the
crisis but to also be better prepared to take advantage of the recovery.
Fundamental to your preparations is keeping up to date with official information on COVID-19 and any directions
public health authorities may issue. It is therefore important to follow the website of your local health authority.
1. Update Your Financial Statements
To be able to make the best possible decisions in a difficult environment, you need access to the most up-to-date
information on the state of your business finances. Therefore, we recommend you bring your financial statements
up to date and keep them up to date.
2. List Possible Impacts On Your Business, Estimate The Financial Impact And Develop Mitigation
Discuss with your staff, key suppliers and key customers what the likely impact of COVID-19 will be on your
business. The impacts on a business will likely be most significant in the following area:
• Sales – particularly if you have little to no online presence.
• Staff availability – with people likely to be subject to restrictions on their movement, their ability to work will be
curtailed, particularly if there is limited scope for them to work from home.
• Supply chain – particularly if you rely on suppliers from badly impacted parts of the world.
• Finance – particularly if your cash reserves are low.
If your business is already impacted, start by listing what those impacts are. If you are not impacted yet, you should
still be able to make some informed projections. In listing those possible impacts, attempt to quantify what those
impacts will have on your business and identify possible strategies to mitigate those impacts.
3. Perform A Financial Health Check On Your Business
Knowledge of the financial health of your business is fundamental to assisting you decide what you can and should
do now to place your business in the best possible position to navigate through the crisis.
A significant amount of information on the financial health and performance of your business can be gained by
analysing your financial statements through financial ratios.
4. Re-Do Your Budgets With New Assumptions
The assumptions you may have used to produce your budget are most likely no longer relevant because of the
crisis. Working with your accountant, take the list of possible impacts of COVID-19 you have developed and re-do
your budgets. Include a range of possible previously unthinkable scenarios, such as a 50 to 80 per cent decline in
sales over three to six months, or a supplier being unable to supply you a key item for six weeks.
Carefully consider how each of those scenarios impacts your cash flow.
5. Act Now To Improve Cash Flow
After re-doing your budgets and determining the financial health of your business, including your cash reserves,
you are likely to find your business will struggle with cash flow in the near future. You must therefore act now to
improve cash flows.
The first step to improving cash flow is to prepare a cash flow forecast, and updating that forecast throughout the
crisis, possibly weekly. This will give you forewarning of any cash flow problems so you can act early to address
The following tips to improve your cash flow may appear unorthodox and extreme. Some of them we would not
recommend in a normal situation, however you may soon be operating in an environment you have never
• Take steps to increase sales, especially of stock that may not last three to six months.
• Focus your promotions towards these stock items.
• Reduce stock orders, particularly stock you assume will be in low demand during the crisis.
• Increase purchases of stock you think will be in high demand during the crisis.
• Promote the selling of excess, slow moving and/or obsolete stock.
• Contact your debtors and ask them to pay you, even if before the due date.
• If your debtors are experiencing cash flow difficulties themselves, negotiate periodic payments and make sure
they stick to their side of the deal.
• Invoice as soon as the product or service is delivered … don’t delay.
• Produce aged debtor reports and follow up with aged debtors.
• Reduce debtors by encouraging customers to pay at the point of purchase or to pay early.
• Only pay commission to sales staff when payment is received on their sales.
• Review your sales contracts to determine under what circumstances customers can cancel orders. If
necessary, update those contracts to limit the ability of customers to cancel orders.
• Seek payment extensions, even temporarily to your credit terms with suppliers.
• Check your supply contracts to determine under what circumstances you can cancel orders if necessary, or at
least delay delivery.
• Negotiate instalment plans with the tax authorities.
• Cut spending you believe unnecessary in a crisis, such as advertising.
• Delay unnecessary capital expenditure.
• Look to reduce staff costs by reviewing staffing arrangements. This could include reducing employee or
contractor numbers, reduced working hours or implementing a recruitment freeze. You may need to seek
advice as to how to do this.
• Reduce your drawings from the business.
SEEK FINANCE TO FILL CASH SHORTFALLS
• Speak to your lender about introducing or increasing your overdraft facility. Demonstrate that you are on top of
your business and understand your cash flow.
• Determine your own personal cash position to see if you can inject cash into your business.
• Seek out other investors to see if they can inject cash into the business.
CHANGE YOUR BUSINESS MODEL
• Increase your investment in selling online. If you are not selling online, you should seriously consider doing so.
• Look at different ways to deliver your product or service to your customers.
• Sell or lease out assets you don’t need.
Some of these actions may be detrimental to your business in the recovery stage. Keep an eye open for changes
in the environment so that you can return to normal business operations quickly.
6. Increase Online Sales
Recent experience from markets already impacted by the virus shows that customers are likely to stay home
(whether at the instructions of health authorities or by choice), and therefore, purchase more online. To remain
viable, many small businesses will need to begin selling online or increase how much they sell online.
A key part to preparing for the crisis is investigating different online platforms to see which one is best to sell your
products to reduce your reliance on your shop front. You should also review how best to deliver your products to
the customer. Your accountant may be able to assist you with these important considerations.
Suppliers of services should investigate digital solutions to the delivery of services to reduce the need for face to
face contact. Consequently, you may choose to close some of your physical locations.
7. Put In Place A Contingency Plan
See example checklist – COVID-19 contingency plan (PDF)
8. Talk To Key Suppliers
Talk to your key suppliers about their ability to delivery reliably during the crisis. Consider not only their ability to
produce the inputs you need, but also the transportation of the products to you and keep to the agreed
costs/prices. For example, if your supplier (or their key suppliers) are based in a location hard hit by COVID-19,
production may slow or stopped, and/or their ability to get those supplies to you is restricted. Consequently, those
key supplies take longer to arrive. If authorities impose import restrictions based on the product origins, then more
time will be spent at customs clearance points before you are able to utilise the goods.
In such a scenario, you should consider setting up alternative suppliers, including local suppliers even if more
expensive. Source them now and start price negotiations early.