Over the last three months, we have spoken to many business owners about the coronavirus pandemic and what it means for their businesses both in the short and long term. Many understandably have concerns, but a number of our clients are looking for the hidden opportunities within this crisis.
As we gradually make our way out of lockdown, you may be in a position to start looking into new opportunities that will hopefully turn your prospects around. Here are some considerations you should be making…
New Customer Checks
Make sure new customers/prospects are thoroughly checked and vetted prior to doing any business with them. Are you dealing with a reliable company? Can they afford to pay their invoices?
Lots of businesses are going to be struggling over the coming months, and you need to avoid having to write off large bad debts. If in doubt, get proforma payment.
Manage your cashflow
It’s important to regularly check and update your cashflow. Before agreeing to any new business opportunities, check your cashflow can sustain any large orders or extended credit terms.
You should also work out your working capital cycle by product / customer / sector / department. Your working capital cycle or cash lockup days is the length of time it takes to convert the total net working capital (current assets less current liabilities) into cash. Use this simple tool to calculate your working capital cycle.
Monitor Creditor Changes
Regularly update your cashflow forecast to reflect any changes to Creditor terms/stock/new sales. If external finance is needed, make sure you have this in place well before, to give better options and choices.
Is diversification the answer?
Business owners must make be closely monitoring market change to enable them to quickly find alternative revenue streams. However, if you are considering diversifying your product or service offering, you should aim to do this with as little risk as possible.
Can you open the door to a new market by making a small vertical or horizontal step? Does it make financial sense? And, will there be demand for your new product or service? Be sure to utilise our opportunity matrix when deciding how to diversify your business.
Seek advice from your accountant
Your accountant should be able to provide you with support and guidance you need throughout this uncertain period. Get in touch with the team at Oldfield Advisory if you need any assistance.