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Back to Business – Better Business

Just as business owners have planned how to survive the challenge of hibernation, they must now plan the challenge of restarting their businesses.

This planning must focus on the following key uncertainties.

• How to approach creditor arrears
• The uncertainty of the speed that sales will return
• How to fund the costs that are needed to get back into business
• Making a meaningful profit in the shortest term possible

We would anticipate that profits will take an extended time to return to normal and the debts of your business will get worse before they get better.

Our thoughts on strategies

Creditor arrears

• Suppliers will need to understand that it will take time for their old debts to be repaid, and that further support of your business will be required to help you get back in business. Businesses need to support each other to get through this time and business owners must have open and transparent discussions to negotiate a fair and achievable return to normal payment plan.
• Superannuation and tax arrears need to be addressed by businesses lodging all overdue returns, and negotiating in good faith extended and achievable repayment plans to bring debts back into good order.

Banks, landlords and leases

• Until the profitability of the business can be re-established, it will not be possible to commit to business as normal payment arrangements with these critical stakeholders, and business owners must have open and transparent discussions to negotiate a fair and achievable return to normal payment plan.

Return to profit

Underpinning the commitments being made above is the ability of the business to return to profit. Business owners must focus on the following areas to achieve this goal in the shortest possible time:

• focus on selling only goods and services that can achieve the best profit contribution margins. Do not waste capital on holding stock that generates a low profit contribution margin.
• be slow in reintroducing overheads to the business that have been cut over the past months.
• It will take months of reinvested profits to make meaningful reductions on creditor arrears, so business owners need to be prepared to tighten the belt and defer dividends and excessive drawings.