Businesses have to evolve quickly to adapt to the uncertain economic climate. Government actions enforced across the region have disrupted supply chains, and changes in customer demands are straining budgets as businesses struggle to keep up. So how can businesses adapt with the uncertainty these challenges bring? Below are some considerations for those seeking ways to keep their business afloat.
1. Scrutinise cash flow
Accurate and up-to-date financial data can help businesses control cash flow and provide the visibility required to stay afloat. While most businesses operate on a 12-month budget cycle, the uncertain economic climate has required businesses to focus on short-term budget strategies.
Scrutinising cash spent on a weekly or monthly basis can help your business budget effectively to avoid unnecessary expenses. Start by updating your balance sheet to identify if cash-on-hand is being used efficiently and if there are
outstanding payables that can be deferred. This can help ensure that you have adequate cash to continue business operations and not waste cash on initiatives that may not happen. Businesses can also review existing contracts with suppliers and seek out more flexible payment terms to maximise cash. And if existing cash reserves are still not enough, take advantage of local government stimulus packages that provides cash relief to businesses and programs that may defer payments on existing debts.
“We had to look at cash preservation,” Chris Tham, CFO of Bailey Nelson said. “In a situation like this you can’t hesitate.
You have to act quickly. We made decisions around what costs we wanted to cut, and because of that we were able to ramp down our costs quickly.”
Stricter government regulations should also be kept in mind when managing cash flow. For example, supply chain disruptions caused by lockdowns may restrict labour and supply routes, limiting your supplier’s capacity. This will not only create inventory problems, but also negatively impact cash flow if your current inventory can’t meet customer demands. Start establishing regular communications with your suppliers to identify risks that may prevent them from fulfilling supply obligations. When this happens, consider alternative suppliers. This may be an opportunity to find bargain prices from new suppliers who might offer more attractive terms to sign on new business.
Cash is king, and now more than ever businesses need to have a clear understanding of their financial standing. Optical retailer Bailey Nelson realised the importance of this when all of its 70 stores across Australia, New Zealand, Canada and the UK were forced to close.
2. Shift business resources
Stricter government regulations are changing the way businesses operate across the region. As these changes happen, businesses can plan their strategies to align with immediate customer needs. Businesses can consider tweaking their business model and shift resources to areas that can still bring positive cash flow.
In the case of Australia’s first female-owned brewery, Two Birds Brewing had to move away from keg production as pubs, bars and restaurants were forced to close. Founders Danielle Allen and Jayne Lewis had to redirect beer that would normally be sold in kegs to bottles and cans and quickly think of new ways to label their beers. The brewery launched new initiatives such as a drive thru bottle shop and the introduction of new mix packed offerings to drive ecommerce sales and meet demand for online ordering and delivery.
Businesses that adapt to these changes can cushion the blow to their financials. While businesses can never truly eliminate risks, shifting resources will at least help weather the worst of it. This ensures that the resources of a business can be deployed toward tasks that can keep the business afloat.
3. Be lean, mean and adaptable
There will come a point where businesses need to upgrade their infrastructure. Social distancing rules enforced across the region has limited buyer’s options, giving birth to new spending habits and market opportunities. In Australia where online shopping has previously lagged other countries, online retail activity increased 119% between January 5 to April 19. While Singapore has seen two big increases with consumers shifting to ecommerce in February and April, coinciding with their circuit breaker measures. The sudden rise in demand for online ordering and delivery has fuelled ecommerce initiatives. Businesses should consider where technology solutions can help them respond to these new needs. These solutions can provide returns not just now but also in the long-term, providing better experiences across business channels.
For the Japanese eyewear retailer Oh My Glasses, closed stores didn’t stop the company from delivering an incredible customer experience. By offering frame fitting consultations through Zoom, it was able to add a human component to its ecommerce strategy. Providing a new way of enjoying their services online not only benefitted customers, but also their team members who otherwise would not be working.
“What we’ve learnt is that nothing is perfect,” Yosuke Watanabe, marketing manager for Oh My Glasses said. “In this new world, you just have to get out there and try things. Your customers will understand it probably won’t be exactly right. And that’s okay. At least you’re trying to help them.”
This article was originally published by NetSuite – JCurve Solutions (ASX: JCS) is NetSuite’s leading partner globally by customer count. See NetSuite’s Business Now site for more ideas on building business resilience through uncertain times.