By Kuben Rayan, CEO of RentWorks
It is clear that the COVID-19 crisis is creating tough times for businesses all around the world. Experiencing substantial declines in sales or even a complete suspension of operations, they face severe cashflow constraints that threatens their future. Post the current COVID-19 crisis, most businesses would have lost two or three months’ worth of revenue – which will be exponentially harder to recover from as the world resurfaces from the effects of economic lockdowns. Unfortunately, the harsh reality is that businesses will not be able to simply reopen and hope for the best recovery, as most would have acquired a new string of debt during the lockdown period. But, as difficult and uncertain as the future might seem, companies will have to focus on the way forward and plan for the ‘new normal’.
COVID-19 is not an event with a clear beginning or end, but rather an occurrence that brings about a complete shift in the foundation of the modern world. It is tough to predict what will happen next. The only way to mitigate some of the risk, is to prepare and ask the tough questions.
In this Sound Advice article, I will be focusing on preparing for business in an uncertain post-COVID-19 future for 2020 and beyond.
Protect and prioritise
In the current operating environment, it is of paramount importance to conserve cash for core activities. Post lockdown, as we get back on track, we will still need to ensure we safeguard the business, especially when procuring much-needed new assets.
In this regard, new business procurement must be slicker and more intelligent. Procurement also relates to communicating internally, working with stakeholders to avoid fear-mongering, and focusing on developing and successfully implementing action plans to mitigate emerging and evolving risks. If you have traditionally paid cash for your IT and other business assets and now want to conserve cash for core activities, you should consider a RentWorks facility when making your next procurement decision post lockdown, which is likely to alleviate a large upfront cash outlay.
An additional option is to look at the assets you have and make use of the Sale & Rent Back facility from RentWorks, which will provide an immediate cash injection while you rent your IT asset back over its remaining useful life. This gives you the benefit of using the asset, but still conserving your scarce cash resources. These facilities will ease your cashflow burden and assist your business in both the short and long term.
Chart a course forward
Over and above the strain that isolation is placing on many businesses’ cashflow, most are under extreme financial pressure, often leading to mounting debt. The solution remains unchanged: consistent information and communication to all stakeholders, especially your bankers and suppliers. Protect growth and profitability through actions such as scenario planning, take the pulse of your customers, and think through longer-term considerations around shifts in core markets or business models as a result of the pandemic. In addition, consider disclosures related to the direct effects on the results of operations, as well as second and third round effects. Think about the disclosures related to risks and uncertainties regarding the impact of COVID-19 on future periods. Assess these disclosures in light of the current and future effects on liquidity and solvency.
Planning for uncertain times
Although the changes in the operating environment brought on by the coronavirus is beyond our control, we can control how we respond to it. As business leaders, it is in our best interest to have a plan of action for every reasonable but plausible scenario. Putting our heads in the sand and waiting for the pandemic to pass is not a solution.
This is why this is not the time for complacency. Boards must review their business plans, business models, and business continuity strategies. COVID-19 is not an event with a predictable period or defined timetable. It’s likely to remain an ongoing threat that requires different responses at just the right time. Additional lockdown periods and other disruptions are very likely, as I highlighted in my previous article: Five practical business steps to navigate through the pandemic.
Organisations must look at what will ensure their financial sustainability during these periods of uncertainty. Those that adopt a wait-and-see attitude or assume that the crisis will resolve itself are in significant danger of becoming a statistic. The epidemic demands direct and clear plans. At the very least, organisations must develop 12 to 18-month plans to navigate the uncertain future. Only by proactively planning for an uncertain future can we give our businesses a fighting chance to have one.
For more thought-provoking articles or industry insights, follow Kuben Rayan on LinkedIn; alternatively, visit the RentWorks website.