The impact of COVID-19 on Australian businesses is unavoidable but there are strategies to help mitigate the effects. Marketplace CEO Leo Tyndall explains.
COVID-19 is causing considerable economic distress with more significant flow-on effects to SMEs than the Global Financial Crisis of 2007. Now is the time to pre-plan in anticipation of industry movements in the months to come. Here are some tips for the food and beverage manufacturing sector.
Tip one - Ensure sufficient capital
For both offshore and local manufacturers and supply chain businesses, sufficient reserve capital is essential to cover expenses for the next six months. Assume a basis of a reduced income of circa 30 per cent and prepare cash reserves accordingly.
COVID-19 will impact businesses for six to 12 months.
Tip two – Remove any unnecessary expenses and implement alternative work methods
It’s important not to jump into a mass hysteria but rather find effective solutions. Now is not the time for large expenses that will not yield quick results. Focus on expenditure that delivers short to medium term results. In the instance of manufacturing and supply chain businesses, ensure you are meeting immediate business and customer demand and understand what is wanted in this current COVID-19 consumption environment.
Following the workflow reduction in China, it is likely a similar situation will occur in other countries. Senior personnel of SMEs should not be travelling as they risk affecting the business’s day-to-day operations if they contract COVID-19 and need to self-isolate. The escalating travel restrictions mean businesses are unable to perform at their optimal state in the short-term. To adapt to the circumstances, methods such as working from home, conducting meetings online or via video and coordinating workload with staff are necessary.
Tip three - Investigate and do due diligence for external manufacturers
For manufacturers, it is prudent they identify the logistic arrangements of their raw material suppliers and ask about their supply methodology and where the resources are coming from. This will aid in preventing a shortfall of raw materials used in the manufacturing process and allow ample time to identify a contingency plan should supply be limited or restricted.
China is the onset of manufacturing for many businesses. Any businesses engaging with or relying on manufacturers in China need to consider quality control of goods and ensure supplies get delivered within the required timeframe. Paying a deposit and end payment can assist with this. SMEs need to investigate and perform due diligence on factories’ delivery times or negotiate how to improve this process in the current circumstances.
Tip four - Secure payment terms
Identify payment terms from people supply to you, whether raw materials or goods in part. It is essential during this time to negotiate partial payment, and the remainder paid in full on delivery. Current government interventions and border restrictions may limit offshore and interstate trade in the coming months, and businesses must ensure that they do not pay for a good or raw material if it cannot be delivered.
