As we enter into the second year of the covid19 world, we have been examining the rationalization and changing business landscape. As accountants we are often lamented as being the providers of historical information and not necessarily forward thinking. In this light we have been working with our business planning by making the change to fully adapt our business not only for covid19 but for the landscape that will follow it.
Now is the time to be planning your business for when there is a return to normality and to accept that there will be different business conditions. The level of Government support will continue to decline and this will be the crossroad for some business, change and adapt or let things continue and hope for the best.
Do You Read Your Numbers?
At Vault we undertook a project to complete all corporate compliance this side of Christmas, this was twofold, one giving us the data to start planning for next year, but also give our team the chance to work more closely with their clients in the business analysis and development function, putting a value on the numbers not just preparing them for compliance purposes.
Using Xero to it’s best ability means that we work with you to bring the numbers to life, to give them meaning in the context of improving your business and maximizing your profitability. If you are only getting the numbers without explanation or an understanding what they mean, feel free to reach out to us here.
In the context of business planning the numbers are a key element in understanding cost rationalization, cost planning and cash flow.
Using my previous business as an example, covid changed the business model overnight, the regular 4am wake up on a Tuesday morning to fly to Sydney and the 4am fortnightly wake up to fly to Melbourne ended in an instant. Then it was time to analyse the costs of the business from top to bottom.
Line by line analysis it was appreciated that the business was not running leanly and there was opportunity to rationalize the costs of the business. There was a tough few weeks as things were critically analyzed and changes made. Some of the big ticket items included;
1. Occupancy and space
Having had a retail presence and being forced to work remotely meant that immediately the office had to go, but the cost benefits of this were also significant. We had utilities, insurances, telecommunications and storage that was immediately jettisoned.
We took a review of the calendar for the previous two years and noted that the visitors to the office was less than 5 per month, and these meetings could be held remotely.
2. Working from home and the required technology
On the flipside working from home was a significant financial impost and it required a substantial investment. This was analyzed on the basis of the loss of the office space, and when fully accounted resulted in a saving of 65% against keeping the office.
The management of the travel budget was significant, and in real terms was a 100% reduction in the first instance, but once the transition completed was still a 95% saving against the previous expenditure, for any size business, it is not just the flights, but the parking, the meal expenses, the transfers, the accommodation and the down time.
The covid changes have meant that businesses have had the downtime to plan their costs into the future. In assisting a retail business we have used the forced closures to business plan for the future and this has meant having an opportunity to plan, something that the business has not enjoyed for many years.
Things that have popped out during the cost planning and business planning discussions have been;
- Marketing cost and exposure
- Technology and systemisation
- Outsourcing of key functions
- Occupancy and lease negotiations
- Calendar and scheduling (in the case of the retailer, understanding the real cost of opening).
Cash Flow Management
Throughout the period of the recent covid closures cash flow has been paramount and the cash flow planning for businesses has been significant. Whilst there have been substantial savings in some elements, have these assets been re-deployed or simply retained for a later day. It is a core component of the business planning process and one that has ultimately decides the success or failure of the business.
In discussing cash flow we have been looking at;
- Revenue expectations
- Deferral of expenses
- Debt reduction
- Debt facilities and the ability to access them
Grants And Government Support
The development of a practical approach to grants and Government support of business has been significant and one, that unfortunately, has been done poorly. We have recently assisted a business owner that missed a $200,000 Government grant simply because their accountant did not realise they were eligible. For this business owner it was the difference between surviving or closing.
We have used the time understanding what grants are available, this can only happen when you know the businesses and what’s available. For most business owners accessing Government support is a new thing, but one that should be a core component of your discussions with your professional advisers,
Utilization Of Digital Communications Within The Workplace
As we accept that digital communications are here to stay, we looked at our own usage at Vault and found that we are having less and less face to face meetings at the office and more on site, we view this as a continuation of the streamlining of businesses.