What To Do Now? COVID-19 Survival Guide for SMEs

Nearly 10 days into the lockdown in Malaysia, the new cases of Covid is increasing but hopefully will go down by soonest. Some are saying the Government might extend the lockdown till end of April 2020.

Even before the lockdown, the tourism business in Malaysia has suffered mainly due to China’s Covid 19 issues at home. Tourism related businesses all suffered especially those with high rental or loan asset commitments i.e. Airlines, Tour Buses and Resorts. Many cancellations were made and some airlines and hotels even offered refunds (might be insured) and allow postponements of bookings. Some even offered one fee year round vouchers to travellers for specific travel dates which is so smart and relevant.

Nevertheless, there will be plenty of SMEs that will not see the end of this financial year.

However, taking action is more important. There is a few things that can be done during these bad times. Hopefully this will increase the sustainability of the business and thrive later on after the virus situations improve.

Do your Cash Flow Forecasts now
We shared on our Facebook Live on how to do your cashflow forecast for the next 12 months. Many business owner may have just done a sales forecast, checked their bank balances and look into their debtors. Some just ignore the creditors. Besides the above, the monthly fixed expenses such as rental, utilities, staff costs and loan repayments need to be considered also. Please click on Cash Flow to download a sample spreadsheet to do the cash flow forecast.

Cheng & Co has launched our CSS STAND BY YOU (Click) info package for SMEs to survive and grow thru this crisis.

Sign up for our CSS Service by clicking here.

Renegotiate with Supplier/s
Every business must renegotiate with essential suppliers to lower prices or longer repayment terms for a duration of 6 to 12 months. This can be done in exchange for a longer fixed term price or supply contract so everybody wins.

Another suggestion is for the supplier to be a part of your business thru joint venture or preference share where the supplier business and yours can be joint during and after this period.  This is a critical time when we need all parties to be coming together to face the current crisis.

If the supplier does not respond, you may consider going for Restructuring. (Please click on: Business Restructuring during/ after Covid 19)

Talk to your Banker
The Government announced auto moratorium period of 6 months for all business loan repayments.  This will help ease the cashflow of the company but take note interest will be still charged on outstanding loan amount.  Many banks have also started offering deferment proposal to clients whose business have been affected by the Covid 19 situation.  Our Government thru the bank have also launched and added a low interest 3.5%, RM50 billion business loan scheme to assist those business affected by the Covid 19 crisis.   Business owner must take advantage of these initiatives by the banks and Government.

Take advantage of Invoice Factoring thru banks/ P2P/ Fintech
Business owner can consider selling their invoices now for a discount to if the typical payment terms are long. For example, if a client owes you $100,000 and the payment is only received in another 90 days, you can have an option to sell the invoice for $90,000 but received the money today. Online applications thru P2P lenders are easy and fast. The accounting firms serving your business will know some of these lenders and will be able to assist you on it swiftly.

Discount Vouchers
Airasia starting the ball rolling by offering RM499 travel for a year voucher with terms and conditions. Many people went to buy this vouchers. Vouchers will enable your company to generate cash flow now but it is important that the voucher must be fulfilled.

For food and beverage related business, there has been a trend offering preference share investment with fixed returns and food vouchers giving returns up to 20 to 35% per annum. Recently BMS Organics raised a million ringgit in just 4 hours thru our associate Mystartr platform.

Loyal customers that patronise the outlets often will surely have an interest and this also ensure more loyalty to the business.  Some e-commerce sellers have even come out with proposal for their e commerce platforms to encourage their buyers to support the e commerce favourite stores by buying gift vouchers.

Internationally, the more popular platform, more than 10,000 GoFundMe campaigns have raised tens of millions of dollars for individuals and businesses affected by the coronavirus according to their website.

Capture New Demands and trends

Delivering Other Items
Besides selling vegetables in their shop, a business owner has offered home delivery of not only vegetables but also essential sundry shop goods such as eggs, can food, sanitizers, bread and other items during this period. Delivery will be free if it exceed certain amount. This is a lot of application to help with the delivery. Consider to use simple cloud applications for online booking and delivery.

Going online is now so simple with cloud solutions readily available online. Just do a search online or see look for your accountants or consultants to assist you on which solutions to start the online business. You can just start simply by creating an ordering form and posting and sharing on Community Facebook pages i.e. Melaka Food Delivery (69,000 members) or Whatapps your services to your friends and family to share.

Employee cost management
There was so many opinions on Employers’s paying employees during the period of lockdown. The focus should be whether the business can survive and sustain to pay the staff salaries in the company.  Business risk is always there and a health crisis effecting business globally affects SMEs tremendously.

Business owner can negotiate with employees on pay cuts or deferred bonus payments. A business having 50% paycut may be able to survive another 6 months. Under the EIS scheme thru Socso, employees that have been layoff may be able to claim EIS benefits which may ease the situation.  (Click on Managing your payroll during COVID19)

There is no one size fits all solutions. We are sure SMEs owners have thought about how to go about it and some even take opportunity to change their business model during this crisis.

We hope to share more SMEs owner advise on how they manage their business during this crisis time. Please feel free to contact us if you have any feedback or would like to talk about implementing any of the above actions.

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