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COVID-19: 5 Mistakes Businesses Might Be Making With Their Finances
Even before Covid-19 came along to ruin the year, running a business could often prove difficult, with disappointment, struggles and risks. Business owners need to constantly mitigate company-specific risks while providing products and services that meet consumer demands.
Many Small and Medium Enterprises (SMEs) already face survival challenges during their first year of operations, with half of new businesses fail within the first three years, and only 20-30% will survive more than 8 years.
Now that the pandemic has been unleashed on the economy and the livelihoods of countless people everywhere, it's time to look on the bright side and identify mistakes exposed by the crisis that SMEs have been making all this while.
Failing to adopt contactless payments
Now that businesses are reopening in Phase 2 of post-Circuit Breaker, it's important to understand that the new norm isn't just a set of procedures that may last the rest of this year before everything goes back to the way it was again.
Experts believe that aspects like adopting contactless payment options were spurred on by the frantic changes amid Covid-19, and they are most likely here to stay. If your business doesn't have a way for customers to pay with the wave of a card, or through online channels yet, then you're setting yourself up for more business stoppage and poor finances in the future.
SME companies in Singapore cannot rely completely on on-ground transactions anymore, especially as the government resumes its push towards digital adoption. By setting up a contactless payment infrastructure, you'll not only be able to continue business in times of crisis, but you'll have alternative digital options to reinforce sales and revenue.
A lack of intelligent spending
Now that so many people have their defences up, it's clear to see that one of the very first things that SMEs need to re-adjust is their spending. The pandemic has led business owners to reevaluate their financial priorities and cut away unnecessary expenses that have been accumulating all this while. Now, it's time to focus on intelligent spending - going over the benefits and disadvantages of every single new expense that might be brought on.
Similarly, intelligent spending also involves going over other financial obligations like opted financing options and business loans. Debt accumulated over time could lead to compromised accounts, which require owners to settle outstanding payments before moving on to other expenses. Clear off debt whenever possible, and move forward with a more critical eye on the types of loans your business needs. If your budget is tight and you don't want to increase financial risks, opt for short-term loans and only make applications to pay off crucial assets.
Not realizing the scale of disruption
There's a big difference between conventional business disruptions and pandemic-related disruptions, and one major aspect is the scale in which they impact your business. Normal business disruptions are often localized, meaning that they only affect a specific part of a sector or other specific elements like a workforce or facility. They might also affect businesses in a particular geography. In other words, business disruption is more controlled and less all-encompassing.
Pandemic-related disruptions are on another level. They are systemic explosions that affect nearly everyone and everything in your industry - from the workforce that you've incorporated to the customers you sell to. In fact, pandemics are notorious for deeper wounds that damage logistics, supply chains and competitors. The solution might lie in leaving no stone unturned.
It's important to consider your business in its entirety and start thinking of ways to reinforce the way you manage your inventory, the way you interact with and acquire customers and the way you receive products or deliver services, because they all may be affected in some way or another. For instance, if your current product-driven logistics strategy has been proven vulnerable, then it's time to look at pre-booking air freight or rail capacity to protect your supply chain, as well as using after-sales stock to resume business as seamlessly as possible.
Not considering legal and long-term strategies
Covid-19 has also changed a lot of things about the legal and long-term tactical aspects of business infrastructures. Liquidity is a prominent point of discussion now, as many SMEs try to weather the corona-storm.
Considering SME financing in Singapore?
It's time to look at things like contingency plans and plan B measures if the economy continues to sink.
There’s also a need to look at dealing with legal obligations like statutory taxes and employee salaries before things get worse. Look for possible problems that could impair liquidity and identify them as soon as possible. The good news is that Singapore has issued a variety of relief aids and assistance programmes for employees and employers alike, so be sure to apply for relevant initiatives to relieve some pressure.
Not being flexible enough
Flexibility is a key pillar of business survival. Don't be afraid to pivot, shift or switch certain things about your business model moving forward. Countless companies have applied innovative alternative offerings and quick thinking to make up the pandemic's brutal disruption, and they are doing fine now. The ones that are going belly up at this time are the ones that weren't willing to apply some flexibility in the way they conducted business.
If possible, consider diversifying your offering to keep your finances intact and maintain relevance in a post Covid-19 world. Think about how your business works with employees, stakeholders and consumers and see if there is any wiggle-room to make things better for everyone. Don't be so rigid.
Finally, it's important that businesses don't forget about their loyal customers amid all the chaos of internal preparations. Offer incentives and discounts to them because this could help your business remain relevant in the market. Initiate outreach campaigns that involve a sense of gentleness and compassion - this can go a long way in terms of retaining customers and boosting brand value.