Combatting the economic impact of coronavirus
The Australian economy has taken a beating of late, and with the coronavirus now declared a pandemic, the effects on Australian companies will linger for months to come.
The RBA estimates a -0.5% hit to the March quarter GDP, just from the fall in education exports and tourism alone. This is in addition to the RBA’s estimate of -0.2% to the GDP from the bushfires across the December and March quarters.
The Australian Government recently announced its stimulus package, worth more than $15 billion, to give the backbone of the economy a much-needed boost.
Small business makes up 90% of the economy, so it’s these businesses that will bear the full brunt of the economic effects of the coronavirus, and will benefit most from the package.
Aside from the masses stockpiling hand sanitiser, in-store foot traffic has reduced and international supply chains have been severely disrupted. There has been a stronger focus on local imports, but suppliers everywhere are struggling to keep up with the demand.
Just one payment default can lead to a dire future for a business. According to CreditorWatch’s data, 50% of companies that suffer a default will go into administration within 18 months.
How can SMEs protect themselves?
It’s imperative that businesses are proactive to protect their livelihood and cash flow: prevention will always be more effective than a cure. Just like washing your hands, these strategies will make a difference.
Make decisions with data
Too often, companies take on new customers without having a clear understanding of their financial history. Who is the director? Has the business incurred any payment defaults or court actions? What does their credit score look like? These are the types of questions you can – and should – answer with data.
A credit reporting bureau like CreditorWatch utilises a range of unique data sources to help you make more informed credit decisions.
The best part? You don’t need extensive industry knowledge (or 10 extra packets of toilet paper) to understand our credit reports or use our credit management tools. They’re designed to be intuitive, interactive and easy to navigate.
Know your supply chains in and out
You might perform credit checks on and monitor your customers, but what about your suppliers? Having a key supplier go down can be as detrimental as losing your biggest customer.
Your supply chains may be more complex than you realise. For example, at least some part of your product might depend on resources from China, which have been directly hit by the coronavirus epidemic.
Become familiar with your suppliers and reach out if you have any qualms about their ability to keep up with your customer demand. If they’re unable to deliver, seek out alternative local suppliers.
If one of your key suppliers is affected and you don’t have a contingency plan, your customers (and your cash flow) are the ones that are affected.
Be vigilant with late-paying debtors
In times of economic downturn and panic, businesses can struggle to pay on time, and if you’re a small business, expect to be the first to miss out on your money.
Keep a watchful eye on late payments and ensure your clients aren’t using you as a bank. A constant extension of payment terms can have dire effects, especially for SMEs, who depend on their steady cash flow to pay their bills.
Get in contact with debtors and remind them of outstanding invoices. If polite conversations fall on deaf ears, use one of CreditorWatch’s debt collection tools, like our letter of demand templates to get paid.
CreditorWatch customers report a 53% increased chance of receiving payment when they used the CreditorWatch logo on their invoices and statements. If all else fails, lodging a payment default is a powerful way to prompt a slow-paying customer.
The economy will recover from the effects of the coronavirus in due time, but this won’t be the last time a crisis impacts the lives of business owners.
You don’t need a crystal ball – you just need to equip yourself with the information to make better business decisions. Trial CreditorWatch for free to discover the tools you need by your side.