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Preparing your business for the challenges of Omicron

Reading Time: 3 minutes

As the Omicron variant sweeps across Australia, the initial relief that came with opening up after the lockdowns has quickly dissipated. With supply chain disruptions and labour shortages severely restricting capacities, many businesses are in a worse position now than they were during the lockdowns. So, how can small businesses navigate the impact of Omicron, prevailing uncertainties and best prepare for the potential challenges of the year ahead?

Current challenges faced by small businesses 

December and January saw the usual seasonal spike in company deregistrations, particularly in construction, logistics and manufacturing. These key industries have a huge bearing on the rest of the economy in terms of jobs and demand for materials. As they have been struggling due to ongoing COVID-19 cases and the omicron outbreak, there will be a knock-on effect on other industries and businesses, impacting the first two to three months of the new year.

Small to medium businesses are being disproportionately affected by supply chain disruptions. Many have depleted their cash reserves since JobKeeper ended and are unable to accommodate increased costs. They are being forced to rapidly increase prices, obtain storage for more orders and quickly move online. With more employees self-isolating due to Omicron, staff shortages have severely limited business capacity and operations. Many small businesses have therefore ground to a halt or are operating on much tighter margins.

Start preparing now for March 2022

With health experts indicating that Australia will overcome its Omicron peak in late-January or early-February, now is the time for businesses to get their house in order so they can accelerate out of the pandemic when the economy starts to ramp up in March.

In these uncertain trading conditions, small business owners need to have a clear understanding of the financial health of their customers and suppliers. Your trading partners will likely be in a more precarious financial state compared to pre-lockdowns. Start the year by performing robust due diligence to mitigate risk and protect cash flow.

Here are some ways small businesses can start preparing themselves for the year ahead:

Stay vigilant about your trading partners and recognise warning signs

Are you updated about your trading partners’ financial health? In a few months, some businesses will start finding out that outstanding invoices have not been paid because certain customers have become insolvent. This realisation would have come too late.

In this climate, your customers’ financial situations will fluctuate. Small business owners can manage volatility with ongoing monitoring to be fully aware of how their customers and suppliers are performing. Now, more than ever, it is important to take a proactive approach to debtor management and keep track of key information and unusual activity.

CreditorWatch has the latest financial information and exclusive risk insights that provide a comprehensive view of an entity’s financial health. We conduct 24/7 monitoring on your customers and suppliers and alert you instantly when any of their circumstances change. Be the first to know about adverse events and high-risk indicators such as court actions, payment defaults and insolvency notices so that you can act quickly to mitigate risk.

Understand risks associated with potential and existing trading partners 

Who should you be doing business with? Before making any decisions, it is essential to understand the creditworthiness of potential and existing trading partners.

Risk Rating is the most predictive credit rating system in the market. It indicates a business’ creditworthiness and predicts its likelihood of default in the next 12 months. This is derived from unique tradeline behavioural data, business demographic risk data and traditional credit risk drivers. Easily understand an entity’s creditworthiness by glancing at its numerical credit score between 0-850 and riskiness rating from A1 to F. Business owners should be using this to make smarter and more confident decisions about who to do business with.

Protect your assets when your customers wind up

What happens if/when your customer winds up with your stock on hand? If you’re not registered on the PPSR, it’s likely that you’ll lose all your goods and outstanding debt. The PPSR helps businesses protect their assets and recover debt in the event that their customer becomes insolvent or liquidates. It is essential for any business that supplies goods on credit terms; leases, rents or hires out goods; or accepts personal property as security for outstanding debt.

As a secured creditor, you gain priority in getting your goods or money back. You also retain entitlement over goods that have been used or sold and are protected against preferential payment claims. Registering on the PPSR could be the key to saving your business. It is the most affordable way to protect yourself against losses and bad debt because of customer insolvency. However, the PPSR is notoriously complicated to navigate; one wrong detail could void your entire protection. As a result, many businesses are losing out due to incorrect or incomplete registrations.

PPSRLogic provides a simple and cost-effective way to create, manage and renew PPSR registrations. It helps you save time and money by ensuring your registrations are accurate and complete. It also ensures that you never miss a renewal, even when securities have been registered for different terms and across different dates.

CreditorWatch empowers small businesses and startups with the credit risk management capabilities of larger organisations. Prepare for the year ahead with tools like monitoring and alertsRisk Rating and PPSRLogic. If you’d like to find out more about tailored solutions for your business, get in touch with our Customer Success Team at support@creditorwatch.com.au today.