October 6, 2020
Written by: Atul Oka, Senior Director of Strategy and Business Development, DUKE Heights BIA
The impact of COVID19 has been particularly hard on many businesses across Canada. A poll earlier in the year by Stats Canada revealed that over 50% of businesses reported a decline in revenue and two-thirds experienced significant declines in consumer demand. Most business expenses however have remained static resulting in many businesses facing increased financial stress. With many areas expecting a second wave, consumers will once again become more hesitant in frequenting places of business and reduce nonessential spending.
Studies have shown that even in a healthy economy, 82% of small businesses that fold do so due to cash flow issues. How then can businesses better manage their cash flow? On the broadest level, managing cashflow revolves around two main themes, namely income, and expenditure. Traditional thinking around cash flow management while effective during normal economic conditions, cannot all be applied during the challenging environment many businesses currently face.
The initial and correct response for most businesses involves the reduction of overhead expenses where possible. These include cutting down all nonessential recurring expenses, as well as evaluating and rationalising essential expenses. Security services as an example may be seen as a nonessential cost that can be cut or reduced. If your business intends to cut or reduce security services, let the BIA help you supplement this by registering for the FREE security service offered by the BIA.
Both employment and rental costs also form a large part of any business which are often seen as areas where costs can be reduced. Cutting or reducing these costs in the short term however comes at the trade-off of less flexibility and agility when the economy improves, thus creating a disadvantage over the longer term. Businesses are encouraged to solicit professional advice so that they can best understand the financial state of the business, and the options available to the business, thereby making the best-informed decision possible during these trying times.
If you do not have access to a finance professional or require a second opinion, the DUKE Heights BIA is offering a FREE consultation with a professional accounting firm for both general financial planning, and assistance in accessing and applying for federal support grants or loans. This service will soon be supplemented by a funding tool that will be launched on the DUKE Heights BIA website, allowing businesses to better identify relevant funding for their particular needs.
While cost-cutting can relieve pressure on working capital, a concurrent and potentially greater drop in revenue may lead to an increase in total debt as businesses try and finance the shortfall utilising loans and other forms of debt in the hope that revenue will increase before the cost of servicing that debt becomes unsustainable.
In this instance, businesses have little choice but to explore adding new products and services to their offering, while expanding current sales channels to sell more, to a greater audience. Many businesses in the BIA are looking at creating an online presence and trying to sell directly to the end consumer. This change in business model can seem daunting, and lack of knowledge and skills on e-commerce can create a barrier inhibiting many businesses from implementing this change to their business model.
If you are exploring e-commerce but need any assistance, the BIA has, with various partners, created a suite of FREE digital services to help you with this transition. These services include a FREE initial evaluation and assessment of your digital needs by DMS (Digital Main Street), a grant to create or update your website including e-commerce functionality, FREE access to a large digital marketing platform called GetintheLoop which can expose your products and services to thousands of new consumers, and FREE marketing on social media channels.
As a key partner to all the businesses in the area, it is hoped that these FREE services and initiatives offered by the BIA, aimed at helping your business better manage short-term cash flow and long-term growth, are fully accessed and utilised by our members.
Should you require additional information on the BIA or the services available to you, please access our website (dukeheights.ca), or email us (firstname.lastname@example.org).