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What to do Now? COVID-19 Survival Guide for SMEs

In the whole world, new cases of Covid is increasing affecting many SME businesses. Many Governments might extend the lockdown till end of April 2020.

Even before the lockdown, the tourism business in has suffered severely due to China 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 and allow postponements of bookings. Some even offered one fee year round vouchers to travellers for specific travel dates which is innovative and relevant.

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

However, taking action now 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 cashflow forecasts now
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 forecasted and funding need to be prepared based on 50% of the projected sales. We have attached a simple spreadsheet to do the cashflow forecast.

Talk to your Suppliers
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.

The supplier can be part of your business thru joint venture or preference shares where the supplier’s 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.

Negotiate with your Banker
Many 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 who business have been affected by the Covid 19 situation.

The Malaysian Government thru the bank have also launched a low interest 3.5%, RM3.3billion 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.

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.

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.

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 etc and whatapps it to your friends and family to share.

Employee cost management
Many news on employers will need to pay employees during the period of lockdown. The focus should be whether the business can survive and be profitable to pay the staff salaries in the company. Business risk is always there and a health crisis effecting business globally is one of them.

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 or forced to go on unpaid leave may claim EIS benefits of RM600 for 1 to 6 months which may ease the situation.  The Malaysian government has also announced the wage subsidy schemes thru Socso.  Please Click to have get more information on it.

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.

Cheng & Co is the leading home-grown International Accounting Firm provide one-stop professional centre with innovative solutions for excellence. Our team is specialized in providing insightful advice to assist your company to get through the business difficulties. Please drop us a message at enquiry@chengco.com.my or visit our website at https://chengco.com.my/ for more information or further enquiries.

The contact details of our Human Resource team is as follows:
PRO B CENTRE SDN BHD
No. 16-05, Tower B, Vertical Business Suite II, Avenue 3, Bangsar South City, No. 8, Jalan Kerinchi,
59200 Kuala Lumpur, Malaysia.
Contact Person: Tamil/ Jia Ler
email: tamilirasi@chengco.com.my/ jialer@chengco.com.my

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