The pandemic COVID-19 has disturbed the world. Irrespective of the industry in which you are involved, you will have to alter your business operations, according to the current scenario. The response in the traditional crisis will not be sufficient because this kind of crisis has never happened before. It is very crucial to adjust according to the transformation by applying some strategic measures. Below are certain tips that you can follow to decrease organizational risks:
The first step to mitigate the risks related to organizations is getting the right mindset. It must be viewed that this is not the end of the world. This is the time when we must change the negativities and inabilities into the pool of opportunities for growth and learning new measures. We will have to work according to three scenarios: survival, restructure, strengthen.
SEEK THE DATA FOR SCENARIO PLANNING
Before making any decisions, get the data that is required. Many times, entrepreneurs make negative decisions under stress. This is the worst thing that the business owners do in the scenario of financial turmoil. The first data point that you see, is the break-even cost. This will assist you to notice how different situations may play out financially, also how much you will have to keep into your reserves.
Calculation of Break-Even
Break-Even $ = Fixed Cost $/ Gross Profit %
Now after having with the break-even point, review the budget. Planning and budgeting are more crucial in this scenario than before. If you do not have a budget then this is the time to make it. Assure that the living document that you create is up-to-date as per the situation.
CASH IS SOVEREIGN: DO WATCH YOUR CASH FLOW MANAGEMENT
If your business is sinking, then cash flow can work as a hope to make your business afloat. The cash flow forecast of your business needs to be updated in a regular manner to ensure that you are prepared for your future. The answer here to the question that why some companies survive during the recession, while some fail? The answer here is the focus on cash flow. During the challenging times, efficient management of your cash flow can either build or break your business. Without any sense of cash flow, you cannot go forward.
Start preparing with the cash flow forecast. Make use of your estimated sources. You will be able to make your path in the business and recover quickly.
MODIFY YOUR BOOKS
Bring into your consideration to add an additional expense item called COVID-19. This involves the material related and supplies also, the time that staff spent on dealing with the crisis. Measure all the extra time that the workers spent on meetings related to Coronavirus, either strategy sessions or safety meetings.
If the authorities provide relief, your data must be organized in the best possible manner.
CUTTING BELOW LINE COSTS
Evaluate the indirect and overhead costs deeply. These are the products which are good to have, but not are vital to keeping your company working.
Make use of these suggested cuts:
- People not at the workplace: Reduce the cleaning team to once or twice a week.
- No generation of paper: As people are working remotely and everything can be available on the cloud. Therefore, you do not have to pay for extra papers.
- Eliminated onsite costs: You and your business must take advantage of working from the home environment.
- Reduce the non-required events of the company: You must cut any non-essential company events or parties.
Another option that you can consider is to outsource non-competencies as a solution to saving money. To exemplify, the outsourcing bookkeeping functions costs much less, up to 30 to 40% than an in-house bookkeeper. Many businesses in this scenario are transferring to outsource accounting services as a cost-effective and reliable alternative to in-house accounting.