There is no doubt that the current situation that we have has given intense difficulty to many small to medium enterprises (SMEs). There is a direct link between small businesses and Covid-19 since many non-essential enterprises were forced to temporarily halt their operations. In most cases, it is the small businesses that suffer the impact of Covid-19 because of financial struggles.
Aside from the impact on public health, the pandemic has resulted in major economic shocks. Because of the prolonged situation, many small businesses had shut down and ceased operations, resulting in several financial challenges and employees losing their source of income.
But even with all the negativity, small to medium businesses are still hopeful, keeping their financial spirit. They are carefully planning their business operations to cope with the current situation.
Struggles of Small Businesses During this Pandemic
Small businesses are the backbone of the economy. And many of them are in survival mode and still trying to continue despite the still ongoing financial challenges because of the current economic situation. It is said that when businesses do not spend, the economy weakens. When businesses shut down, many get unemployed.
Struggles are inevitable for all kinds of businesses especially for small to medium enterprises. Even before the pandemic started, many of them were already facing financial challenges. But the pandemic just added fuel to their struggles.
Here are some of the financial struggles that small businesses are facing.
- Shortage in Cash Flow
It is hard for any business to continue when they are losing their financial sources. When the pandemic started, many of us hoped that this would not last long. Small businesses temporarily closed with the hope of re-opening soon. Some of them used their emergency funds because they thought that they could immediately gain them back.
But the problem with this pandemic is that everything is uncertain. Experts cannot even say when the pandemic will be over or if it will ever be. The economic situation, though, is slowly recovering around the world. Many countries have allowed businesses to re-open. Some schools are also opening gates to their students and non-essential businesses are also allowed to operate. For small businesses, this is the start. They are slowly recovering their financial flow.
- Drop in Revenue
This pandemic has also resulted in a decrease in revenue. With authorities ordering some small businesses to stop operations, the total amount of generated income will also stop. Some businesses need to adjust their sitting capacities to comply with health and social distancing measures; thus a drop on their income. Though not all experienced this decrease, it is noted that about 29.8% of small businesses, on average, saw a drop in their revenue since July 2020. You can see this from the Australian Bureau of Statistics, Business Conditions and Sentiment April 2021, reported increase and decrease in revenue.
- Access to Additional Capital
One of the biggest challenges for small to medium enterprises is having access to additional capital for them to stay in operations. Many businesses have emergency funds but that can only keep them for two months at most. Some small businesses have expenses like rent, bills, loan payment and employees’ salary even when they are closed temporarily. So, when they’ve run out of funds, even if they want to continue or re-open in the future, they are still unsure because of lack of financial sources.
- Transitioning to Complete Digital
Businesses that survive and flourish during this time of pandemic are those that maximize the use of the digital world. Large companies can quickly transition into online transactions because they have the budget to manage so.
Sadly, not all are capable of this. In-depth research and planning are needed to make this work and some small businesses just don’t have the capacity to completely transition to digital business.
Financial struggles are part of running small to medium enterprises. Coping with this difficult situation is hard but you do not need to deal with it alone. With Doug Durie, he will assist you in planning your next step to continue running your business, helping you strategize more efficiently especially during this time of a pandemic.
Rebuilding Financial Spirit During Pandemic
Small to medium enterprises (SMEs) are known for being innovative and adaptive. Regardless of our current situation, many business owners are finding ways on how to operate again or re-open their business. It is important to have a recovery plan to establish new normal operations.
A Financial Spirit Recovery Plan is vital so that you know what to do to rebuild your business during the pandemic and when the pandemic ends. Maintaining a positive financial spirit despite our situation is hard but not impossible.
Here’s a helpful guide to get your business back in operation.
- Know your financial damage
First step in rebuilding your financial spirit is assessing how deep the pandemic has impacted your business. You need to update your financial statement to know your cash flow. Compare your latest statement to last year’s numbers to know your losses.
- Consider getting additional funds to recover
It is more likely that small businesses will need more capital to re-start their business. There are many options available and to consider when it comes to financing small businesses during the pandemic recovery period. But before getting financial help, take into consideration that borrowing money is competitive as it has its pros and cons.
- Develop a timeline for rebuilding spirit financially
Doing all things at once is not realistic. You may want to do several things to recover your finances but know first what’s on top of your priority list. Take small steps and track your progress. You may check weekly to see what are the processes that are delivering solid results. Then move to monthly as the business operation begins to normalise.
- Have a contingency plan for the next crisis
We are hoping that this pandemic ends soon and also praying that nothing else will follow. But it is better to develop a plan to help protect your business from future crises. An example of this can be creating liquid cash savings. Use your experience during this current crisis in preparing your business operation.
The more out of the box ideas you have, the better… so you can prepare for the worst scenarios.
None of us knows what will happen next year or in the future. But it is best to always be prepared for those uncertainties to make sure our businesses can overcome any crisis.
