With the COVID Delta variant causing a new level of community angst, ongoing business disruption is inevitable and returning to what we once considered normal seems unlikely for a while yet, if ever.
Generally speaking, moving forward for business owners will involve reflecting on what their last two financial years of results have revealed, and applying what they’ve learned operating in COVID conditions to remain profitable and productive amid ongoing changeable business circumstances.
For businesses that opt to consolidate and shore up financial management basics, it will afford them time to properly review where they are now and what needs to be done to thrive, or even just to survive, the near future.
A ‘flight to safety’ occurs when business owners (and their investors) perceive high levels of economic uncertainty, coupled with probable high-risk factors that will likely result in adverse conditions, such as reduced cashflow or investment value. It’s the carving out of risk from your business, redefining and re-assessing its core and focusing decision making around that.
As a business lifecycle stage, ‘flight to safety’ is not specific to the current crisis situation, as it is actually quite common. It can happen during normal business trading conditions, such as when a significant new strategy has failed, and it’s time to take stock and try again from a different angle.
Typically, business owners who have taken this approach during COVID are making the most of the government support where it’s available. This support has so far provided a safe option to enable them to ride out the worst of the disruption. The goal has likely been to maintain their current position, and accept that they are unlikely to grow, while not wanting to lose too much ground either.
Generally speaking, the government support has allowed businesses to prop up patchy turnover and retain staff.
We’ve worked with clients in some of the hardest hit areas, and JobKeeper and other government support measures have certainly softened the blow in many respects. However, it takes knowing the numbers and implementing strategy to truly benefit from a ‘flight to safety’ approach.
For example, we worked with a business owner so they could fully understand their current financial position and the steps they would need to take to maintain it.
Retaining his team was a priority and while JobKeeper helped, we were able to demonstrate how encouraging his staff to take annual leave, rather than standing them down or worse, would be beneficial for his team as well as his business.
Taking this approach meant the business could continue paying staff their usual wages, which not only prevented financial disadvantage, but also significantly reduced the financial commitment of leave entitlement on the business. Retaining his ‘A’ team means the business remains strong, and at the ready, to pick up new business as circumstances change.
Regularly reviewing your numbers will provide clarity around your current financial position and contribute to efficiently managing your general accounting commitments. A more aggressive strategic approach to budgets and cashflow during the ‘safety’ stage will help strengthen the overall financial position, and often, the value of the business.
Predictive modelling, benchmarking and KPI performance monitoring will be among the more helpful tools available to you. As we’ve noted in earlier articles, we understand business owners will always favour evidence-based insights over assumptions.
Taking actions such as these will help to find the change you’ve been looking for to propel your business forward and confidently manage uncertainty. Importantly, it will create clarity around most-likely future scenarios, which is necessary for decision making.
P+Y Accountants and Business Advisors are known for expanding the possibilities for professionals and enterprising business owners.
The information contained here is general and not intended to serve as advice. Any information supplied is not a substitute for independent professional advice. We do not warrant the accuracy, reliability, completeness or adequacy of the information or material. All information is subject to change without notice. P+Y and each party providing material displayed here disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. Users are encouraged to contact P+Y for advice concerning specific matters before making any decision.