The Covid 19 pandemic has made the financial stability of many businesses to hit a critical point where management of debts and sources of capital have become a nightmare, all of a sudden.
Ultimately, it is a season that demands deliberate actions from business owners and decision-makers at all levels even as we seek sustainability in the long run.
Which financial opportunities can businesses leverage in this pandemic season for success?
1. Reduce your operating costs:
Key costs to target in this reduction are your fixed costs. This includes investments in inventories, your occupancy (rent a less costly premise) and staff costs. You can reduce your employee-related costs by reducing salaries of managers, reducing travelling allowances, and as a last result sending excess staff on unpaid leave.
When reducing the operating costs; be attentive to not lose your trust with key stakeholders. You may categorize your staff as core function staff and support function staff. The core function staff are staff who will be performing duties even during the COVID-19 season while their support counterparts will be reporting on a per-need basis. You may also retain your staff under flexible terms of employment such as reduced working days on mutual agreement on remuneration plans for the same.
2. Capitalise on available funding options:
As a micro, small or medium enterprise (MSME), you can prudently seek financing from banks, microfinance organizations, credit companies and SACCOs. SACCOs are a go-to option due to their low-interest rates. Besides the temporary suspension of listing of loan defaulters by credit reference bureaus in the country, banks are extending loan terms and restructuring the payment terms at the request of their customers.
3. Harmonize your tax issues:
As a business, you do not want to fall into problems with the Kenya Revenue Authority (KRA). If your business has dues with KRA, take an individual initiative to negotiate a tax liability plan with the tax collector. The Kenyan Government has also provided Small businesses with tax relief by reducing the corporation tax rate and the turnover tax rate. The new law reduced Kenya’s corporation tax rate from 30 percent to 25 percent per annum. The turnover tax (TOT) rate also was reduced to 1 percent from the previous 3 percent. As a small or medium business, consult with your certified public accountant (CPA) or tax advisor to be advised on how to legally reduce your tax liability.
4. Improve your appeal for borrowed capital:
Ensure you bank all receipts and make your payments using banking platforms. This provides your bank with transaction history and insight into the cash flows into your business. Initiate a consistent accounting system which will provide you with audited financial statements at the end of each financial year.
5. Launch an online base for your business:
The Covid 19 pandemic has proven that digital tools are not just essential elements for making sales but also strengthening your relationship with the supplier and client community. Online businesses have been growing during the pandemic period and brutal fact is, they will continue to grow even in post-Covid 19. As a micro, small or medium business; you have no option other than considering online marketing and sales.
Map your audiences, create a plan on how to engage them, develop or improve the preferred channels and execute your digital strategy for your business. Find digital content and marketing professionals to help you get a robust starting point.