Building businesses warned not to be complacent about coronavirus
As the impact of the coronavirus on Aussie businesses set to worsen, insolvency and business recovery firm Jirsch Sutherland is warning business owners and directors to take action immediately. The firm has seen an increase in businesses in the building sector contacting them wanting to know what their options are and, hence, have set up a special hotline (1300 547 724) to provide guidance and discuss solutions.
“The coronavirus is already affecting businesses and it’s vital to take swift action,” says Jirsch Sutherland managing partner VIC Glenn Crisp.
“We have had enquiries from building companies and subcontractors who want to know what they can do to protect their businesses. There are solutions and processes that can buy a company time, and the sooner owners and directors seek these solutions the better.”
Glenn says Australia’s economy was already affected by the slowdown in China’s GDP, and the virus will aggravate the situation. “The impact of the coronavirus is spreading to global supply chains, and building contractors are warning clients of potential delays on projects because factories in China have closed and the contractors are unable to get building materials,” he says. “The closure of factories and transport links for any period of time will inevitably lead to massive disruption and supply issues once existing stocks are exhausted. For a small business, this can be catastrophic.
“It’s unknown how long the coronavirus threat will be around, but it will have a lasting effect on many businesses. Fixed costs for businesses, such as wages, rent, utilities, financing costs and statutory liabilities are not affected by the sales decline. But the anticipated downturn in revenue and impact on supply chain will have a huge impact on working capital, and those businesses without sufficient reserves may find themselves suffering cash-flow issues. If this occurs, business operators should seek assistance immediately to try to minimise the impact.”
According to Kee Guan-Saw, Principal of audit/accounting firm KST Partners and immediate past President and current Chairman of the Chinese Chamber of Commerce of Victoria (CCCV), the longer the coronavirus is a threat, the greater the number of Australian businesses that will be affected.
Kee believes the situation will get worse and that “cooperation” is crucial. “A lot of cooperation is needed to help businesses survive,” he says. “For example, landlords and banks need to ‘chip in’ to provide support, such as allowing delayed payment of rent and loans, or by implementing payment plans.”
Glenn says a powerful solution could be to seek leniency from creditors using one of Australia’s various safety regimes. “Safe Harbour or the Voluntary Administration regime may buy the time needed to ‘right the ship.’ Business operators need to take action for the short and long term,” he says.
Kee adds it’s vital for businesses to understand the options available. “Many don’t understand the difference between Voluntary Administration and Liquidation,” he says. “Voluntary Administration doesn’t mean it’s the end of the line.”
To help business owners and directors affected or likely to be affected by the coronavirus, Jirsch Sutherland’s special hotline has English, Mandarin and Cantonese speakers available.
“Speaking with a Jirsch Sutherland expert is one way to prepare for the impending financial fallout,” says Crisp. “We urge business owners and directors to call us at the first sign of cash-flow stress. We can provide information and guidance on options – whether that’s Safe Harbour, Voluntary Administration, standstill agreement, or business rescue. We can also help implement options, and that includes informal and formal engagements.”
He adds, it’s also important for business owners to be mindful of their mental health and wellbeing during periods of financial distress. In addition to having experience working with those suffering stress and anxiety, every Jirsch Sutherland Partner, Principal and Manager holds a Mental Health First Aid Certificate, enabling them to offer appropriate support to those experiencing mental ill health issues.
Tips for businesses impacted by Coronavirus:
- Don’t wait: it’s uncertain how long the crisis will last, so build a forecast to understand how long your business can survive under the “new norm”
- Diversify and limit risks: seek alternative markets (supply or demand) for your product or service
- Seek help: If you don’t know what your business options are, speak to someone who can help. Equally, if your mental health is affected, seek help from a health professional
- Engage: get on the front foot with your customers and creditors
- Communicate: talk your stakeholders through the impact on your business and the contingencies you are implementing
- Take action: reduce costs where possible to minimise any impact on your cash flow
- Think long term: evaluate supply chains and ensure that future access to raw materials, components and finished goods will not be affected by another catastrophe
- Assess: determine whether you’re over-reliant on China and weigh up how to diversify your supply chains geographically