As thousands of people have headed back to work, the manufacturing industry will need to have safety guidelines set out for both customers and employees as the industry is particularly prone to close contact with others.
Here Alastair Wilson, a partner at leading accountancy firm, MHA Tait Walker has some advice for manufacturers in light of the COVID-19 outbreak which has caused major disruption across global markets, with restrictions on human movement disrupting the majority of sectors.
Manufacturers have taken a hit during lockdown. They have been faced with the problem of either a reduced workforce or suddenly been faced with totally absent teams. There has also been a pause to supply chains and an aggressive decline in customer demand.
Despite the Government’s advice for a return to work this week, there have been a number of concerns around both safety and cashflow implications. Both will no doubt remain significant for some time. Fixed costs have already drained cash reserves for many and the uncertainty of the lockdown period has made management decisions on safety very difficult.
What can manufacturers do now?
In terms of cash flow, hopefully by now business owners will have accessed the Government-backed initiatives in order to ascertain what can be used and what impact they may bring.
The deferral of tax balances bring an immediate cashflow saving and the use of the Coronavirus Job Retention Scheme can also yield savings. The Coronavirus Business Interruption Loan Scheme can also be considered for those businesses with proven viability and an historic financial performance that demonstrates the ability to service new debt.
On the safety front, a Covid-19 risk assessment should be carried out in consultation with workers and trade unions. Employers will also need to redesign workspaces to maintain 2m distances between people by staggering start times, creating one-way walkthroughs, changing seating layouts and opening more entrances and exits.
Initial thoughts and decisions will be largely based on an assessment of what options business owners have at their disposal and the ultimate execution of those options.
Business owners should consider the working capital implications of exhausting reserves in the immediate term, with the problem looming as to how you can fund the recommencement of operations in the post-lockdown period.
You should therefore take care of your financial plan. Your eyes should be focused on the security you have pledged to external funders and that which may be sought during any CBILS application. Longer term assessment of overall indebtedness should also feature, with a lot of Government initiatives being debt based, which by their nature will require repayment. This will therefore pose directors some challenge as they balance their wider responsibility to all business stakeholders.
How can you manage the cashflow risks?
A thorough and robust financial plan will be central to your business planning in the coming months. Additionally, the use of your advisers will be key during any negotiations undertaken with your funders. Capital holidays and short-term facility extensions will provide temporary respite, but you should look beyond the initial period of uncertainty and retain some focus on what comes next.
The re-opening of markets will see the re-emergence of demand, but this may not be swift. A gradual build up could be in order for a lot of markets. The risk of customer and supplier failure should also be considered, with contingency plans drawn up.
The demands and pleas for prompt or upfront payment are likely and a natural drift in credit terms may also be imposed by your larger clients. You should therefore assess those impacts and build a cash buffer, with attention required on the covenant suite your funders will have in place. Keeping your books and records up to date will therefore be imperative and allow maximum flexibility as you continue to make strategic decisions.
What else should you consider?
Non-financial considerations will also be vital, as well as the re-introduction of your team in to the workplace. Workforce morale and overall productivity should be monitored closely. Repairs, maintenance and reconnection of idle plant and machinery will also need consideration.
The considerations for business owners are extensive and will move and change due to ongoing problems which may linger due to COVID-19. Cash management will also drive focus and risk monitoring will be an increased priority as we proceed through 2020.
FIVE REASONS WHY YOUR BUSINESS’ PROCUREMENT TEAM SHOULD BE USING A CONTRACT MANAGEMENT SYSTEM
By Daniel Ball, business development director at Wax Digital
Even in today’s digital-first environment some businesses are still storing documents, such as contracts, in filing cabinets making it labour intensive to retrieve, manage and even identify important paperwork. In fact, it is calculated that poor contract management practices are costing companies an average of nine percent of their annual revenues.
Moving to a contract management system online can speed up the retrieval process and help decrease the amount of time and resources required to manage contracts. Using a CMS companies can create an online database to centralise information and store documents. Not only does this help ensure contracts are well managed and kept up-to-date, but it can also help businesses save up to 20 percent of overall costs per year.
From legal departments overseeing regulation compliance to finance teams ensuring payment deadlines are met, contract management technology benefits many areas of an organisation. So, how can a good CMS help your procurement team?
How will a good CMS help your procurement team?
The number of suppliers your procurement team must oversee varies depending on the size of your business. It’s not uncommon for large enterprises to be working with thousands of suppliers at one time. A CMS will use automation to record, manage and streamline data, providing procurement teams with important contract details including time and location information, as well as real time alerts such as contract breaches.
Here are five reasons why your business should be using an online contract management platform:
- Increased spend visibility
Using a CMS can give procurement professionals full visibility of suppliers, including the company name and location of where a product is coming from and in what quantity. This transparency will also help contribute to the risk management strategy of your business as it enables you to spot vendors who may be prone to environmental, economic and political uncertainty. In the current environment, for example, suppliers’ may have decreased or ceased production due to COVID-19 or could have been heavily impacted by the negative price of oil, making visibility increasingly important for businesses.
- Eliminates maverick spend
Centralising and streamlining contract documents will ensure that buyers can instantly access up-to-date information to see if a contract already exists. This helps buyers avoid simple and common mistakes that often occur when using manual filing systems, such as onboarding new vendors when existing agreements are in place with another supplier.
- Keeps track of contract renewals
It’s easy to forget about contract renewals or sign up for another term without ending an existing agreement, especially when using a traditional filing system. Businesses using an online CMS can set up renewal alerts in advance, allowing buyers sufficient time to source new vendors or negotiate better prices.
- Improves spend management
A centralised database means that all negotiated prices, contract conditions and other important transactions can be accessed in one place, making it easier to analyse spend. A CMS can help identify discrepancies, find where contract violations have occurred and deal with any associated problems.
- Adhering to regulatory and legislative compliance
It’s important to ensure that all suppliers are meeting the terms of their contracts. A CMS will automatically audit supplier information, meaning that any failures are immediately raised to procurement teams. The platform will also provide notifications if any new data is required or updates need to be made, avoiding potential legal issues.
It’s clear that using an online CMS will benefit your business and procurement teams by increasing spend visibility, enabling access to up to date information, ensuring contracts are closely monitored while contributing to the reduction of unnecessary spend. So, now’s the time to stop relying on those dusty old filing cabinets and start using a CMS.
PROTECTING YOURSELF AGAINST A RECESSION
James Turner, Director at Turner Little
The coronavirus outbreak has spread to businesses, leaving many around the world counting costs. Notoriously, known as the Great Lockdown, it’s been affecting the world economy since early this year. The predicted recession is considered to be the steepest economic downturn since the Great Depression.
So, what does that mean for you? James Turner, Director at company formation specialists, Turner Little, suggests “While there’s no fool proof way to ‘recession-proof’ your finances, establishing a solid base now will put you in a better position to weather the storm.”
“Whilst the future of the global economic landscape is simply too complex to predict, it’s not hard to spot imbalances that have built up, as central banks and governments around the world talk about introducing further fiscal stimulus and monetary expansion, the consequences could be significant,” adds James.
A good wealth management agent will recommend starting by saving a substantial cash emergency fund in a high-yield savings account, understanding your spending habits and where you could cut back if you needed to, and establishing your long-term investing strategy now, so you can stick to it.
If you were to solely invest based on the inevitability of a recession, you are likely to miss returns that are immediately available. If you truly want to recession-proof your assets, the best thing to do is develop a long-term strategy and invest wisely.
Diversification still matters
It’s dangerous to pile all your investments into a single sector, including consumer staples. Diversification is especially important during a recession when particular companies and industries can get hammered. Creating a diversified portfolio of assets blended across asset classes—such as fixed income and commodities, in addition to equities, sectors, geographies and strategies—can also act as a check on portfolio losses.
Build a reserve
To keep your money protected before, during and after a recession, it’s recommended to have an income generation conversation with a financial advisor. This will cover a lot of different topics, but one of the most important is the emergency fund. You’ve likely heard many times that it’s good to have between three and six months’ worth of living expenses set aside in the event of a job loss, health crisis, or other unforeseen circumstance.
Protect your assets
If you’re interested in talking about protecting your assets and your investment portfolio, do get in touch. We specialise in creating bespoke solutions for individuals and businesses of all sizes. The knowledge and expertise of our specialists will be able to assist with any enquires, no matter how complex.
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