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Navigating your finances post Stage 4 restrictions

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It’s time to begin discussions with your professional and independent finance broker regarding your personal and business finance options. 

Navigating your finances post Stage 4 restrictions

Your finance broker should be playing a key role in helping you and your business through the unchartered waters of the pandemic and through to the other side.  These discussions need to include what type of builders and construction projects are likely to suffer or be eliminated entirely as a result of the pandemic and also highlight the ones which are likely to boom in the future.

Below, we have covered key areas which can help you be well placed to continue trading profitably and set you up to be in a strong position once things return to normal.   

  1. Industry Expertise
  2. Income
  3. Expenses
  4. Opportunities & threats
  5. Phases of recovery
  6. Future direction of the business

1. Industry expertise

Your finance broker should be well informed and considered an industry expert in finance and the building and construction industry.  This way, they will be well informed about the federal and state benefits available and how this relates to you, your business and your clients.  At the very least, they will be able to liaise with your accountant who should also be able nominate support packages available to you.

When discussing your business’ specific situation, the finance broker will be able to benchmark how you are tracking and give you insight to how banks perceive the risks to your industry.  Discussing these realities will assist in making decisions for your business whilst considering the bigger picture.

For the plumbing industry, the changes put in place now may point towards a new normal beyond Stage 4 lockdown and it is important to understand how your clients - whether they be consumers or builders, are planning for the future;

2. Income of the business

Plumbing-related business owners should discuss the income and revenue forecast of the company.  Special attention should be paid to the impact of COVID and industry changes to assess whether any interruptions, delays or increases are likely to continue in the short medium and long term. A discussion around income should cover how and when customers normally pay as well as whether COVID-19 has impacted this. It should also look at when they forecast normal trade conditions to start again.

Most banks and lenders are asking for cashflow forecasts so having these already in place for each project as well as for your business as a whole is imperative to your financial wellbeing.  Your broker should be able to talk you through alternate methods of doing this if you don’t already have software packages that do this for you.

Should you be thinking about applying for a loan, this information is critical to a bank’s assessment, so doing this in conjunction with your broker first will put your application in the strongest possible position.

The conversation around income should also include whether your debtor collections are well-controlled and whether you have sought any government or other financial assistance due to COVID-19.

3. Expenses of the business

Discussions about the expenses or outgoings should look at payment cycles, outstanding payments and creditor payments and assess how up to date the business is.  Another big thing to discuss is supply; many businesses currently feeling the pinch when it comes to the impact of COVID-19 on supply chains with materials looking to be sourced locally rather than overseas but having to pay more for materials quoted pre-COVID, eroding the profitability of jobs.

If the business is slowing down or looking likely to slow down, having to recalibrate the fixed overheads of the business to accommodate the lower revenue stream or the smaller profit margins is imperative.  A good finance broker will be able to help you identify break-even points in your business and discuss ways to minimise operating costs and expenses.

4. Opportunity and Threats

Identifying threats to your business by analysing the situation of your target market is critical at this stage.  Some market segments will have a full recovery once COVID is controlled whilst other segments may take years to recover.  Understanding these threats will help you translate the opportunities and threats to your own business. 

Being able to pivot towards target markets which should do well in this environment will set your business up for success in the short and longer term. Laying the groundwork sooner rather than later will help you beat the potential competition which may come to the same realisation.

With some businesses thriving in the current environment, the impacts of COVID-19 have not been negative for everyone.  In Victoria, the government has touted a ‘construction-led recovery’ but this does not flow into each construction segment.  Identifying the segments which will do well and avoiding the ones which will struggle is the first step to having a solid 2020/21.

Analysing whether you should close, reduce, or expand the business will help dictate whether there is a need for capital or cash flow injection to help with the change.  This may also be a great opportunity to investigate potential acquisition bargains - either of competitors, residential and commercial properties, or potential projects.

5. Phases of recovery

Discussing with your broker a short, medium and long-term horizon of recovery and what that may look like regarding financial needs is essential now that the ‘Roadmap to Recovery’ has been announced by the State Government.  This discussion should plan for operating during the pandemic or a possible resurgence, planning for the recovery and the pace of change and how gradual change may impact the business’ resourcing needs, the attrition or recruitment of staff as well as the impact on revenue, income, costs and profitability. 

Reviewing the financial alternatives to achieve the corporate objectives may also be required in case there are lending requirements in the future so setting up the business to have strong revenue flows and reducing costs to maximise profits may also be essential.

6. The future direction of the business

This involves understanding the plans and the aspirations of the business moving forward, and whether they are sustainable.  A conversation around this should look at possible growth, changes in direction, the reasons for these changes and whether there are clear corporate objectives for the business.

Master Plumber members are eligible for a Free* one on one business planning session with Harry Pontikis - a well-known industry expert on business management within the Construction Industry in Victoria.  Call Chocolate Money on 1300 137 539 or email [email protected] and request a free and no obligation business strategy session.

*Free session valid only until the end of this month. $990 inc GST is standard cost.

Chocolate Money holds an Australian Credit License 387 277 and serving the construction industry since 2003 | This article is general in nature and not to be considered specific advice as your situation has not been taken into consideration.


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