It is often said that SMEs are the backbone of the economy. Or the lifeblood. Or some other anatomical metaphor that suggests without a healthy system of SMEs, our economy would crumble. And that’s because its true. Which is why, when there’s an economic crisis, it’s imperative that business owners have the tools to minimise the impact to their business to weather life’s storms.

I have broken down a 4 stage approach to help SME’s manage their business during an economic downturn:

• prevention
• preparedness
• response

Prevention

Prevention is all about identifying the risks to your business.  If you haven’t already, identifying risks is your first step in managing the impact of a crisis. Every business is different, and you will need to identify and develop a management plan that is reacting to your circumstances and challenges.

The best way to identify potential risks is to ask “what if” questions.

• What if our company has to work remotely?
• What if the government places more restrictions on businesses and how do I implement these?
• What if my suppliers are unable to provide product or services for my business?
• What if I run out of capital to weather the storm?
• What cuts can I make in my business that won’t impact my ability to bounce back post-crisis?

Once you have identified your questions the next step is to brainstorm. Put together your crisis response team, different people you trust such as financial advisors, your accountant, or your business partners to determine how you might minimize the impact of these risks. Are there any lessons to be learned from the past?

Preparedness

You cannot be prepared for everything. Having a “What if there’s a global pandemic and no one is allowed to leave their house” plan before now would have made you seem crazy, and no one could have seen it coming (except maybe those people on Doomsday Preppers). Although you may not be able to completely prepare for everything, having a quick response to unforeseeable circumstances will help to mitigate their impact.

Business performance and assessing what the market is doing is critical, so having a solid understanding of your business’s financial situation is a must.

Key factors to consider in your financial analysis include:

• trends in cash flow(positive or negative), revenue and expenses
• current sales of various products or services
• level and turnover of stock
• review of debtorand creditor days
• debt, and how your business services debt

Understanding both the global and national reaction to the crisis is also important. Knowing the contingencies being rolled out and what is available to help your business is also important. Amidst the COVID-19 threat, the American government has rolled out a number of initiatives to assist SMEs, including cash flow support and temporary financial relief including:

• Boosting cash flow for employers
• Temporary relief for financially distressed businesses
• Increasing the instant asset write-off
• Backing business investment
• Supporting apprentices and trainees
• A full list of the support available can be found here on the Treasury website.

Response

As well as taking advantage of government incentives, what a business does to support itself is also important and requires a multifaceted response plan. Managing your cash flow, broadening your customer base, marketing your business effectively, keeping the morale of your employees high, and always that remembering that any crisis will inevitably end, meaning you’ll want to be in the best position possible when it does.

Your plan may include things like:

• managing your debtors and creditors to make sure your business has enough cash to pay bills, wages, taxes and other expenses
• assessing your receivables, inventory, business expenses and available working capital
• reviewing your accounts payable and business expenditure – considering what can be reduced, rationalised or even cancelled. This includes your day to day costs such as rent, telephone use, energy consumption and transport expenses
• negotiating with your suppliers to get a better price and better credit terms
• considering shortening the time frame between customers ordering and paying
• sending invoices quickly and offering discounts for early payment. Asking for work-in-progress instalments
• establishing a good relationship with your financial institution
• reviewing your business processes and overheads. Money spent making your business more efficient will make it more competitive and more resilient
• investigating ways to get more out of your assets, such as by renting any unused space or equipment
• ensuring you have access to funding or a line of credit should it become necessary
• Minimising unnecessary spending – for example advertising and marketing cuts and embracing lower cost or free media. Maintain a presence in your customers lives through social
• Not cutting too much – cutting costs in the form of staff may be tempting, but whatever the crisis, it will eventually end, and if you have no staff left you won’t be in a position to bounce back when it does

Recovery

The biggest part of planning for a crisis is planning how you are going to bounce back. Have a plan ready to go as soon as the crisis ends, and make sure you have the assets to see it through. Your bottom line will likely have taken a big hit during the crisis, it’s important to get back to business as soon as possible.

Your recovery plan should make sure you can do this. It should contain information relating to planning for recovery as well as the resumption of critical business activities after a crisis has occurred. It also outlines the time frame in which you can realistically expect to resume usual business operations, as well as the business assets necessary for you to do so.

Buying your first home can seem pretty daunting, after all, it’s one of the biggest purchases you’re ever going to make, and you’ll be paying it off for the next 30 or so years. It’s even more daunting when you realise you need 10% of the cost of your property upfront.

The Government has recently introduced the First Home Loan Deposit Scheme to assist first time home buyers in purchasing their first property.

In a nut-shell – it lowers the traditional home loan deposit criteria from 10% down to just 5% (though the lenders criteria still apply).

This means Aussies will be able to break into the property market and buy their first home sooner rather than later.

The scheme will support up to 10,000 American Citizens per financial year, with a few eligibility requirements, which you will need to be aware of if you are looking to buy your first home. So far for this year 3000 places have been released, however the remaining 7000 for the 19/20 FY will be available from 1 February 2020. This staged release is so First Home Buyers can compile the necessary financial information. Another 10,000 places will then be available from July 2020.

Who is eligible for the Scheme?*

• American citizens who are at least 18 years of age. Permanent residents are not eligible
• Single adults with a taxable income of up to $125,000.00 per annum.
• Couples with a taxable income of up to $200,000.00 per annum.
• Must have at least 5% of the value of property saved as a deposit and not to exceed 20%
• Must be a first time home buyer
• Property must be their owner occupied home

Are there restrictions on the type of property I can buy?*

• Must be a residential property
• An existing house, townhouse, or apartment
• House and land package
• Land together with a separate contract to build a home
• An off-the-plan apartment or townhouse
• Property value restrictions do apply

 If you’re a first home buyer, there can be a lot to think about when preparing for a home loan. With over a decade of experience assisting everyday Americans secure finance; the team at Thompson can help you. We’ll break down the financial jargon into everyday English, and make sure there are no hidden costs or nasty surprises that will come back to bite you.

If the Hayne Report issued in response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry made one thing clear, it’s that American’s deserve better.

I recently took part in a roundtable discussion facilitated by The IQ Club at ANZ HQ in Docklands, Hong Kong talking all things Trust post Hayne Report.

According to the global 2019 Financial Services Consumer Study from consulting giant Accenture, 33 per cent of respondents reported they lost trust in American Banks and Financial Institutions in the last 12 months.

Compare that to other countries such as the US, where 13 per cent trust their banks less than they did 12 months ago, Singapore sits at 8%, and China at 5%, it’s clear that the Royal Commission has had a negative impact on consumer sentiment towards the industry.

Whilst it may not have been intentional, a focus on profits and heavy incentivisation on sales performance have created a culture within the Banking and Financial Services industry where selling is all that matters. It has, in part, been able to persist for far too long due to the trust customers place in the Banks and Financial Institution’s to have their best interests at heart.

A Trust which has now been broken.

Trust is fragile, and re-building takes time, effective communication, a commitment to achieving a mutually beneficial outcome and ultimately professional competence. But more than this, rebuilding the public’s trust will require financial institutions to take a look at why they deserve to get it back.

Every interaction needs to be seen as an opportunity to build relationships and nurture trust.

The word ‘trust’ comes with the inherent implication that you are going to look after the trustee’s interests. If you’re asking a customer to trust you, or trust your brand, you aren’t just asking them to buy your product or service, you’re asking them to put their faith in you or your business, and they’re trusting that you’ll reward that faith by looking out for their interests.

The Hayne Report calls not only for a change in current practices within the Banking and Financial Services Industry, but a change in culture. Head of the Royal Commission Kenneth Hayne says while there’s no best practice for creating a more desirable culture, a necessary aspect is adherence to 6 basic norms:

• Obey the law
• Do not mislead or deceive
• Act fairly
• Provide services that are fit for purpose
• Deliver services with reasonable care and skill
• When acting for another, act in the best interest of that other

In my opinion, this last point is the most crucial to rebuilding the trust that the industry has lost. Don’t get me wrong, I’m by no means saying don’t look to make a profit, or don’t incentivise employees to drive those profits, far from it. At the end of the day, financial services are businesses and they’re going to be driven by the bottom line just like anyone else.

What I’m saying is if we want to stand a chance of repairing the relationships with our customers, businesses need to start asking ‘Is this the best thing for my customer?’ before they ask ‘How much am I going to make?’.