On the backdrop of the coronavirus crisis, all the businesses in Oman and the whole Gulf region and globally are facing a tough economic climate. It’s critical at such times to take steps to minimise the adverse effects and put your business in the best position.

Here are a few steps that would make sense for businesses to take during this crisis time.

Review the processes to monitor cash-flows

Ensure that you are monitoring the cash-flows in your business in the best and most effective way. Keep your eyes on the cash! Businesses do fail because they run out of cash, not because they are not making profits. Doing the right things at the right time in the right way is very important.

Revisit your business plan and strategy

It’s a good time to relook at services and products you are offering, which customers you are targeting and the channels you are using. The pandemic has strengthened the use of online and similar sales channels with delivery to the home being the norm. Are you offering this? Can you? Do you have non-core businesses which are a drain on your time and resources – If the answer is ‘yes’ then find the best way to address this: Close; change their business model or sell them.

Be proactive in collections

Follow up on the money you are owed and be cautious about giving credit (when, to whom and how much). Ensure you are on the top of your customers’ list to get paid and if you can, don’t do credit (consider incentives for cash sales if B2B).

Differentiate

If you have a lot of competition, find out what your customers value and differentiate yourself. Harness the power of social media to drive business and market your services and products. If you don’t have a website/Instagram page/Facebook page, get one.

Additionally, a lot of businesses who have never had to seek financing now need to approach banks or who now find that the business climate and the pandemic issues mean that they need to restructure their bank facilities. How should they approach this? What are the steps they need to take? Here are some things to consider which can help:

How much do you need to borrow and for how long? Will the amounts required vary? Will you merely need the letter of credit (LC) facilities to allow you to import goods and then a few months’ credit? Do you need working capital or to fund new equipment or premises? These questions will enable you to determine the nature of financing – term loans; finance leases (for equipment); overdrafts; trade finance (LCs, etc). If you are looking for bank loans they may require security – do you have assets you can pledge to the bank? Can you get guarantors? Also, consider, can you register as an SME and seek help from Oman’s SME development fund.

Prepare robust cash flow forecasts

Prepare cash flow forecasts for the next three-five years – ideally the first year monthly then quarterly. These will include underlying assumptions: Make sure these are clearly described and documented, with the rationale supporting them. Don’t forget the value-added tax (VAT) is coming! Highlight what you expect your free cash flow to be – be conservative! Assume 50 per cent of free cash-flows could be used to repay loans (banks and finance lease companies will be risk-averse in the current market) and using a conservative market interest rate work out what that monthly repayment (interest and loan amount) will allow you to borrow repaying over say five years.

Consider the scenarios and prepare cash-flow forecasts for them. For example, base case (most likely), best case and worse case. Show the banks you have thought it through.

Prepare a business plan

Prepare a business plan looking at the market, investments required, historic results (make sure you have audited accounts to show the bank), future plans and forecast results. Make sure the business plan supports your projections and shows the bank why they should invest in you.

If you need and can afford, you should seek professional help. Also, look online and talk to others who have been in the same position.

These are just a few example steps only. If you are looking to enhance your business you should seek professional help. The challenges faced today in terms of the economic recession and the COVID-19 pandemic also offer opportunities, so set yourself up to seize them.

ByPaul Callaghan, partner at Moore Oman

The views and opinions expressed in this column are solely those of the author and do not necessarily represent those of Muscat Daily or Apex Media Publication