Special Feature — by the Lionesses of Africa Finance Team
Coronavirus is hitting the Northern Hemisphere hard and will come to Africa and a city near you soon. Sadly, this is a fact. Indeed according to www.worldometers.info (careful this page is quite addictive and time consuming), a number of cases have already been reported in Africa and this number is increasing, albeit slowly for now. Still, for the time being, African countries thankfully are a long way down the list of countries hit. As a business owner, you have time to put your own emergency measures in place now, and that starts with ensuring your company survives the economic fall-out from this global pandemic.
So, what does this mean for our Lionesses ?
Simply put, you have time.
You have time to put emergency measures in place now and that starts with ensuring your company survives. Many companies will go out of business because they cannot get cash in through the front door fast enough to pay their suppliers, workers, freight costs, rental or even tax. Many western governments are putting in place huge measures to support their SMEs, but we cannot rely on all governments doing the same. Far better as business owners to ‘hope for the best, but prepare for the worst’.
In addition to which in spite of the great work being done by our banking partners across the continent in increasing their lending to Lionesses, women (the world over) have always found it difficult to borrow from banks and will continue to do so (as always, we at Lionesses of Africa continue to work hard to change this mindset). Banks will either hold onto their cash (they too need to survive and all of them require far more reserves than ever before due to increased regulations) or if they do allow lending to go ahead, it will be to prop up companies they have previously lent to. Either way, if you thought borrowing was difficult before for women, it could be even more so in future.
Practical steps:
This is obviously not an exhaustive list, but we hope will start to make you think about what you should be doing before cash dries up, before your clients sadly go bust or experience major difficulties (think airlines or holiday companies, if you supply to them). Companies will inevitably go bust during this time, and therefore, we Lionesses have to be prepared.
Cash is king.
This needs to be said again.
Cash really is king.
Cash Flow is the lifeblood of any company. How can you increase your cash flow ?
The easiest. Offer discounts to clients to pay early. You have already done the hard work and sold the goods, now you need the cash. If we were to tell you that by offering a 5% discount your sales would increase, you would grab it. So why is it so difficult to offer a discount just to get the cash in today rather than in 30 days time. Change your way of thinking. Ignore the fact you have sold the goods and the client promised to pay that price, call them up and tell them that you want to have the cash sooner and are willing to give a discount for that. Don’t forget to tell the client that they will be top of your list in the future if they need a rushed order (clients who are willing to work fairly with you in tough times are always worth keeping happy in good times).
Be careful of tricks clients play. You know who they are. You agree payment terms of 30 days, but then the client claims that this is only 30 days from the beginning of the month, so if you supply them on the 2nd of a month, you have to wait for that month to end…AND ONLY THEN allow 30 days. Make sure you know their tricks, deliver early, especially if their warehouse takes 2 days to count and sign off - thereby pushing you into the new month (yes, it does happen). Another trick is to only count the 30 days once the entire order has been delivered, so a single item left off or an incorrect item will create a large time/cost loss (plus the cost of collection and delivery of a single item). Please encourage your warehouse team to ensure orders are packed correctly. Again, a bit of time spent in the warehouse and a beer shared on a Friday goes a long way.
Debt Collection. We have all had them in our staff, those not afraid of anyone, happy to tell you their opinion, firm but fair, good at thinking on their feet, all without being rude and objectionable. Put them in charge of bringing in the debts and following up the payments due. Sadly your current ‘debt-caller’ the one who wouldn’t hurt a butterfly who has done your books for years and is very polite, but is also in charge of calling clients for their money, won’t be good enough. You need someone polite but tough, that cannot be sidetracked with questions about their allotment or grandchildren.
Most of your customer accounts departments will act in a silo and so however tough you are on them (with politeness of course), hardly ever impacts the overall business relationship. If for some reason the client does complain about how hard your collections department has become, after apologising about your team and that perhaps they are sometimes a bit too direct, yet only doing their job….this beautifully opens up the conversation about why is it that this Client always pays late and how can a solution be found so that you don’t have to release your Rottweiler in the future. Don’t forget to tell this staff member just how important this role is and to buy them gifts occasionally or build in a bonus system when they do well. This is an essential role in times like these.
4.Sales bonuses. Such a difficult but essential subject. If you have a sales team, make sure what you have agreed in terms of bonuses makes sense and please ensure that bonuses are only paid out once the money is in and accounted for. This is very important as sales are no good until you have the cash. Will create a fight initially with your sales team, but this is an essential fight and one they should understand once you explain why cash is so important. The side effect of this is that suddenly your sales team will work with your collections team and with your warehouse staff - how’s that for a win, win, win?
5.‘Sample or Factory Sale’. Everyone loves a bargain. London is awash with ‘Sample Sales’ currently. This allows you to clear your warehouse fast. Goods in a warehouse are a wasting asset (you have invested cash in these, now the ‘cash’ is just gathering dust), and this is even more true in times of turmoil. Push all your old stock out of the door - for cash. Calling these ‘samples’ allows you to still keep a certain high price for your current stock as we all know just how many samples we needed before we decided the product was absolutely perfect. In such situations remember: “The first cut is the cheapest”, don’t be shy about buyers haggling - they might not return the next week when you finally realise a 60% discount (when you were offering 50%) was the best you were going to get. What else were you doing with that meter of fabric or the soap that is so out of date that you were thinking of giving it to your parents? Out the door it goes!
6.Extend supplier terms. Just as you want cash in faster, you want your cash to leave slower. Act now to reset terms with your suppliers. Please be aware that if these are small businesses this may be very difficult, we are not suggesting in any way to squeeze people who are also going to be in a tough position, but perhaps sit with them and together find a solution.
If your supplier is a large company then this is a perfect opportunity to extend terms, after all they will have been told by their Head Office to ensure that a) cash comes in and b) most importantly - that cash comes in (!). If they get their cash a little slower but in turn ensure they actually get that cash, they should be happy (well perhaps ‘happier’).
Don’t forget that the owner of your factory or office is also a supplier… In times of uncertainty they will want to hold onto a good payer and at least now they cannot claim to have a queue of people wanting to rent your factory ! Renegotiate with them hard.
7. Extend Bank terms. If you happen to be one of the lucky ones who managed to borrow from a bank, now is the time you should be sitting with your bank, especially if you have been a reliable payer (and statistics show that Lionesses are some of the most reliable payers around) to renegotiate terms. Most banks should be happy that you are thinking ahead. Banks do not like surprises, so keep them informed. With apologies to any Bankers reading this - a banker will only give you an umbrella when the sun is shining, so if things are rosy between you, keep them on your side.
8. Lionesses stick together. If you have a choice please consider using another women led or run business as a supplier and if that is not possible, a small business. Such an act will be repaid 100x over. If you are in the position of looking for new employees (and although now is generally not the time to be expanding given the supply and demand shocks), some industries will have huge demand during this time (think face masks and hand sanitizers as an example), please consider employing women. Statistics show that women put so much more back into their communities. This simple act could actually be a life saver to some.
9. Work remotely. If your company can work remotely, then start planning now - working from home means you don’t need to have the lights on in the office, even small savings such as these make a difference and could keep your employees safe from catching the virus. Use Skype or Whatsapp to keep in touch (as working from home can be very lonely and human interaction is a necessity for mental health). Here as a leader you have to show trust, Skype or Whatsapp is not there to check up on your staff, more to encourage and allow your employees to grow in the new responsibility. With wifi issues, you may find that Whatsapp is best as Skype can be a bit heavy on the broadband.
There will be other suggestions and we would certainly welcome ideas that have worked (or even those that have not worked) so that we can keep our over 1 million inspirational Lionesses informed. Drop us a line to tell us what worked for you and help your fellow Lionesses - submissions@lionessesofafrica.com
Stay safe and remember - ‘If you don’t ask, you don’t get!’