The recent COVID-19 Coronavirus spread has affected business in adverse ways – in particular, consumer-facing ventures like retail and F&B. Being privy to financial information of a wide variety of companies from various industries, we see firsthand the impact of this pandemic on businesses. While each business problem is unique in many ways, we would like to share a little of our expertise to help soften the blow and to build a more resilient company. We will deal with the issue in 3 parts – lowering costs, keeping morale high and raising capital & revenue.
Management of Rental Costs by Negotiation
Rental is a relationship between a tenant (your business) and the landlord (the owner of the property). It is often in the interest of the landlord to keep a lease – it takes more effort and money to search for new tenants (agent fees, etc.).
If your business has been adversely affected, try to negotiate with your landlord for temporary measures to ease your cash flow burdens.
We have listed some possible methods you can consider;
- Rent-free period / Discounted rent period
- CapitalMall recently announced a rent-free period. (Read more about it at https://www.businesstimes.com.sg/companies-markets/covid-19-capitaland-to-give-1000-tenants-rental-rebates)
- CDL provided a discount on rent for 2 months & promised to pass the full rebate from the government to tenants.
- Delayed rental payment with no or small interest based on the private agreement drawn up between the landlord and business
- Tenants can continue to pay a fraction of the rent on time. The remainder of the rent can be paid in parts 3-6 months from now. To sweeten the deal, tenants can offer the landlord a small interest on the portion of delayed rental payments.
Manpower: Employee Downtime Management, Productivity & Morale
As business slows down, the workload of employees would be reduced. Consider asking employees to go for training programmes & taking advantage of the government support.
The Enhanced Training Support for SMEs will cover 90% of the course fees. Employers only need to pay for the remaining 10% of the course fees. In addition, you can apply for Absentee Payroll funding which covers 80% of the employee’s basic hourly salary (capped at S$7.50) for the duration of the course. Send your employees to training programmes that strengthen critical skills, provide in-depth knowledge of the changing economy or reduce weak links within the company, enabling your company to become more resilient and future-ready. (Read more about the grant here: https://www.ssg.gov.sg/programmes-and-initiatives/training/enhanced-training-support-for-smes.html)
Perception management is a critical factor to consider during this period to ensure that the morales of employees are not adversely affected, which in turn affects the productivity of the business. Be frank and open with communications. If possible, assure the employees about the financial standing of the company and that the company is committed to avoiding retrenchment. Speak to employees to let them know how they could help the company do better financially.
Apply for the Enhanced Work-Life Grant for flexible work arrangements. Companies are eligible for S$2000 incentives per employee for 2 consecutive years (capped at S$70,000 per company). It might not be a lot of money but it would certainly ease the cash flow a little. Furthermore, the flexible work arrangements could allow employees to better balance work & family obligations. Employing flexi-time and flexi-place also reduces the risk of the entire workplace being exposed to Covid-19 at simultaneously & thus building greater resilience. The standard variation for the grant are;
- Flexi-Load (job-sharing)
- Flexi-time (e.g. staggered hours, compressed workweek)
- Flexi-place (e.g. telecommuting, working from home)
Telecommuting and work from home schemes are not exactly difficult to implement if employees do not necessarily have to be on-site for their work. A mix of simple off-the-shelf solutions like Adobe Cloud Solutions (we really love Adobe Spark & Adobe Sign!), G-Suite & Zoom allow you to keep up with productivity with remote work. You can check out more about their solutions here: https://www.adobe.com/sea/information/smb-cloud-solutions.html
Still not sure? We are certified Adobe partners and we have plenty of experience in providing advisory on productivity solutions for various businesses, from task and document management to sales systems. We are always ready to help. Get in touch with us to learn more about how you can benefit from the seamless integration of various productivity solutions!
Are the above measures still not sufficient? Instead of asking employees to take no-pay leave, consider offering half-pay leaves entitlement to be utilised during this period of the downturn to allow your employees to pursue what is important to them.
It could be spending more time with their loved ones, pursuing a long-lost hobby or to focus on their love ones. This policy allows the company to save a little on wages & in comparison to those who enforce salary reduction or no-pay leaves, your employees would be grateful and likely to agree that the company has shown compassion even in face of adversity. One can expect that your well-rested employees will be more productive at work & the attrition rates during good times will be lower than the industry average.
If it is absolutely necessary to consider no-pay leave or implement salary reductions, the allocation among employees is critical to the overall morale. As accountants and employment agents, we have extensive experience in the advisory to our clients on employment-related measures as a method of managing cash flow. The key take-home factors to remember when handling the sensitive topic of salary and work reductions:
- Allocate no-pay leave or wage reduction fairly. Higher paid employees will not feel the burn as much as lower-paid employees, hence, your cost-cutting measures should come from the top and work downwards on the pay scale.
- Abide by employment guidelines and regulations from the Ministry of Manpower (MOM). Do not unfairly treat your employees during this period by forcing unfair pay cuts/pay freezes.
- Explain every pay and work reduction-related matter clearly to your employees and seek a clear understanding from them before proceeding. Communicate with them – let them know this is a temporary measure & when, or under what circumstances their wages would be reverted to the original.
- Ensure that you have the correct paperwork and agreements signed by both you as an employer and your employees to protect the business and its employees during disputes.
- Be grateful. Appreciate the employees that stick with you through the tough times. Praise employees for good performances, thank them for the extra mile & when business recovers, remember to give them a bonus for facing adversity with the company.
Before the implementation of no-pay leaves, discuss with your employees how they intend to spend it and when would be a good time for them to take the leave. Help employees explore possibilities, encourage your employees to fully utilise the leave to pursue their passion or pick up a new skill. The government topped up S$500 worth of SkillsFuture credits for every Singaporean aged 25 & above. One can propose picking up a new language for the avid traveller, or for the worried mummy, learning First Aid from accredited training providers.
Increasing Capital
During this tough period, it is in the interest of many financial institutions and the government, to ensure that as many businesses as possible are kept financially stable. The health of businesses affects employment prospects and overall GDP.
As such, the government has worked with multiple financial institutions to provide working capital loans. One example is DBS which offers unsecured / no-collateral working capital loans of up to S$600,000 with low-interest rates to aid businesses to continue operating during this period. (Read more at https://www.dbs.com.sg/sme/covid-19-relief-measures.page)
ForBis Accounting is a champion partner of DBS. We generally prefer our corporate clients to DBS when they are looking to set-up their bank accounts or to apply for corporate loans. Of course, we understand that some clients (and maybe you?) have a preference for other banks or institutions. Regardless of your preference, our professionals will still assist you to the best of our abilities to obtain a corporate loan to aid your company tide over this period.
ForBis also provides advisory services to manage your working capital, cash flow as well as alternative methods to raise short-term capital. All you need to do is simply to contact us at your convenience!
Increasing Revenue
Provide tempting promotions! Did you hear how Paradise Group offered 30% off dining for its restaurants including Beauty in a Pot? This encourages people to take advantage of the limited-time discount – encouraging first-timers to try & for existing customers to increase the frequency of visit/expenditure per visit. Although the discount would affect the profitability of the company, it helps to boost the revenue easing the cash flow. By continuing to order ingredients when competitors are shrinking or stopping orders, it gives the group additional bargaining power with its suppliers which are likely to carry on even when the economy recovers. Additionally, the company don’t have to worry about keeping the ingredients for too long. It will be able to keep its reputation of serving fresh, quality food. What are some irresistible offers you can think of for your company?
If your business is primarily offline, you might also want to consider introducing another sales channel to increase your revenue. You can easily set-up an online shop that is integrated with your POS and accounting system. Since your POS is integrated with the online shop, the company don’t need to hire extra manpower to man the online shop. The online shop is basically a platform to sell the inventory in your physical shops. The retail assistants in the physical shops only need to help pack the products sold on the online shop for delivery or self-collection at the store by the customers. There is no heavy upfront investment either, most of the POS and online shops can be obtained for free or at small monthly subscriptions. Our interns produced a report about entering the e-commerce market, if you are interested, please read more about it in our E-Commerce Guide!.
Check out our digital marketing partners, Traction Haven for your digital marketing consultation, at https://tractionhaven.com
Closing Notes
Out of adversity, comes opportunities. Show compassion, build resilience & you will come out stronger. Forbis Accounting is currently providing a 30% discount on all advisory related services for all Singaporean Firms to help you through these tough times.
About the Authors
Willy Tan, ASEAN CPA
Director, Accounting Services
https://www.linkedin.com/in/WillyTanSG/
Willy is an entrepreneur at heart and an accountant by training. He gained his experience by working for a fast-growing accounting firm for 3 years while pursuing his bachelors and later went on to set up Forbis. Willy is a strong believer in education. After completing Advanced Certificate in Training and Assessment (ACTA), he went on to pursue a Master of Education (Curriculum & Teaching) from NIE. Willy hopes to play a critical role in the training and guiding future accountants regionally. A member of ISCA & ASEAN CPA, he currently advises on accounting and tax matters and is in charge of the accounting services in the firm.
(Ryan) Adnin Goh, MBa
Director, Advisory Services
https://www.linkedin.com/in/RyanAdnin/
(Ryan) Adnin is an entrepreneur and business management consultant. Specialised in developing digital businesses. He has founded and participated in the growth of multiple digitally-enabled companies across 3 continents; Africa, Europe and Asia Pacific including overseeing mergers and acquisition (M&A) in private equity, gaining experience in finance & business strategy and business management. He has also consulted companies independently on matters such as IT (including budgeting and planning), fundraising and growth strategy. Ryan leads the firm’s advisory services on all matters related to finance, manpower, growth and IT.