1. Protect your business assets, financial reports and documents – you need to be very sure that your business assets are safe while you are at home.
– Get insurance for your assets, properties, warehouse, inventory for sale, office equipment.
– Also get your home insured! The victims of the gas explosion at Abule Egba, for instance, did not have prior notification before the incident that happened the other day. So be sure you have a home, even if you have no office.
– Get your financial records together- store them in the cloud (Cloud accounting or ERP) so you can have access to them from any location. Also, if they are on cloud, you do not have to worry much about losing them or maintaining the IT infrastructure. Going forward, the practice of generating transactions straight from the accounting software is crucial especially for businesses that still use manual invoice, excel based fixed assets schedule, excel based payrolls and tax calculations and a hybrid of automated and manual finance functions that is highly prone to manipulations.
– You need up to date accounting records to see what the business is doing right or wrong; make financially informed decisions and strategies . You also need them if you decide to get insurance.
– You should also scan or snap your important business documents and file them off in the cloud- we have heard about serial office fires recently.
– we will be very happy to help you with choosing and implementing cloud based accounting/ ERP software.
2. Managing cashflow – Prepare robust cash flow projections for the next 3 months, then another 3 months, up till December 2020.
– If you have up to date financial reports -Profit or Loss, balance sheet and cashflow statement, use them as a bases for preparing the forecast.
– articulate all expenses
– review them and cut costs where necessary
– use services and product subscriptions that allow you pay in monthly instalments.
– restructure expenses-. See if outsourcing will be more cost effective than having the function in-house. Exchange fixed costs for variable costs.
– See what capital expenditure is absolutely necessary or not – cut or hold on huge investments, unless you are investing in an opportunity created by the Covid-19. Be sure you are very certain that the investment will at least return the principal amount.
– Plan for insurance, get all your business assets insured, especially your goods for sale.
– Plan for tax , it only accumulates if you don’t. Crude oil prices are getting so low and I hear Nigeria is finding it hard to find buyers even at the ridiculously low prices. So diversification strategy for government may be tax, agriculture and local production or manufacturing. So plan for taxes.
– we have our app – Tax Law Book on Apple app store and google play to help you navigate taxes. If you download the app and subscribe to our in-app purchase, we offer you free high level guidance and advisory on your tax issues.
– below is a simple cash flow forecast to help you get around it.
| Cash Flow Forecast | |||||||||||||
| NGN | NGN | NGN | NGN | NGN | NGN | NGN | NGN | NGN | NGN | NGN | NGN | ||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
| Sales Income | |||||||||||||
| TOTAL INCOME | 0 | 1,175 | 2,409 | 2,761 | 3,231 | 4,054 | 4,641 | 6,463 | 7,638 | 6,698 | 8,519 | 9,106 | |
| Cost of Goods Sold | |||||||||||||
| TOTAL COST OF SALES | 0 | 0 | 435 | 458 | 494 | 517 | 670 | 705 | 611 | 705 | 823 | 823 | |
| Overheads | |||||||||||||
| Staff Pay | 1,200 | 1,200 | 1,200 | 1,200 | 1,200 | 2,400 | 2,400 | 2,400 | 2,400 | 2,400 | 2,400 | 2,400 | |
| Employers Costs | 360 | 360 | 360 | 360 | 360 | 720 | 720 | 720 | 720 | 720 | 720 | 720 | |
| Communications | 0 | 59 | 59 | 59 | 59 | 59 | 59 | 59 | 59 | 59 | 59 | 59 | |
| Office costs | 0 | 82 | 82 | 82 | 82 | 82 | 82 | 82 | 82 | 82 | 82 | 82 | |
| Marketing | 940 | 118 | 118 | 118 | 118 | 118 | 294 | 294 | 294 | 294 | 294 | ||
| Insurances | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | |
| Professional fees | 0 | 118 | 118 | 118 | 118 | 118 | 118 | 118 | 118 | 118 | 118 | 118 | |
| Banking fees | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Expenses | 50 | 50 | 50 | 50 | 50 | 50 | 150 | 150 | 150 | 150 | 150 | 150 | |
| Other | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | |
| VAT | 75 | 15 | 170 | 225 | 300 | 350 | 450 | 525 | 460 | 600 | 650 | ||
| TOTAL OVERHEADS | 1,750 | 2,949 | 2,126 | 560 | 2,126 | 4,674 | 5,552 | 4,362 | 4,362 | 5,003 | 4,362 | 4,362 | |
| Capital Expenditure | |||||||||||||
| Car | 4,000 | ||||||||||||
| TOTAL CAP EX | 9,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| TOTAL EXPENDITURE | 10,750 | 2,949 | 2,561 | 1,019 | 2,620 | 5,191 | 6,222 | 5,067 | 4,973 | 5,708 | 5,185 | 5,185 | |
| OPERATING cashflow | -10,750 | -1,774 | -152 | 1,743 | 612 | -1,137 | -1,581 | 1,395 | 2,664 | 990 | 3,334 | 3,922 | |
| Financing | |||||||||||||
| Equity Investment | 7,500 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Loan Drawdown | 6,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Loan Repayments | 0 | -208 | -208 | -208 | -208 | -208 | -208 | -208 | -208 | -208 | -208 | -208 | |
| Interest Payments | 0 | -50 | -50 | -50 | -50 | -50 | -50 | -50 | -50 | -50 | -50 | -50 | |
| Investment liquidation | |||||||||||||
| TOTAL FINANCING | 13,500 | -258 | -258 | -258 | -258 | -258 | -258 | -258 | -258 | -258 | -258 | -258 | |
| Opening Balance | 0 | 2,750 | 718 | 308 | 1,792 | 2,146 | 751 | -1,089 | 48 | 2,454 | 3,186 | 6,261 | |
| Cash Flow | 2,750 | -2,032 | -410 | 1,484 | 353 | -1,395 | -1,839 | 1,137 | 2,406 | 732 | 3,076 | 3,663 | |
| Closing Balance | 2750 | 718 | 308 | 1792 | 2146 | 751 | -1089 | 48 | 2454 | 3186 | 6261 | 9925 | |
| Agreed Overdraft | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 |
Articulate how to raise cash to cater for your cash flow needs. Your business can raise cash through:
- Sales
- Loans
- Equity
- Overdraft
- Debt Factoring
- Asset Financing
- Liquidation of investments
- Selling off business assets or other non-current asset item
- Crowd Funding.
Loans- leverage on CBN Interventions (through NIRSAL MFB)
- See other asset financing or working capital financing options you can get from your bank, development bank of Nigeria or bank of industry or MSME development fund, Lagos State Employment Trust Fund (for those in Lagos).
- We can help you prepare your business plan, your financial reports for the required periods and register your business (if it is not yet registered so you can apply for loans with ease).
Equity investments would be scarce at this time unless you have a really bankable business opportunity from the Covid-19 that would be attractive to equity partners.
Overdraft from bank – will be very expensive at this time.
Debt factoring might be a very good idea at this time – selling off your unpaid customer invoices to debt factoring companies at a lesser value. You can find debt factoring companies in Nigeria by browsing the internet, but we cannot recommend any right now.
If you have made short term investments to asset managers, you may consider liquidating as nothing is certain. Investment in treasury bills will be more secure – at least you are sure of getting back your capital, if not interest.
Crowd funding means campaigning for money on a web based platform. It works well in the western countries where we have kickstarter, Go fund me and the rest. It will work well in our country once Nigerians come to trust and embrace it.