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TSWOT YOU DO WHEN THINGS GO WRONG he impact of last summer’s the right time’ motto. Prepare a simple provide you with an improved bushfire season followed wages budget for the next week and merchandising strategy to optimise by COVID-19 has been consider how many staff you need front-of-shop sales? extraordinary for most of for each hour the business is open. If cashflow is very tight in the us. Some pharmacies have found the Use your POS reports to reinforce busy short term, negotiate a deal for financial situation much more difficult than others have. Even the most robust of businesses, which initially seemed to have avoided problems, have since experienced delayed interruption to operations. If you now find yourself in this scenario, you need to act to navigate a pathway – especially if you’ve been relying on JobKeeper subsidies or reduced rent or mortgage payments to get through. Some obvious indicators of distress: • Unable to pay all your bills on time. • Overdraft or credit cards always at their limit. • Behind in paperwork such as BAS lodgements. • Stock levels significantly lower than normal. If you’re the owner, you must assess the symptoms and take control. You need a plan. Start by conducting a thorough SWOT (strengths, weaknesses, opportunities and threats) analysis to define your problems in detail. Once you have an overview, talk to your accountant to gain an objective perspective. Next, review your cashflow position and identify your normal monthly outgoings. Also consider if you have any extraordinary costs likely in future. How much income do you expect to deposit each week from sales and PBS during the next month? Are there any sources of short-term cashflow you can arrange (such as redrawing on existing loan facilities)? Conduct a quick ‘skills audit’ of your team to help understand your mix of staff. Are there any holes in what your business needs? You need to adopt the ‘right people doing the right thing at and quiet periods so you plan to use the staff resources effectively. If you’re working full time in the business, use this as an opportunity to show leadership by setting your standards of work ethic and motivation. You should also implement training to ensure the staff have strong knowledge of products and health issues, so that customers are completely satisfied and monthly sales targets hopefully achieved. Rent is typically the second largest overhead after staff wages, so any rent reduction/delay in the short term can be a welcome relief. Depending on the location, your landlord could be a multinational company or an individual owner. So, tactically, the way you approach the landlord might differ but, regardless, in these negotiations you need to present a win/win offer. You might ask for a reduction in monthly costs, a short-term rent holiday, assistance with a shopfront makeover or possibly to downsize the business’s footprint to reduce your commitment. In return, the landlord gets a strong tenant committed to the site for many years to come, thus adding value to the landlord’s asset. Consider engaging a specialist lease consultant for advice early on. Liaise with your wholesaler to discuss what’s happening in your business. Explain why you’re having difficulties meeting payment. How can they potentially help you increase sales and margins? Are you holding the right type of stock to suit your demographics? Is there sufficient quantity on the shelves to attract customers to buy, without crippling your stock-turn ratios? Are you taking advantage of all the available discounts and rebates? Could they extended trading terms. You’ll need to demonstrate your forecast of future sales and cashflow, and highlight what you require and how long it will take to repay the short-term loan. Be prepared to provide copies of your current financial statements, business plans and budgets, to earn their trust. Don’t get bogged down by attempting to design the ‘perfect’ plan. It might take weeks to prepare and by then it could be too late. Instead, start by taking an overview, then refine along the way. Once you’ve worked through the above steps, you have a blueprint to reconstruct the business. You can then meet with your bank and provide the details of your plan, including cashflow forecasts from your accountant to show expected timing of trading activities, and what help will be required from your bank to make this happen. The bank could allow you a temporary increase in facilities or revert to a short period of interest-only finance to accumulate your cashflow. They need to be comfortable that their debt will eventually be repaid. By recognising the warning signs early and taking action, you could avoid significant problems later. BUSINESS THROUGH INNOVATION FINANCE 45 By Neil Featherstone. Director Pinn Deavin Neil Featherstone is a director of Pinn Deavin, a leading accounting, management consulting and investment firm. Neil has been advising pharmacists since 1984. Inquiries: neil@pinndeavin.com.au or 02 8525 3700. Accountants specialising in Pharmacy www.pinndeavin.com.au Neil Featherstone (02)85253700 Neil Featherstone 30x190.indd 1 2019-1-11_PinnDeavin_StripAd_Proof.indd 1 19/1/05 8:38:24 AM RETAIL PHARMACY • JUL 2020 11/1/19 1:26 pm