A legal perspective: Five things businesses should be doing through these tough times!

If the COVID-19 pandemic has taught us anything, it’s that being in business is HARD WORK.  So here is a list of FIVE things that every business owner (large or small) can be doing now to help their business move in the right direction:

1.       Review existing contracts and understand your RIGHTS and OBLIGATIONS.

Many businesses take the “she’ll be right” or “that’ll never happen” approach when it comes to contracts, we all know the devil is in the detail and we should avoid the devil if we can help it!!

It is imperative that business owners take the time now to review existing contracts to understand:

• What happens if you can no longer provide the products or services that you have said that you will?

• What happens if the other party can no longer provide their products or services to you?

• Do you have the right to suspend performance under your contract?

• What happens if the contract is cancelled or terminated?  Who pays for what?

• What penalties and fees may be triggered?

• What are the guidelines around communication and notices?

Now is not the time to put your head in the sand about your contractual rights and obligations.  It may be an uncomfortable task to review your contracts, but it is a vital task.

Reviewing your contract is the first “C” in the “three-C” process:

CONTRACT – CONTACT – CONVERSATION

Once you have an understanding of your CONTRACT, you can CONTACT your counterparty and have a CONVERSATION with them about where you are struggling, where they are struggling and what you can do together to get through this time.

2.       Cash is king!

A lot of businesses are hurting at present, maybe your business is one of these…if so, there is a chance your cash is starting to dry up.  Here are just a few tips to help optimise your cash flow:

• Overdue debts – chase them down!  Be proactive, call, email and call again.  Not getting paid is the number one killer of a good cash flow.  If your debtors are struggling, consider extending an olive branch such as payment plans… anything that will get the cash that you are owed into YOUR pocket.

• Excessive spending – we’ve all heard “build it and they will come”… for some, they may be fortunate enough for this to be true, however the vast majority in business need to keep tight reigns on spending.  Don’t spend money that you don’t have.  Simple cost-benefit analysis on all costs will help your cash flow.

• Bullish future sales forecasts – while optimism is a key ingredient for business success, certain segments of your business require keeping it real.  Accurate cash flow forecasting depends on keeping it real.  Minimise the gap between forecast and reality.

• KISS – “keep it simple silly” – be sure to keep your invoicing processes simple and make your payment methods as user friendly as possible.  Issue your invoices electronically, allow for several payment methods including immediate electronic payments.  The easier it is for your customers to pay you, the more likely you will be paid (on time!).

And remember, a sale is not a true sale until the cash is in the bank.

3.       Avoid the gap!

For many businesses, the COVID-19 pandemic has exposed gaps in business processes, procedures, and work-place policies.

Many businesses have found themselves exposed with the sudden onslaught of employees working from home; new ways of sharing data and information; increased health and safety obligations; different reporting obligations; and different ways of doing things….

Businesses that are not well prepared to overcome the inevitable gap between “the way we used to do things” and “the new world order” will be exposed to risk.

So, what should business owners do?

Stop, think, and assess. 

Analyse your existing policies, procedures, and contracts – do they still work for the way that you’re doing things now?  If not, change them! 

There is a glut of publicly available information out there to help businesses through these times – start by looking at Business Victoria or the Victorian Chamber of Commerce.

4.        Research, research, research

All three levels of government (local, State and Federal) have continued to provide support for businesses throughout the COVID-19 pandemic.  Be sure to research all available options for assistance and avail yourself of that assistance wherever possible.  

Remember that assistance may come in the form of financial assistance (JobKeeper, JobSeeker, Business Support Fund Grants etc.) but may also take the form of advertising assistance (Melton City Council’s ‘Open For Business’ program), education assistance (local council webinars and Victorian Chamber of Commerce members have access to FREE tertiary education programs) and mental health assistance.

Many businesses are also aiding fellow business owners – Cross the T (for example) provides FREE initial phone consultations. 

The point is to research, research, research.  There is a glut of information and assistance out there – it may not all be useful for you, but some of it will be – you just need to find it.

5.       Negotiate

All businesses should be reviewing and assessing their current expenditure, contractual relationships and ongoing responsibilities and identifying where there is room for negotiation so that the business can make it through these tough times.

Before approaching your contractual counterparty, utility provider, bank etc with a view to negotiating a better outcome for yourself, consider the following tips:

• Be prepared, do your homework – you should know your rights and obligations back-to-front, you should know what you are required to pay, what you can pay and what the difference is.  Do your homework.  If you can go into your negotiation armed with facts, you’re far more likely to be successful.

• Be reasonable and empathetic – don’t go into a negotiation demanding the world from your counterparty.  Remember that they, too, are suffering now.  If you approach a negotiation with empathy, reasonableness, and a willingness to listen, you are far more likely to succeed in reaching an outcome that works for the both of you.

• Understand that you probably won’t get everything that you want – be clear on what you want versus what you need.  It is usually the case that they are very different beasts. 

• Go in with an open mind – don’t go into the negotiation with your blinkers on.  Have an open mind, the person with whom you are negotiating may have some very useful insights or ideas that you had not thought about. 

Tania White
Principal Lawyer & Director
Cross the T

Cross the T is a Melbourne-based boutique commercial legal practice and business consultancy delivering specialised and flexible solutions to protect and grow businesses.