Due to the Coronavirus pandemic, businesses across South Africa are facing incredibly uncertain times and new challenges on a daily basis. While there’s no textbook on how to run a business in a pandemic,  regularly stress testing your business is a vital tool for business owners to test their resilience, navigate uncertainty during this virus outbreak, and understand how prepared they are to weather unanticipated future challenges. 

Sandra Beswick, Director at  financial and strategic advisory company Fluence Capital, says stress testing helps business leaders uncover weak spots, identify risks and take preventative action. 

“In such unpredictable and unstable times, it is vital for business leaders to be prepared for all possible scenarios. Stress testing allows you to assess the financial health of your business, as well as helps to identify key areas of business vulnerability. It should form part of any leader’s arsenal when attempting to steer a business through these uncharted waters.”

Sandra says regardless of the position your business is in, regular stress tests help business owners to react nimbly in the face of unanticipated events, enabling leaders to make key decisions very quickly. 

She says stress testing also helps business owners adopt specific strategies to more effectively minimise risk, and enable continuity planning.

When stress testing your business, you should ask the following questions: 

1. Is crisis management the order of the day? 
2. Do you prepare and review monthly management accounts and have them audited? 
3. Does your organisation have clearly defined responsibilities and roles?
4. Do you manage your cash flow daily? 
5. Are your customers paying on time? 
6. Do you have measures in place to monitor daily cash usage and control expenditure?
7. Have your overhead expenses increased over the past 12 months? 
8. Are the company’s total liabilities greater than its assets?
9. Have funders refused the company funding or refused additional facilities? 
10. Do you have regular contracts?
11. Has the company’s cash flow declined rapidly in the past 12 months?
12. Can you meet your monthly obligations like paying salaries and suppliers on time? 
13. Are you in arrears with paying suppliers and other creditors including funders?
14. Are you behind on submitting SARS returns and payments? 
15. Have any key individuals resigned or are threatening to leave? 
16. Do the gross margins meet your overhead expenses?
17. Can you afford to pay long term loans interest and capital? 
18. Have Inventory levels increased substantially at year end compared to prior years?

Conclusion

Sandra says if you (the business owner) negatively answered 5 or more of the above questions (which is highly likely in the current climate), you should seek professional assistance to understand the measures you can implement to offset the impact of the crisis.

She says there are so many factors beyond a business leader’s control at the moment. But, one thing they do have the ability to take control of, is the financial health of their business.

“Understanding the worst-case scenario will make business owners far more resilient and adaptable to change. If this pandemic has taught us anything, it’s that change will soon be the only constant in business. Those businesses who conduct regular stress tests have a far higher chance of not only surviving, but thriving during economic downturns if they have a plan and are prepared.”

Fluence Capital will conduct a thorough stress check of your business, assist with cutting overhead expenses, conduct a careful analysis of working cash flow to ensure continued operations, and help to restructure your company if required.

Visit www.fluencecapital.co.za for more information or Email [email protected]