The COVID-19 pandemic has reshaped the business world in ways that we would never have imagined before. While global markets have all been severely impacted, it is the small to medium businesses that have taken the brunt of the losses. So, what are the biggest financial business problems related to COVID-19 that are being faced today?
Cash Flow
According to a report that studied the impact of COVID-19 on businesses, it was found that interrupted cash flow was the biggest problem that most companies was facing. In fact, 85% of the companies studied stated that they were struggling with cash flow problems since the start of the pandemic. In fact, they stated that this issue had had a medium-to-high impact on their organizations.
Sadly, only one-third of these companies that had been impacted by cash flow issues said that they had enough money to recover from this financial setback.
Another fallout of the lack of cash flow is the employment ability of these businesses. While the larger corporations have tried to retain as much of their staff as possible, there have been staff cuts – at some places to as much as 40% of their workforce. The problem is that 48% of Americans are employed by small to medium sized businesses, and these are the businesses that are struggling to remain open during this crisis.
Another research paper shows that most American companies (the small to medium kind) usually only have enough cash in hand to cover a two-week operation period.
Insurance Coverage
Another huge issue that has faced companies is the lack of (adequate) insurance coverage. 54% of companies surveyed stated that they had no insurance coverage at all. Only 26% said that they were completely covered.
To complicate matters further, insurance companies are not willing to honor claims of business interruption due to COVID-19, stating that pandemics were not a part of their coverage. This has led to many businesses taking their insurance companies to court, but the problem is that the financial losses have continued mounting while they struggle to get their claims approved.
Ability to Adapt
Another issue that businesses have faced during this pandemic is their ability to adapt to the circumstances.
Industries such as real estate, financial services, professional services and so on were relatively less impacted by this pandemic simply because of their ability to operate even from a distance. Such industries were able to move to remote operations with relative ease – they could still meet their customers’ demands while dealing with them through remote (online) channels; for example, online house viewings in the real estate industry have become the norm, and financial services were already mostly migrated to online offerings even before the onset of the pandemic.
On the other hand, the service, food, hospitality, tourism, entertainment, and other service-related industries have taken a massive beating during the COVID-19 pandemic. The very nature of these businesses has meant that they have not been able to migrate effectively to a distance-based operation. The entertainment and tourism industry has been especially hard-hit due to this.
Mistakes in Forecast
When the pandemic spread across the world like wildfire in early 2020, most expected it to die down – or at least become manageable – by the middle of the year. The lockdowns instituted across the nation were not expected to last too long.
This led many businesses to create only short-term business continuity plans, plans that catered to a lockdown lasting only say, one month. Therefore, such businesses’ plans did not factor in the possibility of having to completely restructure their business completely to deal with a new normal. A normal where online sales would be key to survival, and physical stores would take a backseat.
Conclusion
There have been many businesses that have been able to adapt to the changes in the markets fast enough to save themselves. Switching to online services and offerings, connecting with their customers, finding alternate revenue streams, making as much use of government support through programs such as the CARES ACT, loans and so on, downsizing, cutting down on expenses, etc. is what has helped many companies survive and grow in these times of crisis.