Impact of COVID- 19 and actions businesses can take to mitigate the effects of COVID-19
Current state of the economy
- The increase in unemployment rate (especially in the young population and black majority of South Africans.)
- The GDP fell by just 16% between the first and second quarters of 2020 giving an annualized growth rate of -51%
- Restricted activity for some sectors of the economy. Tourism, alcohol and restaurants are suffering the greatest brunt.
How has COVID-19 affected SMEs
- Analysts predict that 60% of SMEs may close before the crisis is over
- Low awareness of opportunities especially those presented by online platforms
- Lack of financial knowledge remain a barrier to SMEs accessing the required support
- Lack of resources to sustain longer periods of recession. Many already closed down
What can SMEs do to mitigate challenges during this pandemic?
- Leverage technology to reach new customers
- Develop clear market access strategies
- Get educated on the financial support you can get as an SME
- Diversifying activities in order to withstand shocks associated with the lockdowns
- Prioritize cost control e.g., reducing rentals and staff costs
How do we manage our finances this year?
- Try to save when you can. Avoid unnecessary costs.
- Be vigilant
- Look at your incoming and outgoing and consider what adjustments you can make to put yourself in a better position going forward
- Focus more on liquidity and survival. Profiteering In this environment is not a sustainable strategy
How do we prepare for the 2021 financial year?
- As auditors there is need to maintain skepticism. Many businesses may no longer be going concerns
- As accountants, closely review income streams and observe those which present risks
- Building relationships and evaluation sustainability of existing business relationships
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