Adapting to the New Normal: Lessons from the 2020-21 Financial Year

2020 was a year of both challenge and opportunity. The world bore the brunt of a pandemic, caused by an easily transmissible virus, with many of us being affected in some way.

In South Africa, businesses in all sectors, from manufacturing to tourism, were forced to shut down for indefinite periods, something that only a few could have predicted and even fewer were equipped to manage effectively. While most businesses recovered to some extent, some “non-essential” sectors (such as leisure and entertainment) weren’t so “lucky”.

Despite all the hardships we collectively faced, there was, and is, a clear silver lining. For example, we saw businesses starting to use platforms like ours to unlock new revenue by taking their businesses online. And, as FY21 comes to a close, there’s room for you to start-over or elevate your strategies, and face the new financial year with force. 

Let’s look at some of the key business and financial lessons we’ve learned, and how we can walk into FY22 with the right mindset – and the tools we need to reach our business potential.

Savvy spending is the cornerstone of managing financial risk

When it comes to spending wisely, debt management and financial planning are the two most talked-about facets of finance. Oftentimes, businesses and individuals are tempted to spend more money than they earn, and resort to borrowing for survival instead of growth.

  • Manage your debt. While there is “good” and “bad” debt, it is worthwhile to have the future in mind when deciding whether or not to take out a loan. If your business has a clear growth path, taking out a loan could be a viable option, as a contingency plan. This can work as a buffer for unexpected expenses. But, it goes without saying that debt should be limited where possible and carefully managed to help prevent paying too much interest or getting into a financial hole you can’t get out of.
  • Plan to strengthen your finances. As you head into FY22, financial planning and investment should be crucial to your growth strategy. The sooner you can prepare for the future the better, and these plans should be in place before the start of the new financial year.

    A financial plan is a detailed view of your current finances, your monetary goals and any strategies you want to put in place to achieve these goals. “According to renowned financial experts, Kevin Voigt and Alana Benson: “Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life”.

Saving is still crucial

Everybody talks about the benefits of saving but why is it so important, really?  Many businesses can’t afford to shut down for a few days, let alone a few months, which would mean living hand to mouth.

  • Protect your interests. Saving helps to protect you or your business by giving you an emergency fund for a rainy day, such as a nationwide lockdown. By making sure your essentials are covered, you’ll be better prepared for any unfortunate circumstances and, in doing so, your money can earn interest. Of course, you would have to give up on a few luxuries, but the feeling of financial freedom is priceless especially in the midst of uncertain times. 

Taking a hybrid approach to working can be a major benefit

One thing a number of managers didn’t bank on was the fact that some employees could work from home to some extent and be productive. While the jury is still out in terms of what works and what doesn’t, here’s what the experts are saying: 

  • Productivity goes up.  A study by Standford of 16,000 workers over 9 months found that “working from home increases productivity by 13%” – and we’ve seen this success in our own hybrid approach. That being said, there are benefits to in-office meetings in terms of team cohesion and loyalty. Currently, the best approach seems to be a hybrid of bringing the team together, coupled with remote working mechanisms.
  • You can cut operational costs. In FY21, adopting a hybrid approach allowed companies to save on specific day-to-day operational costs and provided their employees with technological tools needed to perform tasks from home, as well as in-office. The working environment as we know it has been transformed, as business activities have become more agile.
  • Some wealth is more important than money. On the employees’ side, savings were also realised from reduced travel and daily costs. However, the cost of setting up home offices should also be taken into account. Employees should also be allowed to make use of equipment and amenities, in-office, where possible. For many, the infrastructure is still not entirely available for them to productively work from home. Until this problem is solved, a hybrid approach, especially in emerging economies, should be an option. 

Resilience lies at the heart of a great team

When countries began to institute lockdowns, we thought it would only last a few months. Fast forward to a year later, we have realised how resilient and resourceful we can be.

One important lesson we learned is that sometimes we need to stick it out in order to achieve anything or even to just weather the storm. With the business environment constantly changing during the pandemic, and the dreaded possibility of many businesses being forced to shut down at a moment’s notice, this has become a necessary skill for the future. And forward-thinking entrepreneurs will be forced to keep building on this resilience and finding ways to adapt as new options and challenges come to the fore. 

Diversification is key

Going into FY22, we can also take the lesson of diversifying from FY21. As the financial volatility in 2020 showed, it’s essential to have multiple sources of income for your business.

This can take on the form of investments into various stocks for example, or a company in a different sector to the one your business operates in. The investments become buffers for one another, should storms arise. 

Preparing for what’s to come

Finally, experts have warned that this will not be the last pandemic. Therefore, it is important that we take the lessons learned in FY21 into the future. As businesses have been forced to go online, with face-to-face interactions and physical money exchanges currently discouraged, incorporating online payments into our business is now more important than ever. 

Over the course of the South African lockdown, South Africa saw an increase in the uptake in instant EFTs, particularly via reputable e-commerce sites. The basic lesson here is that futureproofing means embracing digital, wherever that makes sense for your business.

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