For large global companies, the virus could have a significant impact on profitability. For smaller companies operating in China, losing several months of business is likely to leave them fighting for survival. Most SMEs have low margins, high fixed costs and few reserves. Here is our essential, ten-step guide for SMEs in China to help manage this challenging period.
1. Cutbacks
This is the time to scale back as much as possible and reduce or remove all non-essential costs. Communicate with partners, suppliers, staff and customers to explain the challenges the business is under and try to arrange financial terms that work for your business.
2. Manage your staff well
Many companies have advised their staff to remain on holiday after Chinese New Year. Communicate with them that they might need to take paid or unpaid leave until the situation is under control.
The China Labour Bureau can offer guidance on what you can and can’t do with your staff but it is clear that companies cannot terminate staff due to the virus. Ask your team to work from home or, if that is not possible for your business, negotiate a temporarily reduced salary.
The Labour Bureau says businesses affected can reduce salaries as long as employees receive enough to live on, as a percentage of the local minimum wage. Ensure your staff are safe and don’t forget your duty of care to them, they will remember this in the future.
3. Deferral of tax and social insurance payments
Local governments have set up systems to provide tax relief and to allow deferred payments of tax and social insurances to keep cash flow within businesses. Each province has set its own rules, which are constantly being updated. Speak to your accountant or CBBC regional office representative to find out what you might be able to benefit from.
4. Use the time for training
Offices closed during the outbreak are entitled to receive up to 95 percent subsidies on vocational training for their employees. Only enterprises who file applications on training platforms and courses certified by the authorities in charge can obtain the subsidies. Companies are advised to check with their local district authorities and the Labour Department to find out whether they can benefit from this provision.
5. Get financial assistance
Banks are offering discount and low-interest loans to affected companies, while the government is providing financial support to keep companies going.
6. Negotiate, negotiate, negotiate
Negotiate deferred payments, better deals or discounts or delays in delivering your products with suppliers, partners, landlords or customers. If you are stuck at an impasse, you could be able to implement the force majeure clause in your contract.
7. Getting back to work
Ensure you are following local legal regulations and policies when returning to work. These vary by region and are being updated daily. Some regions require companies to fill in dozens of forms before permitting them to reopen, whilst others are helping bus and fly in workers. However, companies that are infringing the rules could be liable for high fines and penalties.
8. Use it as an opportunity to rebalance
Renegotiate with suppliers, agree better terms, sign long-term deals. This is a great time to reassess your business and your partners. Take advantage of offers from local government for discounted spaces in trade zones or tech parks, and of low-interest loans and finance.
9. Work with your partners
Showing local government departments and business partners you are willing to stick it out in such challenging times may lead to longer-term benefits. Look to your government relations and your regulators, as they will remember how it was in the hard times. That engagement should be dynamic and ongoing.
10. Prepare for the future
Treasure the lessons learnt during this crisis to protect yourself from the next. Spread your network of suppliers, and diversify your supply base. Be nimble and agile, keep a broad inventory, and ensure there are funds available to keep you going for several months.
