Economic life has stopped unexpectedly because of coronavirus. But it is a misconception to think that it will also suddenly resume. Restaurants will have no money to buy products, the service sector – to pay off rental debts, travel agencies – to fulfill their obligations to customers… Consumers will also have less money: someone will have lower wages, someone will switch to unemployment benefits. Small and medium businesses will suffer the most. We estimated the number of companies in this niche and their position by the time the self-isolation restrictions are lifted.
What awaits us?
Quarantine restrictions will be removed gradually, people will slowly return to normal life. The habits will change – someone will continue to buy online and do sports at home, many will continue to avoid crowded places, others will stay at a distance.
The example of China confirms that the return to normal life will be difficult. On the one hand, on the second weekend of April, which was a holiday in China, hotel reservations increased by 60% compared to the previous week, buying tickets for trains – 2 times. On the other hand, the decline in demand for the products of Chinese enterprises does not yet provide an opportunity to restore production volumes.
When the quarantine is over, most businesses will have to start from scratch and pull themselves out of the deep financial pit. A survey of 1,200 U.S. small companies conducted by LendingTree showed that 71 percent are afraid of not recovering from the downturn caused by the pandemic. Seventy percent are planning layoffs, salary cuts, and time cuts, and 69 percent said they won’t have enough money to keep their jobs up for the next 90 days. By the way, 73% of US citizens according to the polls have already fixed a decrease in their incomes.
Who is among the most affected?
Restaurants, hotels, transport, services and entertainment sector, importers, tourist firms, organizers of business events, builders, fitness centers, duty-free trade – this is an incomplete list of industries most severely affected by the coronavirus.
Which companies will be able to continue working with after quarantine?
Business, most likely, as in previous crises, will hold money. But there will also be companies that will go bankrupt only because of the moratorium on bankruptcy imposed by the government.
It will be difficult to recognize such businesses: at best, you can learn about changes in companies’ profit and revenues six months after the end of the reporting year.
An additional plus of payment data is the opportunity to see that a particular counterparty is paying you worse than others (apparently, higher priority) partners. This should help you in negotiations with such willing to be credited to someone else’s account.
Another option for the rapid tracking of the financial situation of the counterparty – request a credit history. Such a request can be made, by law, however, only with the consent of the audited (person or company).
For retailers, an important indicator is also online cash register data, which allows you to track changes in turnover, the average check, the number of cash registers at a particular retailer. For example, if the cash register of a store suddenly does not break through the checks for more than 30 days or the revenue for the last 30 days has fallen – it is an alarm signal.
In 2020, by the way, the share of “bad payers” who allow an average delay of more than 90 days was only 5.2%.