One of the effects of the virus crisis on the economy has been to slow down, and often stop, cash moving between businesses.
This week, the government will publish its plan for how Jersey gets back to work, and one local business leader is arguing for some creative thinking, to get that cash moving again.
In this article for Express, Eliot Lincoln asks why the government doesn't step in to help businesses get paid?
"Commercial pressure drives business innovation.
There is nothing like a significant market disruption to focus a business owner’s mind, as s/he seeks for the edge, the change that needs to be made to help increase income or decrease costs. At a fundamental level, all business is the same.
Pictured: Eliot Lincoln is a former president of the Chamber of Commerce.
You take an input - be that a raw material, another product, another service or perhaps human intellect and muscles - you add value to it in some way and you sell it on for hopefully a higher price than you spent on the inputs. Innovation happens when looking for ways of improving the inputs, the process, the outputs and finding ways of spending less on the inputs, improving the efficiency of the process and delivering outputs that are preferable to your customers over those of your competitors.
It’s a simplification, of course, but it’s a process experienced by the thousands of business owners in Jersey on a 24/7/365 basis.
The process is constantly building and evolving and over many years, a symbiotic process is created that relies on the flow of business – and cash – to sustain itself. Whilst the cash is flowing, business keeps moving and the wheels keep turning.
Business is vital to our island. It is ultimately what pays for everything - some business provides income directly in the form of taxation and Social Security contributions, it employs the people that pay income tax, it supports the tourism industry, it brings investors into the island, and it provides the infrastructure that gives the quality of life that is the envy of many other jurisdictions.
Pictured: "There is nothing like a significant market disruption to focus a business owner’s mind."
Taking the June Labour Market Report, of the 7,750 businesses in our island, 6,310 have fewer than five employees - and they are the lifeblood of our island.
Together, they employ more than 11,000 individuals. They support many other businesses, households and the Government as they deliver their value.
The current situation is unprecedented. Never before has such a significant impact been felt on a worldwide basis. The last 20 years has seen two significant recessions and, though these were felt significantly by the island, business made the changes it needed to and mostly kept going, many in a similar albeit quieter version of the time before the recession. Innovation happened, wheels again kept turning.
But now it’s different.
For some businesses right now, there’s minor disruption in the fact that staff are working remotely. Technical and HR process have been put in place and things keep moving.
But for many businesses, the fundamental environment they exist in has stopped them trading in their existing business model. They are simply not allowed to open their doors physically. Many have rapidly moved to or increased their trading online, though for many it is a massive reduction in throughput. Many who are not able to move their business online, especially hospitality, have simply closed their doors and are sitting it out.
Pictured: "For many businesses, the fundamental environment they exist in has stopped them trading in their existing business model."
We don’t know how long this will take and that is something that is preventing some businesses making major changes to their business model. When we do come out of lockdown, what will the world look like? Will we ever get back to ‘how it was'?
It’s unlikely that things will ever be the same, but generally business owners are massively adaptable. The businesses that are able to adapt and make the changes they need to make will be in a good place as the island gradually recovers. Just like in the recession in 2001 and 2008, we won’t see a sudden point that says we are recovered, the recovery from covid-19 is a long and gradual journey that already started in March.
The current lockdown has effectively put many of us on pause, but business is already responding where it can, and the business processes being developed now will be weaved into our economy for years to come. We could see waves of relaxing and contracting the lockdown, we are likely to see more and more businesses yield to the trading conditions and simply fail.
Cash, as they say, is king.
It’s always been the case that businesses that don’t keep an eye on the cash are more likely to fail quickly. But in these uncertain times, cash takes on an even greater priority. Many businesses right now are doing what they can to hold onto cash (as would be expected), but it is causing other businesses problems.
Pictured: Corona virus has badly affected businesses across the island.
As we don’t know what even next week might bring - never mind next month or quarter - some larger businesses that buy goods and services from smaller businesses are stretching the terms on which they pay. This is a survival move for those larger businesses and is understandable, however it puts the smaller businesses under significantly more pressure.
Even invoices from before the lockdown are still going unpaid and it is stretching these businesses, many of whom operate with tiny margins, to breaking point. It is not the time to be entering a time-sapping and costly legal process to get your invoices paid, when facing a customer who themselves are struggling.
And here is where I make my call on our Government: how about going into the factoring business?
Those small businesses that are still trading, despite the conditions, need their invoices paying. Their customers are withholding payment for sound business reasons, and we need the economy to keep turning. Buy the debt off the business and hold onto it until the situation eases. In this way, cash moves into the economy, business keep running, staff keep getting paid and we make one more step towards what will become ‘the new normal'.
And here’s my call to the island: it’s imperative that we do what we can to buy our goods and services here.
Pictured: "A pound that leaves the island will not come back."
It’s not always possible, especially when Amazon is just a click away, but please do what you can to support businesses locally. Cash needs to move around, and a pound spent in Jersey is recycled many times.
A pound that leaves the island will not come back, especially as the tourist and business travel industries are largely on pause."
READ MORE on Jersey's covid-19 recovery...
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