Business Trends to watch for in 2021
It is easy to see that many business process changes, or trends, made because of Covid will remain in 2021 and beyond in Canada. Many of these changes are accompanied by an attitude change. For example: With the risk of Covid the need for face to face meetings isn?t as important as it used to be. Many companies have been forced to change operational procedures and implement different technologies, such as Zoom. In turn these companies have discovered the cost savings, increased performance, improved Client services and profitability that come with technology. For many companies Covid has been a real eye opener and many of the changes will become permanent.
Customers on the other hand have become more familiar with conducting business online and using new interactive technologies. Services that require face to face communication can be done online, which in turn saves valuable time and the expense of travel. Compared to a year ago, customers are no longer as resistant to conducting business online and are more open to change.
In some industries the changes have been minimal, as their industry has already been using these technologies. Other industries have benefited from the Covid situation. However, in some industries and markets the changes have had a massive impact on their profitability and how they conduct business.
2021 Debt Bomb
It appears that the biggest impact from Covid is a debt bomb that will break during 2021. Many companies have had to incur more debt, while making cuts to their operations. Some companies will survive and some won?t. There is also the domino effect on suppliers and creditors when some of their customers suddenly go out of business.
What makes this debt bomb different from ones in the past is that many of these companies have never been in this type of financial situation before. When a company is in a debt spiral there are warning signs that they should shut down and cut their losses. Companies that have not been in this situation before often hang on too long, which only increases the financial damage.
Some industries have already been devastated and many companies have already gone out of business, Restaurant, aviation, tourism and other related industries will take years to recover. At present, many companies are hanging by a thread of debt and if Covid doesn?t subside soon, they will hit a tipping point.
In 2021 it is advisable to keep a tight rein on your receivables.There are alwayswarning signs a company is in trouble. It is safe to assume bankruptcies will increase in 2021, but hard to say by how much.
Other Trends
Here are some other trends we think you may run across over the next year:
- The use of EFT (Electronic Fund
Transfers) and eTransfers will continue to increase. Because of
Covid many people have learned how to transfer money electronically. Instead of
going through the hassle of mailing a cheque, it is easier to send an eTransfer.
- Telecommuting, or working remotely,
will become more commonas companies realize the cost savings
and improved efficiencies that come with new technologies.
- With the increase in telecommuting the demand for commercial
office space will contract. Many companies have discovered when
they have employees working remotely; they no longer need as much space.
- Some industries such as the retail
craft industry, computer sales and
liquor will continue to boom. As Covid recedes their revenues
will subside and go back to normal.
- Many companies will see their
accounts receivable DSO (days outstanding) increase. While proper AR management can limit the
increase, companies will have to be more lenient so their customers can survive
until normal times return.
- As Covid recedes there will be huge gaps in some industry markets. Restaurants is a prime
example of an industry where there will be numerous new startups to fill the
void left by all the restaurants that have gone out of business.
- At some point many companies will be
crushed by their debt load. The longer the Covid situation
lasts, the bigger the debt explosion will be. This in turn will impact many companies, such as suppliers, who are extending credit.
2021 will be a year of transition as companies adapt to the new realities of conducting business in a Covid and post Covid environment. From a credit and collection perspective, 2021 will be a very interesting year.
