Every other Czech firm gets invoices paid late or pays them late itself. Entrepreneurs expect their turnover to fall by up to 40% in 2020 and as a result they have to touch their financial reserves. On the other hand, some entrepreneurs view the crisis as an opportunity and plan to invest primarily in digital channels if their financial resources allow. These conclusions follow from a survey conducted by advisory firm KPMG Czech Republic.
“Fears of the pandemic’s economic effects on financial performance reach across all industries, with the exception of some e-commerce and retail sectors“, says Tomáš Potměšil, Head of the Customer and Strategy team in KPMG. “Self-employed persons, small and medium-sized companies and companies focusing exclusively on the export of goods or services feel most jeopardised by the effects of the pandemic.
Three-quarters of the surveyed firms expect a decrease in turnover of 11% to 40%. Three out of four firms have thus been planning to use their financial reserves. More than a half of the surveyed firms are paid late by their customers or receive requests for the deferment of payments from them. Of the respondents, 42% have admitted to paying invoices late.
Entrepreneurs have also adopted restrictive cost measures in their management of human resources. For the time being, they prefer steps less drastic than redundancies – reducing or cancelling non-mandatory benefits, not paying out bonuses, reducing working hours to part-time, or increasing the number of vacation days. At the same time, most of them have stopped recruiting new employees. Almost 40% of firms intend to reduce working hours to part-time.
However, according to the respondents, these measures should only be temporary, as firms are trying to keep their employees and are ready to invest to develop their business during the crisis.
“Most entrepreneurs view the crisis as an opportunity, and if their financial condition so allows, want to invest primarily in IT, online technologies, and customer experience. This is one of the reasons they do not want to lose their employees. But, at the same time, they have to adhere to the strictest cost and financial discipline,” explains Tomáš Potměšil, adding that as a result of the crisis, the entrepreneurial environment should be better prepared for other potential economic fluctuations and better adjusted to modern trends.
Respondents also assume that a longer-lasting crisis is bound to have a bigger impact on investment plans than expected based on existing developments. The investment plans of firms would also probably be complicated by the worsened availability of financing resources for their projects from banks. The representatives of Czech firms mentioned that the availability of financing resources from banks has been worse than in previous years.
The survey was carried out by Ipsos for KPMG among 570 respondents in May and June 2020. You can find more information about the survey in Czech here.
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