COVID-19 has changed the way businesses operate, no matter the size or industry
Since the COVID-19 pandemic hit the U.S. in March 2020, the economy has seen an epic downturn. Millions of Americans are claiming unemployment, hundreds of thousands of small businesses are closing either temporarily or permanently, and the future remains uncertain.
If you’re running a small business or startup, your books have no doubt been impacted in some way by the pandemic. What should you be doing to manage these changes? Here are a few important COVID-related considerations.
Take a look at your debt
You may have had a solid plan in place before the pandemic for paying off your business’s debts. But these good intentions may have changed drastically in the last few months.
Many small businesses have turned to business loans to keep their doors open. (As of August 2020, there were more than 5 million Payment Protection Program (PPP) loans approved by the Small Business Administration.)
While some government loans will be forgiven if certain terms are met, some businesses are still facing mounting debt. It’s challenging to think about what could happen after the pandemic is over when you’re just trying to take things one day at a time.
Sit down and look at your current debt situation. It’s always better to know exactly what you’re dealing with, rather than putting it off until later. Try to apply for grants or business loans that can be forgiven, if possible. And brainstorm new, creative ways you could tackle your debt now.
Reassess your cash flow
Your income and expenses may look at lot different since March. Reassess your cash flow each month to see what’s changed, and identify weak or declining areas. It may be wise to start cutting back on expenses that you’re not using during the pandemic, like workspaces. Eliminating expenses may require re-evaluating and renegotiating contracts you have with service providers and vendors, which can be a tricky process.
Cut back on as much as you can to stay in operation. Assess what is a necessity and what isn’t. Create detailed, regular cash flow estimates and predictions for your business’s future, as much as is possible with so much uncertainty in the economy.
Embrace non-standard metrics
During a crisis, your business needs to track new metrics, even if temporary. For example, your revenue may look a lot different pre- and post-COVID. This means that your financial benchmarks and goals need to be updated and revisited regularly. Instead of comparing your profits to what they were a year ago, for example, try going back to April or May.
Look at all the KPIs your business tracked and depended on before the pandemic. What do you need to change? What hasn’t changed? There are probably new standards of operating for all aspects of your business, so make sure that you evaluate each component.
Compensation considerations
Unfortunately, many businesses of all sizes and in all industries have had to lay off or furlough workers during the pandemic. The government sought to relieve some of that activity with loan programs like PPP. Even if you’re not yet at that stage, chances are you’ll have to adjust compensation in some way to help balance your cash flow.
For example, many organizations may decide not to offer cost-of-living raises, bonuses, or promotion raises this year because they are struggling financially. Benefits packages may need to be revisited to be more affordable for the business. Startup and nonprofit founders may even consider taking a pay cut this year so they can keep things more stable without having to lay off workers.
Work with a financial professional
When dealing with accounting issues during COVID-19, your best bet is to work with an expert. You may not be aware of a government program you’re eligible for. There could be another vendor you could use that is more affordable. There may be many solutions you haven’t yet considered to help your business keep running.
The team at Franco Blueprint is ready to help support you through the pandemic and all the uncertainties it brings. We help small businesses understand and update their accounting processes so that tasks are streamlined, and your cash flow is under control. We also help you implement the right accounting systems for your company to ensure that you stay on track long into the future.
Contact the Franco Blueprint team today to schedule a free consultation.