March 18, 2020 | by Andy Hale
Every business in the United States will be affected, directly or indirectly, by the spread of the novel coronavirus (COVID-19). The proper response on the part of your company depends to some extent on the severity of the outbreak and the nature of your business. Still, there are some steps that every business owner can take now to minimize the potential impact.
Prepare — But Don't Panic
Communication is key — both with your employees and your clients. Calm, clearheaded leadership that makes employee safety your top priority is of paramount importance during any crisis. Reach out to your clients to let them know you’re there to support them as best you can.
COVID-19 is no longer a distant threat. In addition to close communication with employees and clients, you also need to develop strategies to protect your core functions and incorporate business continuity planning that will help you keep your business running.
Imagine the Worst-Case Scenario
You can't be prepared for the worst if you haven't thought through what it would look like. With the coronavirus pandemic, that would be a government-mandated shutdown that applies to your business. There's no wiggle room there; you'd have to do as the government says, and most decisions would be outside of your control. At that point, it would be a matter of working through the numbers to determine how long your business could survive the shutdown and/or other government-imposed regulations.
Before you reach that point, take steps to mitigate, protect and plan. That includes investigating all possible means of maintaining liquidity, including recently proposed low-interest loans through the Small Business Administration.
Identify the Core Functions of Your Business
Another step you can take right now is to think about the most critical aspects of your business. If your options are limited (e.g., for financial reasons or due to a government mandate or employee unavailability), you'd need to protect your core processes. These include key processes within sales, product/service delivery, accounting, human resources and finance. The most critical processes are typically those that are required by law (payroll and taxes), create revenue (sales) and increase the likelihood that employees remain engaged (human resources).
While all your processes may be important, begin thinking about which ones would be most acutely affected if your employees were unavailable and/or forced to work from home (in quarantine).
Mitigate the Risk
After identifying your core processes, think about how to mitigate the risk of a possible quarantine in which your entire team is forced to work from home and/or team members are unavailable as a result of becoming ill or being responsible for taking care of others. Look for ways to proactively increase the number of individuals who could assist with your core processes, such as through cross-training or by proactively granting access to certain systems. Additionally, look for ways to reduce the likelihood these team members become quarantined (e.g., social distancing, fewer offsite meetings and fewer face-to-face interactions with other employees/customers).
Mitigation is simply a matter of adapting these same common-sense measures to your particular business model. For instance, if you have a manufacturing plant with machinery that can't be moved, begin developing a contingency to mitigate the chances of a business disruption should your team members be unable to work from your facility. Can you increase production now to build up a stockpile? Are there other vendors that you could use in a contingency situation?
Run Through 'What-If' Scenarios and Cash-flow Forecasting
If acquiring new customers is a core process, how long could your business last without doing that? Could you make it a month? A quarter? A year? A bookkeeping services company can work with you to create cash-flow forecasts for different scenarios. You should also make sure you have accurate financial data and access to real-time information so you understand the financial status of your business.
Business Continuity Planning
In response to Hurricane Matthew in 2016, my colleague, Pete Denholm, wrote a blog about continuing business operations after a natural disaster. In his blog, he referred to the Federal Emergency Management Agency's Continuity of Operations plan. It's a plan to make sure essential government agencies continue to function in the event of a disaster.
Business owners can leverage the information in this plan to help ensure their core functions keep running even if staff members become ill. For example, Supporting Strategies' business model meets several requirements for business continuity planning. These include keeping records using cloud-based tools, having employees who are geographically dispersed (though this isn't possible for many types of businesses), building redundancy into your workforce model and documenting tasks and processes for each core function.
This point is worth reiterating: It's helpful to use cloud-based tools that enable staff to access and share information both within the workplace and remotely. With these models in place, another staff member can easily step in and pick up where one left off.
Andy is managing director at Supporting Strategies | Texas.
This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal, and accounting advisors, and you should consult with a tax, legal and accounting professional before engaging in any transaction.
Supporting Strategies is not a CPA firm.