April 23, 2020 | by Steve Barber
If you're a small-business leader, chances are you've been overwhelmed the last few weeks, trying to figure out a way through the COVID-19 crisis. Which aspect of the Coronavirus Aid, Recovery and Economic Security (CARES) Act is best for your company: the Paycheck Protection Program (PPP), an Economic Injury Disaster Loan (EIDL), Employee Retention Credits, or Deferred Payroll Taxes? Or can you get by with selective belt-tightening?
While it may be tempting to keep your head down and focus only on those vital details, it's equally important to lift your head up and figure out a plan for getting through the coming weeks and months, and positioning your company for growth once things return to normal.
PPP Status Update
The PPP funding that was designed to help small businesses meet employee payroll for eight weeks was out of money after just two weeks.
Now, to be clear: Businesses that were fortunate enough to receive PPP approval are still supposed to get their full eight weeks of funding (and loan forgiveness, provided they meet all the terms of their PPP loan). But businesses that have not had their PPP loans approved are currently out of luck, at least until Congress approves additional funds. Your best bet for getting in on the next round of funding, if and when it's approved, is to be sure you have all of your financial ducks in a row, including complete records of your 2019 payroll expenses.
Beyond Eight Weeks
It's understandable that small business leaders who have received PPP loans would feel an immense sense of relief. Between their regular paychecks and their personal stimulus checks, employees at those companies are taken care of for eight weeks. But with the fallout from the pandemic expected to linger for months, if not years, it's critical not to look at a PPP loan as anything other than a short-term fix.
Here are several tips to keep in mind as you plan for the future of your business:
Create a 13-week Cash Flow Forecast Every Week
If you have received PPP approval, have you thought about what your cash balance will be beyond those eight weeks? I recommend creating a 13-week cash-flow forecast every week. With a 13-week forecast, you can get an idea of what your cash flow could look like after the eight-week PPP has ended, and take steps to anticipate problems before they occur.
This is simple math: Every dollar you don't spend is one fewer dollar you have to take in to continue operating. Take a closer look at your expenses and think about whether they are necessary for your business. Some "wants" will be easy to identify: Do you really need to keep automatically renewing your subscription to that trade magazine right now?
Others will be tricky. Examine any leases you have for company vehicles or even office space. If you and your entire workforce have transitioned to WFH (work from home) for the foreseeable future, why continue to carry those significant monthly expenses? If you can't terminate those leases, at least try to renegotiate the terms.
The ultimate goal is to identify your core functions and determine what it takes to keep them intact.
Expedite Cash In
As with cutting expenses, this is an exercise in looking at your business through fresh eyes. The most obvious example involves credit card payments. Maybe you've never accepted them because it wasn't worth the hassle.
Well, now it is worth the hassle. Many of your paying customers are working on managing their cash flow just like you are. Enabling credit card payments could be just the lifeline they need to remain paying customers instead of defaulting on what they owe or closing their accounts.
Devise Workarounds for Supply-chain Disruptions
Even if you run an "essential business" that's allowed to remain fully operational during the pandemic, that's of little consolation if you can't get the supplies you need. Navigating those disruptions will remain one of the great challenges to surviving this period.
There's no one-size-fits-all solution here. You'll just have to get creative. A high-profile example of supply-chain vulnerability is the Great Toilet Paper Shortage, which also yielded amusing examples of creative workarounds.
Think of the COVID-19 pandemic as an opportunity to stress-test your business model. Maybe you decided to cut costs by importing supplies from China, and now you're scrambling to find alternate sources. Remember that when the crisis subsides. Again, plan for the long term, not just for today.
Look for Additional Resources
The Small Business Administration isn't the only funding source available. Look into state and local grants, and contact your local Chamber of Commerce. While they might not be able to provide funding, local business associations could provide key contacts and networking opportunities. Explore the possibility of sharing resources and services with other distressed businesses in your area.
Keep Leading Your Team
In addition to managing cash flow and looking for possible supply chain interruptions, it is important to keep your team motivated. Establish regular communication, including videoconferences, not just to provide updates, but also to seek input. Your team could have workable ideas for adapting your business that you hadn't considered.
Stay Up to Date With Your Bookkeeping
Keeping your financial records fully up to date and in order is more important than ever, especially if you need to apply for additional loans or other forms of assistance. If you're juggling too many responsibilities right now to keep up with your finances, consider enlisting the help of an outsourced bookkeeping services provider. For one thing, you'll need to fully document how you dispersed your PPP funds in order to have the loan forgiven. Your bookkeeper can also provide critical financial insight that can help you fine-tune your cash flow and curb or defer expenses. And, of course, they can help you with that all-important 13-week cash forecast.
The most important thing to remember about those 13-week forecasts is that you need to review them every week and adjust as necessary so you're always looking 13 weeks out. Don't hesitate to pivot; what worked two weeks ago might not work now.
Stay engaged and continue to explore every possible avenue to keep your business solvent. This crisis is not over by a long shot, but you can help your business survive if you keep your head up and your eyes on the horizon.
Steve Barber, Managing Director of Supporting Strategies | Northwest Maryland, provides bookkeeping and controller services to growing businesses.
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.