With all of the changes that are occurring for small business during these unprecedented times, it’s important to reflect on how you can improvise your business while adapting to and overcome the challenges posed by the COVID-19 outbreak and the disruption it has caused.

Improvise Your Business (Internal factors to consider)

Cash Flow

Cash flow will be constrained. Whether it takes longer to receive your payments or whether it takes longer to convert inventory into sales, the cash crunch is real. Try to get sales in advance if you can (ie gift cards). Create a forecasted profit and loss and forecast cash flow to see how you can optimize your cash flow during these tight times.

Revenue

Do you have new ways to generate revenue given current demand for certain products? For example distilleries and breweries are making licensed hand sanitizer, thanks to easing of rules by the FDA but nonetheless a great way to find a new source of revenue while other sales lines are in decline for these businesses.

What do your sales forecasts look like? Are you able to say with confidence that your forecasts are correct? During these times it’s best to have multiple sales forecasts to manage related expenses.

Employees

Who do you protect? With what is going on it is highly possible to not be able to protect that team that you have built along with them. But in times like these sometimes changes have to be made. Here are some ideas to get through:

• Retaining only employees essential to the business

• Lowering hours to include combining roles

• Reducing wages paid

• Payroll tax credits for employer-paid leave

• Using family members to fill positions

• Monitor legislation for additional support to encourage keeping employees longer

Expenses

What expenses are essential? What expenses can be cancelled for the time being? Can you create some distance between when you incur the cost or expense and when you have to dish out cash to pay for it? Here are some ideas to manage this issue:

• Deferring tax payments until the new deadlines afforded by the government

• Contacting your landlord and asking for delayed terms or abatement on your rent

• Cutting discretionary costs, such as advertising, travel, incentive compensation, and contributions to employee benefit plans

• Carefully analyzing all capital investments to include postponing routine repairs and maintenance

• Purging expenses related to segments of your business no longer generating revenue

• Reviewing all contracts for points that can be renegotiated to defer or reduce payments

• Canceling shipments from suppliers that have yet to ship and are no longer needed

Adapt to Challenges (Understanding external factors)

Customers

How can you get more customers in the door? Are there ways to make prepaid sales to your customers? Get an understanding of how you can generate cash now for future profits.

For service businesses maintain relationships by reaching out to customers on deferments or payment plans. You may have to extend more credit but the always keep in mind the lifetime value of the customer. Also, now is the best time to get an understanding of the time it takes for your profits to turn into cash. Offering payment terms may be a good option to get cash periodically instead of months down the road.

Most importantly, be sensitive to the needs of your customers. If they need to have a reprieve from payment see if you can work that out. Deferring payments is always better than losing a customer. Offering curbside carry out or delivery, if allowed, is always better than losing customers.

Vendors and Suppliers

Vendors and suppliers are stakeholders in your business and if you’ve built up goodwill with them they are more likely to offer extensions on payment terms or discounts in order to help make ends meet. It will never hurt to ask.

Hold our ground against vendors who are asking for payments to be accelerated for no reason other than fear of you closing down. Let them know that you still intend to pay them for what you owe but will be evaluating other vendors/suppliers due to this behavior.

Funding

Utilize whatever resources you can find. If you need to take on debt utilize SBA disaster relief loans use them. Remember, your business has probably seen a major reduction in sales unexpectedly and although they may rebound once things normalize, your business probably isn’t sustainable at these sales levels. Use your resources. Make sure your stakeholders are aware of their resources as well so they can be there on the other side.

Overcome the Challenge by Making a Plan

Do you have a plan to overcome the crisis in front of you? Do you feel comfortable assimilating the information you have gathered to a workable plan? It is imperative to quantify your cash flow needs to make the best decisions.

No matter what you’re facing, you are never alone when it comes to your business. Engaging with a CPA firm can help your business by:

• Creating a working cash flow model for your business to run multiple planning scenarios that can be easily updated as conditions change

• Sharing examples of best practices of how our clients are meeting these challenges

• Helping you evaluate all funding sources to meet your cash needs and ascertain the level of funding needed to survive the crisis

• Evaluating your business’s ability to generate future profits to repay the funding required to get through the disruption

• Planning your business model to generate profits to be sure you can sustain yourself through other disruptions in your business