Tips for Small Business Short-term Financial planning during the Current Virus Crisis

Obey the government’s orders during the crisis – If you are a non-essential business, make sure you are compliant with any closure requirements. You don’t want to add fines and penalties to your already large list of liabilities during the crisis.

Prioritize your liabilities – Rent and utilities may seem critical at a time like this, but nobody is going to be evicted or have their utilities shut off during this time of crisis. Look at what truly has to be paid (employee benefit programs, essential software services, key supplier invoices etc.). Separate discretionary expenses from critical. Which vendors will work with you, and which won’t?

BE PROACTIVE – Contact your lenders, landlords, creditors, vendors, employees, customers and stakeholders. Let them know you are actively working on things. Stay engaged. Ask for considerations such as deferred payments, interest-only payments, extended NET terms, abated rent, etc.

Conserve cash – Just because you have the money to pay a bill out of your cash account now, that doesn’t mean you should. When this all ends, you will need operating capital to re-start (much like a start-up business). Utilize all delayed-payment options available, such as Lines of Credit and credit cards. Try to “buy time.” You need between 30 and 90 days – assume things will change after that. If they don’t, the government will have to revise its aid package to avert a full-fledged economic meltdown.

Use extreme caution in making any major decisions affecting the future of your business. - This is not the time to sell your business, nor is it the time to expand (unless your business is profiting by the crisis such as selling breathing masks or toilet paper, as examples). The situation is changing rapidly – what seems like the right thing to do right now may be completely different tomorrow. Sometimes no action is the best action. Keep in mind that recovery loans are LOANS. Although there may be some “forgiveness” options, they will generally require at least partial payback. Be wary of rumors indicating that entire loan debts will be wiped out.

Check with your commercial insurance carrier – do you have business interruption coverage? Can you get deferred payments, or reduced premiums during an ordered shutdown (as your liability exposure is obviously a lot less)? If you had to reduce payroll or furlough workers, does that affect your premium?

If you don’t know your daily/weekly/monthly gross revenue breakeven, determine it - and how short you will be on it. That will give you an idea of how long you can survive under the quarantine. Be sure to factor in changes to payroll, rent and other major expenses that you have made.

Seriously evaluate your payroll. - How critical is it you keep non-essential employees on the payroll? Are they highly skilled, or low skilled and easily replaced? It may be better to lay at least some of them off. There is no shame in laying people off during this crisis, and common sense dictates the government will not hit you with an “experience rate” increase afterwards – especially if they ordered you to shut down.

Continue to Follow Generally Accepted Accounting Procedures (GAAP) - If you infuse capital into your business out of your personal funds, make sure your accountant or bookkeeper properly journalizes that transaction for tax purposes.

FILE YOUR BUSINESS TAXES – whether you have the money to pay them or not – FILE. There will probably be adjustments later. The worst thing you can do is not file – keep in mind number 3 above.