This is a tough time for business owners. The future is uncertain, and the economy is in a downturn as a result of the COVID-19 pandemic. Business owners can make the most of this time with a few steps to strengthen their businesses for the road ahead. As you draw up your company’s roadmap to recovery, here are a few places you can start.
Maximizing Loan Forgiveness
The government issued multiple loan programs for businesses as part of the recent CARES Act legislation. Only one of these new loan types is forgivable, though. Loans through the Paycheck Protection Program (PPP) can be forgiven by the government if the disbursed funding is allocated to one of the approved expenses. These eligible expenses include payroll costs, interest on mortgage payments, rent and utilities. However, in order to be eligible for loan forgiveness, 75% of your PPP loan disbursement must be used for payroll expenses.
In order to maximize loan forgiveness on your PPP loan, you’ll need to meticulously track how your disbursement is allocated. Another key restriction on the loans is that the funding from your PPP disbursement and any other disbursement you receive cannot be used for the same expense. You’ll also need to keep records of how your other funding is allocated to maximize your potential for loan forgiveness.
Establishing a Breakeven Point
Your business’ breakeven point is the point at which your inflowing profit and your outflowing expenses are equal. This point is crucial to creating a budget that will sustain your business. In addition to helping you understand where your business stands right now, you’ll also get a sense of the trajectory of your business.
Knowing your breakeven allows you to create short-term budgets that help you reach that equilibrium. You can create long-term budgets that allocate your cashflow according to your breakeven goals as well.
If you are approved for loan disbursements, your breakeven point will also determine how you allocate those funds.
Refining Cashflow Forecasting
It is vital that you maintain a 13-week cashflow analysis to keep your budgets accurate. This forecast should be updated weekly to help you keep track of any changes in your inflow and outflows.
As your data changes, your business’ trajectory will also change. This forecast will help you make informed decisions about your business’ path to recovery. You’ll also be able to easily determine which areas are going to be roadblocks to your progress for recovery before they become emergencies.
This tool is also vital in determining how best to use your loan disbursement should you qualify on your roadmap to recovery.
Reestablishing Your Budget
As your inflows and outflows shift with the economic turmoil, your pre-pandemic budgets will not work for your business operations anymore. You’ll need to overhaul your budget to reflect the new financial landscape of your business. Using other data from tools like your cash flow forecast and your new breakeven point, you can reestablish a budget that will work for the new way you’re running your business.
A new budget will also help you determine where you need to be cutting costs or allocating outside funding from CARES Act loans and other available disbursements.
Rebuilding and Restructuring Operations
While it may seem like there is no upside to an economic downturn, it’s actually a great opportunity to consider changing up your company’s operational structure. Transforming the way your company operates can not only help you through an economic crisis, but it can also improve your company for the long-term. Perhaps you have some outdated systems and processes that you couldn’t update without pausing business operations? Maybe the pandemic has exposed some bottlenecks in your workflow?
Restructuring can help you do everything from reducing operation costs to improving your overall business model. Any slowdown in business you may be experiencing doesn’t have to mean your business stops seeking new opportunities for success.
Dynamic Financial Reporting
Another thing you can consider while business may be slowing down is a shift from static financial reporting systems to a more dynamic option. A dynamic financial reporting system allows you to access your financial data more quickly and in real time, offering your business higher financial visibility during it’s recovery roadmap.
You will also be able to quickly identify problem areas in your finances. Things like bottlenecks, billing errors, changes in cashflow will all be updated and brought to your attention in real time. You can correct these issues and secure your company’s financial wellbeing in real time, before these issues become emergencies.
Building on Stable Ground
At NOW CFO, we believe you can’t know where your business is going unless you know where it’s been. The strongest companies are constantly looking for opportunities to grow and adapt, even in crisis. This pandemic is a unique opportunity for businesses to take a look at their operations, systems, processes and more. You can make adjustments to the way your business runs without having to disrupt your day-to-day operations.
Focusing on stabilizing your business as quickly as possible in the short-term allows you to position your company for long-term growth and success. Don’t let a pandemic and an economic downturn stand in the way of your business’ growth. Business owners can be building a foundation for their business’ future success right now.
Put your business on the right track with the roadmap to recovery. With a strong foundation to grow your business on in a post-pandemic world, your business can see success for years to come.