Prepare Your Business for the Financial Impact of COVID-19
For a business owner faced with unstable times, it’s easy to be reactive instead of proactive. To get ahead of potential financial turbulence brought on by COVID-19, business owners need to be proactive about what they are doing for their business. Here are a few ways you can get your business ready to weather the storm.
Learn Where Your Business Stands
Put together a record of the money your business has available. This includes cash reserves, credit cards, loan money and any other monetary assets you have. After you have a good idea of your cash status, make a detailed list of the expenses you absolutely need. This list should include things like payroll, rent, loan payments, product expenses and the like. Include expenses for both the short term and the long term on this list. Knowing what cash you have to spend and what you will need to spend it on will be big part of staying viable in the economy in the coming months.
The financial data from these records will also give you a good idea of what your business will look like for the next fiscal quarter and beyond. An accounting and finance consultant can help you evaluate your records and set out a strategy. Therefore, they can also bring insight as to streamlining your operations to save money.
Evaluate Your Customer Base
Put yourself in your customers’ shoes. Will they be needing your services more in the wake of COVID-19? Less? Consider where you are in the supply chain. For example, the service providers that fix the machinery used to restock big box stores may see a spike in business. In contrast, sellers of fine luxury items may see a dip in sales.
Accounting and finance consultants have years of experience and have likely seen the impact of recessions and economic turbulence in your industry before. An accountant can help you evaluate your customer base and categorize your current customers according to risk. That way, you don’t spend money targeting the wrong customers to sell to. They can also help you structure cost-effective incentives programs for expanding or building a new customer base. Strategy will also be an important part of gaining and retaining new customers. An accounting and finance consultant can help you seek out a new demographic of clients to market and sell to.
Run through your income statements line by line, paying special attention to the expenses. During a period of economic turbulence, businesses have to get used to tightening their metaphorical belt. Start by cutting back or eliminating non-essential line items or expenses. Things like name-brand office supplies, customer gifts and swag and the like should be considered first on the list of things to reduce.
When it is your business, it can be easy to make emotional decisions about expenses rather than rational ones. Consider bringing in a third-party consultant to help with those tough decisions. Not only are they a neutral party, your consultant will bring a fresh pair of eyes to your expense lists. That way, you can focus on running your business and someone else can advise you on the tough choices.
Strategize a Financial Plan
Your financial plan is based on your financial data from the line-by-line expense sheets, income statements and asset inventories you and your accountant have already put together. Using this data, your accounting and finance consultant can help you put together a financial plan for multiple outcomes.
In order to put together a plan during COVID-19, you will need to determine your breakeven point. This is the point at which your sales are high enough to sustain your expenses. While your business may not be profitable during this time, it will be surviving. In a recession or economic downturn, surviving is just as important. Your accounting and finance consultant can use your financial data to determine where your breakeven point lies in your financial plan.
Find Alternate Sources of Revenue
Your financial plan also needs to include alternate sources of revenue. Often after crisis, the government puts together a bailout plan for struggling businesses. Bailout plans vary but can include things like tax breaks for small businesses, relief funding, economic stimulus packages and more. Your accountant can help you navigate the application process, filling out the applicable forms and other necessary actions.
You may also need to consider applying for business loans and opening new lines of credit. An accountant’s assistance on loan and credit applications may mean the difference between approval or rejection. They’ll compile any applicable records and data and help you fill out the forms accurately.
Outsource to an Expert
With COVID-19, this is the time to hire an outsourced accounting and finance consultant. Many firms are offering a remote work option right now during COVID-19 quarantine precautions, so you can choose whether to have someone on site. If your business is closed for the protection of your employees, your outsourced accounting and finance consultant can help you evaluate your revenue, put together your financial plan and more over video chat or project management software.
Hiring an outsourced consultant is also cost effective. Since you don’t have to pay their hiring cost, salary, benefits, sick time, equipment costs or price of experience. Instead, you get an expert accountant for the cost of the hours you need one. The firm will quickly assign you a consultant who is already an expert in your market and industry. They’ll have experience with your software, general accounting practices and industry-specific requirements. You get the help you need immediately, without having to hire or train a new member of your accounting staff.
With NOW CFO, not only will you get all those benefits, you’ll also get the right level of consultant for what you need. Based on your company’s needs, you’ll get a staff accountant, controller or CFO level consultant to help you put your business on the right path to survival. Reacting fast is critical now and in the coming months. With a consultant from NOW CFO, you won’t have to worry about training a new person to understand your industry. Our consultants come from variant backgrounds with years of experience and expertise. Therefore, we’ll help you set up your business for success quickly.
Look to the Economic Rebound
The economy will bounce back from the fallout from COVID-19, no matter how long the resulting financial downturn lasts. The steps you and your accounting and finance consultant will take during this time will set the tone for your business’ future. Cuts on expenditures during a recession will prime you for streamlined business operations during a bull market. You’ll also have insights into which employees step up and work hard during tough times and may be perfect for leadership roles. You have the chance to eliminate out of date processes and replace them with more efficient ones. In the end, this is an opportunity to take a look at how your business is running and make some changes for the better. By acting now, your business will be ready for the economic rebound.
- Evaluate your cash flow
- Create a cash flow forecast and strategy
- Prepare a financial model
- Define a breakeven point
- Find alternate sources of revenue
- Hire an outsourced accounting and finance expert