Many business owners and their teams are thinking strategically about how they can augment their work to accommodate a new reality in light of the current COVID-19 pandemic. According to experts, it’s important to think strategically about your business’ financials too.
If you’ve spent the last few weeks getting your team set up to work remotely, it’s time to turn to your books. While it may feel overwhelming to plan during a time of uncertainty, experts suggest business owners focus on the basics and partner with a trusted advisor to provide guidance.
Visit Justworks' Guide to Navigating COVID-19 for additional tips and guidance.
Monitor your Revenue
Revenue is essential to operating any business. Now, more than ever, you need to understand the risks to your revenue and manage what is within your control. For example, if your revenue is driven by billing clients on a monthly or quarterly basis, work with your accountant to review your Accounts Receivable (AR). You should know what your clients owe you and assess your cadence for following up on outstanding balances.
“Any time there is economic distress you can always expect that if your clients owe you money, it will take longer to collect payments,” Kenji Kuramoto, Founder and CEO of Acuity, reminded business owners. What can you do to minimize the impact on your revenue?
“This is a time to be cautious,” Kenji said. “We are recommending our clients to look at their Accounts Receivable aging (a report that tracks your clients’ outstanding balances) on a weekly basis, at minimum. You should already have a cadence and escalation path in place for reminding clients about outstanding bills, but if you don’t, now is the time to set it up.”
If your business is operating without a business plan, now is the time to put one together.
Evaluate your Expenses
In any economic crisis, revenue typically falls faster than expenses. For most businesses, payroll, real estate, and marketing spend are the expense line items that drive this reality. If you need to cut back on expenses, it’s important to evaluate them within the context of your business plan so that you understand how each variable impacts your runway and revenue growth.
“If your business is operating without a [business] plan, now is the time to put one together,” Anurag Pal, CEO of Escalon, advised business owners. “Right now is the time to go to your business plan and run scenarios. At a bare minimum you should run three scenarios: best case, worst case, and most likely. Be open and honest about your revenue in these three scenarios and then everything else should flow from there.”
While the need to cut expenses may be a painful reality for many, Anurag reminded business owners that challenging circumstances also present opportunities. “It’s important to keep in mind that while crises can be challenging, they are also times of great opportunity. Some of the strongest businesses that are around right now were formed in the depths of the 2001 or 2008 financial crisis.”
Keep Tabs on Support Options
Policy makers are working around the clock to address the health and economic needs of their constituents. Keeping tabs on applicable local, state, and national policy will ensure you know what resources are available to your business and how you can access them. You can find updates on the Justworks Guide to Navigating COVID-19, as well as from trusted sources like your state and local government websites.
While legislative details and requirements are still forthcoming, financial experts advise business owners to begin preparing today, regardless of specific programs.
“Small Business Administration (SBA) loans for disaster assistance, for example, are handled on a state-by-state basis,” said Michael Ly, CEO of Reconciled. “The state and county you are located in is required to declare that a minimum number of businesses have been impacted by a disaster in order for it to be an available option. While your county may not be approved yet, you may have had to lay people off already.”
What should you do in the meantime? “The best thing you can do is start tracking every single expense you would’ve spent money on,” Michael said. “Everyone you laid off, all the benefits you’ve pulled back on — these are considered economic hardships in this moment because you normally would’ve spent that money.”
Partner with a Trusted Advisor
At this moment, there is a lot on every business owner’s mind. Remember: you don’t have to go it alone. Lean on CFO and accounting experts to provide guidance on how to manage your business financially through this uncertain time. If you don’t have a CFO or accountant, Justworks’ network of trusted financial and accounting experts can help.
Michael Ly is the CEO of Reconciled, an industry-leading bookkeeping and accounting firm for entrepreneurs across the US.
Kenji Kuramoto is the Founder and CEO of Acuity, an online accounting and bookkeeping service offering small businesses support on everything from taxes to strategic financial guidance.
Anurag Pal is the CEO of Escalon, a one-stop shop for all essential business services from FinOps (Finance, Accounting, Tax, Compliance) to PeopleOps (HR, Payroll, Benefits, Recruiting), Risk (Insurance).
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.