Questions to Consider Regarding COVID-19's Impact on Your Business

March 24, 2020 | Article

In these volatile times, anxiety is everywhere. We are all feeling the impact of the coronavirus pandemic. Owners of small to mid-sized businesses are worried about the future of their business and if they will be able to survive during this situation.

Are you having conversations about business continuity planning?

Concerns Impacting Businesses in the Wake of COVID-19
While business interruption insurance can help, there is the more practical problem of the week to week payroll, payable run and cash receipts. Have customers stopped orders or withheld payments? Will you be able to meet next week’s or next month’s payroll? Should you withhold payments to vendors? Almost all companies are faced with employees working remotely, as well as being impacted by current legislation providing paid leave for child care and illness related to COVID-19.

Questions to Ask
It’s hard to know how to navigate in this uncertainty. Here are a few questions to consider:

Cash flow projections

  • Have you modeled out the next 13 weeks of cash flows?
  • Does that cash flow analysis include various scenarios that could impact your business including “shelter in place” provisions?
  • Are you having discussions with customer and vendors to maintain cash flow?
  • How is the Emergency Paid Sick Leave Act going to impact your cash flows? What if you pay payroll bi-weekly but only get the credit quarterly?

Benchmarking analysis

  • How does your cost structure and working capital structure compare against your competition? Even in times of uncertainty, it’s important to understand how you’re performing and how you’re stacking up against others in your industry.
  • Can you add some leverage to your discussions on customer or vendor terms where you have been less aggressive historically? For example, if you pay your vendors net 30 but others in your industry pay net 60, there is room for a change in process with documentation to support it.

Cost analysis

  • Can you scale back on any overhead expenses that are semi-fixed?
  • How long can you sustain and when should you make cuts to personnel?

Buy-side consulting

  • Are you still in a liquid position and are opportunistic during uncertain times?
  • Do you need assistance in finding target companies to acquire?

Other strategic consulting

  • Were you in the middle of a deal and need advice on how to still get the deal done?
  • Were you thinking about a business exit in the next two to three years? How has this impacted that possibility?
  • What changes do you need to make now to ensure you’ll still be able to achieve your exit plans?

Consider further lending sources
Consider discussing with your bank an increase to your line of credit or look into the new SBA Economic Injury Disaster Loans. These loans have up to $2M in loans available for qualifying small businesses.

Accounting and Financial Records
While personnel cuts may impact your organization, the importance of having solid financials remains. It’s important to have accurate bookkeeping and finances as you make plans to keep your business afloat and sustain it long-term.

There are also several delays, provisions and guidance to consider that will impact your organization’s finances. Having a trained financial professional, whether internally or outsourced, will be vital to your operation.

Maintain Focus
As we continue to experience uncertainty for weeks and months to come, it’s important to make informed decisions. Having frank and honest conversations, even during times of uncertainty, can help you game plan for the months ahead.

Need to discuss the state of your business in the wake of COVID-19? We are offering free 30-minute calls to help you make sense of it all.

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