For a small business owner faced with unstable times, it’s easy to be reactive instead of proactive. To get ahead of any financial turbulence brought on by COVID-19, all 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.
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 a big part of staying viable in the economy in the coming months.
Run through your income statements line by line, paying special attention to the expenses. During a period of economic turbulence, businesses need to get used to tightening their metaphorical belt. Start by cutting back or eliminating non-essential line items or expenses. Consider things like name-brand office supplies, customer gifts, and swag first on the list of things to reduce.
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.
Find Alternate Sources of Revenue
Your financial plan also needs to include alternate sources of revenue. Often after a 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.
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.
The information provided is based upon facts that were available at the time of publication and are subject to change. Better Accounting makes no warranties, express or implied, or representations as to the accuracy, completeness or timeliness of the information provided. Better Accounting cannot be held liable for any claims or damages that result from reliance on this information.