Information current as of March 28, 2020.
The SARS-CoV-2 virus and the incidence of COVID-19 (COVID-19) pandemic is creating devastating health and economic challenges across the globe and placing a heavy burden on small businesses in particular, which often are considered the lifeblood of the economy. According to the U.S. Small Business Administration (SBA), small businesses generate 44 percent of U.S. economic activity and create two-thirds of net new jobs. With each passing day, more governors are mandating stay-at-home orders for noncritical industries. When combined with recommended social distancing and isolation orders, economic activity and related cash flow have come to a sudden halt. Without positive cash flow, the cash reserves of small businesses will be depleted in a manner of weeks. Below are five best practices to help you mitigate these effects:
- Communicate – Be proactive and call your financial institution and creditors to inquire about “interest only” and/or payment deferral options on existing debt service.
- Consider Your Options – The SBA is offering various states, counties and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of COVID-19. Visit the SBA Disaster Loan Assistance Portal to determine the eligibility in your local community and initiate an application.
- For more information on this loan program, read this BKD Thoughtware® article.
- Review Subscriptions – Check your general ledger and examine any recurring subscription-based services. Work with vendors to put noncritical subscriptions on hold. Reach out to additional vendors to negotiate extended payment terms and get out of minimum purchase contracts.
- Be Innovative – Get creative with your revenue cycle and get the digital word out. Although the restaurant industry is facing significant changes, those in the industry are facilitating creative options for delivery, pickup and drive-thru. As many Americans are currently working remotely, digital media has been the sole source of getting this word out. Embrace new ideas and don’t forget to keep your customers updated.
- Stay Informed – Knowledge is power, so stay on top of your accounting and numbers daily. Although government-mandated stay-at-home orders can be burdensome, there are cloud-based accounting solutions for all facets of the accounting cycle.
- With timely and accurate accounting, you can create a weekly cash flow forecast to project your cash reserve runway.
- As our country rebounds from this crisis, this forecasting tool should expand to a 13-week cycle.
Finally, stay on top of all the latest legislative updates and regulatory guidance. On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. This law includes SBA financing options to incentivize employers to retain employees, a possible deferral of payroll taxes, employee retention credits, the provision of stimulus checks to individual taxpayers and several other tax relief provisions. Many of these developments are quickly evolving; check with your BKD Trusted Advisor™ or visit our COVID-19 Resource Center for current information as needed.
Need help managing cash flows? Consider our outsourced accounting services. To connect with a BKD Trusted Advisor, fill out the Contact Us form below.