For companies large and small, things are not simply business as usual right now. In the wake of the COVID-19 pandemic, businesses of all sizes have been forced to adjust on the fly. Given the uncertainty of the current economic climate, it is imperative for companies to find ways to manage cash flow and liquidity. In the meantime, the following tips can potentially aid businesses, allowing them to both continue operating and sustain themselves as the world copes with this crisis.
Finding New Streams of Income
In these new and unpredictable times, businesses can benefit by trying to find ways to adapt. One of the key ways to accomplish this is by figuring out different ways to bring in revenue. The reality is that some of the ways businesses generated revenue in the past are no longer relevant in today’s new reality. For instance, a full-service restaurant that didn’t provide take-out or delivery services prior to the COVID-19 pandemic, may adjust to offer these services today in an effort to retain customers and keep some employees working during the crisis.
These are the kinds of steps that companies can take. Though a business may find that their traditional revenue streams are nonexistent at the moment, this is a good time to look at their business model and consider options where they can offer new services and potentially expand clientele.
Trimming Overhead and Remaining Vigilant About Spending
With everything that is going on right now, companies need to look at ways that cut back on their overhead costs. In fact, the crisis has presented companies with an opportunity to do a mid-year assessment of their expenditures. For example, businesses should take a detailed look at how necessary each expenditure is, and decide whether to continue paying the price, or looking for an alternative that may be more cost effective.
Looking at the organization’s day-to-day operations is a great place to start. For instance, a business can examine ways to reduce its office supplies, especially since most offices across the country have been forced to close and shift to remote working. Additionally, companies that have outsourced operational functions—such as marketing or IT—may consider moving those operations in-house for the time being. During these unprecedented times, businesses will need to look at where they can cut back on spending and increase their cash reserve in every way possible. Companies also need to stay diligent about monitoring employee spending by reviewing corporate credit card statements and implementing policies to curb non-essential spending until the situation normalizes.
Look into Financing Options
At this time, borrowing costs are quite low, and, if desired, a business could evaluate whether it would be wise to create a cash reserve if there is a longer economic slump. In recent years, businesses have been capitalizing on these low interest rates to do everything from investing in construction projects to refinancing debt. This could be a moment where borrowing a significant amount could help sustain a business during this crisis and stay afloat for years to come.
In that same line of thinking, this may also be a time when companies should consider investing in hard currency. These are the types of investments that have a strong track record of reliability and by doing this, it can create a level of protection that can help insulate a business from the long-term effects that may result from the COVID-19 pandemic.
Do Not Hesitate and Keep in Contact with Everyone
As companies move through these uncertain times and shift to a virtual office, it is critical not to remain idle and wait for the dust to settle. Businesses should call their banks and credit card companies. Due to current circumstances, you are seeing many of these institutions offering delays in payments, some having extended grace periods up to two months. Companies need to find out what their banks and credit card companies are offering so that they can factor these new due dates into their planning. Additionally, it is important for companies to work with their banks to incorporate a solution that allows them to continue to make deposits. There are many businesses that utilize remote capture already but other methods, such as sending a messenger or using a courier service like FedEx, can be used to assist.
At this point, companies should also be in touch with their attorneys. They should find out if there are any specific rules and regulations that need to be followed as they make the shift into a virtual workplace. For many businesses, this is completely new territory, however, an attorney can help ensure compliance and prevent any possible legal issues that may crop up down the road. In addition to attorneys, companies should connect with their accountants and business consultants to discuss the various governmental notices and new legislation that is being issued to assist individuals and businesses during this crisis. As the situation continues to evolve, it is essential for business owners to have a clear understanding of the relief options available.
Finally, companies should reach out to their vendors as well. Try to work with them regarding payment terms to help spread things out more, and to discuss how to handle business when operations return to normal. Also, if companies have not done so already, it is imperative to be in contact with their clients, from providing updates on where things stand to reassuring them of the services that can be provided. With that said, businesses should be prepared to hear from clients who may need to have their payment terms extended.
Look at How You Can Structure Operations to Make Everything Easier
The last few weeks have been chaotic for most businesses. However, there are steps that can be taken to make things go a little more smoothly. Given that most businesses are shifting to a mobile setup, companies should make sure that electronic payments are set up, both ACH and wires. If there are employees who are still receiving tangible paychecks, make sure that payroll is still getting them their payments, whether that is by using a service like ADP that mails checks directly or otherwise.
The same goes for how a company charges its clients. Companies should make sure that billing can continue, so there should be a system in place that allows them to send bills electronically. Also, if a business did not previously accept credit cards for payment, now would be a good time to do this.
Ultimately, these are very uncertain times for business across the globe. However, by moving quickly, taking necessary measures, and following these tips and recommendations, companies can work to mitigate potential losses and potentially set up their business for long-term survival.
Marcus Hahn, CPA, is the chief financial officer at Berdon LLP New York Accountants, New York, N.Y.
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