Being financially wise and responsible during times of economic uncertainty as a small business owner with employees is an added responsibility and can be challenging. With the spread of COVID-19, social distancing being implemented almost nation-wide, and the temporary closure of non-essential businesses, this will undoubtedly affect your business.
Though the immediate impacts are only beginning to be felt, the long-term effects of the pandemic are uncertain. There are various financial impacts COVID-19 will play on your small business, and it’s best to be prepared and have knowledge as this “new normal” begins setting in further.
Finances
While your personal finances and budget are usually your top priority, your business’ finances likely will become more complicated. If your business is your sole stream of income, then that too will affect your personal finances. Consider your payment structure for you and your staff and begin planning a way you can make payroll if you’re fortunate enough to keep staff on during these times.
Going from operating day in and day out, to closing with no set opening date, you also need to consider the bigger financial questions at stake that deal with your entire year.
How will this change your P&L? Do you need to alter projected revenue? How will you access and manage your business’ money with banks closed?
These are all extremely legitimate questions, but luckily there are online resources to help you along the way. Money management and budget altercations can be easily handled with a mobile-driven digital bank, while financial communications and planning with employees can be done virtually using platforms like Zoom.
Now that you understand the overarching implications and have the piece of mind that your money is easily manageable, it’s time to dive into other arenas of finance including your cash flow, bottom line, and taxes.
Cash Flow
A simple definition of cash flow is the money you have flowing in and out of your business, especially as it pertains to liquidity. More money coming in means an increased cash flow, while less money coming in means a decrease or slower cash flow. Low cash flow businesses, or those with low cash reserves are especially at risk of being impacted most during a slow down in business.
One way to stem a low cash flow is to apply for the SBA loan to help small businesses through the pandemic. With over $2 billion available for help, a loan may just be the answer you need to bridge the gap and make crucial payments on time and help you turn the light back on at the end of all this. If you haven’t already and your business is low on cash reserves, begin by cutting additional expenses where you can so you’re able to make payments on time.
Bottom Line
Your business’ bottom line is directly affected by the health of your cash flow and is the income after all your expenses are paid off. Unless you are in your first year of business, you should have a basic idea of your bottom line.
While you may forecast your revenue quarters ahead of time, odds are you also build in dips in business. Whether you’re in retail and your Q1 is lighter than the busy Q4 holiday season, or you are a seasonal business who sees regular dips out of season. Whatever the case may be, your bottom line is going to look much different than it normally does.
With business and mandates changing rapidly, take this time to figure out ways you can come closer to meeting that bottom line. Whether that’s cutting a few expenses, or consolidating subscriptions into one, easy to use service, or getting smarter with your hiring.
other valuable tips from our business blog (new win):
Why Your Debt Recovery Process Could be Failing
Entrepreneur Finances: 4 Major Money-Drains on New Businesses
Taxes
With the deadline for business taxes being pushed to July 15th, take some time over the phone with your accountant and comb through all the forms you’re filing.. Maximize your returns and take advantage of government programs to offset costs during your business’ temporary shutdown.
If your business taxes are already set for your 2019 returns, this is a great time to look forward to 2020. If you haven’t already, build an account specifically geared toward putting money aside for taxes.
While 30% of your business’ income is a standard taxable amount, make sure you are setting aside an appropriate amount so you have no surprise out of pocket costs when it comes time next year.
The recent COVID-19 outbreak is disrupting all facets of life. While something like this can’t be anticipated, you now have a basic understanding of the most important finance-related topics for your business. Hopefully, something like this never happens again, but with your new understanding of your business finances, you will be prepared to face any storm head-on.
Image Credit: financial impacts COVID 19 by envato.com
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