As a small business startup ourselves, we understand the pressure the COVID-19 health pandemic and resulting economic turbulence is putting on businesses.
With no anticipated end date to COVID-19 measures like social distancing, there’s a lot of uncertainty. We work with many businesses that are concerned about making it through the short term in order to ensure business continuity.
To help, we’ve compiled a list of 5 things you should implement now to make your business more resilient.
1. Stay up-to-date on your books.
We’re not just saying this because we do bookkeeping.
Unfortunately, your expenses won’t stop, even if your revenue does. Now more than ever, it’s imperative to continue with ensuring your books are accurate and up to date to get visibility and clarity on your finances. Having good financial visibility will enable you to make better business decisions and ensure you have enough working capital to get you through the next few months.
Additionally, you’re still on the hook for federal sales tax (GST/HST) at your regular remittance date and the corporate tax filing deadline remains the same.
The federal government has put measures into place to support businesses such as deferring income tax payments to September 1, 2020 (for installments owed between March 18 – August 31), and temporarily holding off on initiating any sales or income tax audits.
If you’re in BC, the provincial government has taken action to support small businesses, including extending deadlines for PST, employer health tax, and deferred carbon tax until September 30, 2020.
2. Collect cash quickly.
In a situation like this, cash is king and it’s vital to be on top of your invoicing and collections. Instead of waiting to bill your clients at month end or at a later date, bill your clients when the service occurs as this increases the likelihood of timely payment.
If you need help with your accounts receivable and shortening your days sales outstanding, reach out to us to see how we can help. Be sure to also check out our 9 tips for improving AR turnover.
3. Cash flow forecasting: prepare for the worst-case scenario.
If the current government and health authority restrictions are to remain for the foreseeable future (a likely scenario), what does this mean for your business? How many weeks or months can you continue to operate as you are?
We recommend conducting a sensitivity analysis to help you understand how your business would need to operate and adapt in different scenarios – basically looking at the good, the bad, and the ugly. If you are an Enkel client, this is something that our team of CPAs can help you with, so please reach out if you’d like assistance.
As you consider how your business needs to operate to move forward, you’ll also want to adjust your short-term cash flow forecast and budget accordingly.
If financing is necessary, see if you’re eligible for additional funds the federal government announced.
4. Take a not-business-as-usual approach to managing expenses.
Once you have a handle on your bookkeeping and cash flow, you’ll know what you need to stay afloat. From here, you want to look at current and upcoming expenses to see where you can trim, cut, or defer.
Avoid taking a business-as-usual approach for expenses during this time. The goal is to reduce or minimize non-essential spending, like that planned renovation, new hire, or new website. This should all be rolled into an updated budget and communicated with your team. You may need to lock down spending and your team will need to know what they can and can’t spend money on.
Once you’re down to your shortlist of necessary spending, look at your vendor contracts to see if there are opportunities to renegotiate payment terms. This may not work with smaller vendors, but it’s worth the ask.
When you are invoiced, pay in accordance with payment terms. If it’s net 30, pay in 30 days, not today. In fact, try to streamline your payments to two payments per month. This will help with your cash management and visibility if you’re not constantly paying bills.
And finally, take advantage of any subsidies or government support being offered for small businesses or your sector. For instance, the Temporary Wage Subsidy puts $25,000 back in the banks of small businesses, NPOs, and charities.
5. Take care of your employees.
You may be in a financial position where you need to lay off your employees. In order for your employees to get access to EI, you as an employer will need to issue an ROE. We wrote about navigating organizational restructuring during COVID-19 and shared how to support your staff with ROEs and final payments.
If you’re fortunate enough not to be in the aforementioned predicament, there are other government-mandated obligations related to COVID-19. You must comply with leaves of absences as outlined in the Canada Emergency Response Benefit (CERB) for employees that need to stay home for childcare reasons or to take care of a sick family member.
And last, but certainly not least, there’s also the well-being of your staff. Mental health resilience is truly being put to the test in these troubling times. It’s important that your employees feel supported and safe, so when things do go back to normal, they will be motivated and committed employees.
Whether you’re closed and paying staff or have implemented remote working, keep communication lines open and be creative with connecting through video technology. Our team has implemented virtual lunch for social time together.
There are a number of free tools – some which you may already have access to – like FaceTime, Google Hangouts, and Zoom. Keep meetings as scheduled where possible and check-in often with your team.
We’re here to help.
The silver lining in this troubled time is seeing how people and businesses are coming together as a community. Together we can weather this storm.
If you are an Enkel client, please reach out to your Client Success Lead if you have any questions, need help with a sensitivity analysis, or simply someone to chat with.