How to Plan Business Finances During COVID-19 Pandemic

The global COVID-19 pandemic has caused disruptions for businesses of all sizes, and there is no telling when these issues will end. According to a recent survey from the Young President’s Organization, approximately 82% of business leaders predict revenue declines across the next six months.

In order to mitigate these losses, many chief executives -- 95% of those polled -- are leaping into action. 28% are giving employees the option of telecommuting. 39% are taking steps to cut costs. 53% have canceled business travel, while 64% have canceled significant events.

During a period like this, there are many things that are out of your control. Thankfully, you can still take steps to limit the harm that the coronavirus causes to your business. Every business is different, and not all companies can follow the same strategies. With that said, these methods are recommended by experts and can help your company to get through this difficult time.

Predict cash flow and increase liquidity

According to James Cassel, who is the chairman and cofounder of Cassel Salpeter & Co., an investment banking firm, companies can't survive unless they can find a way to acknowledge issues of finances and liquidity during this time.

You should build and stress test a cash flow forecast for 13 weeks. Take both likely scenarios and emergency scenarios into account. You need to review both variable and fixed expenses so that you can get a clear picture of what your cash needs are.

At the same time, you should look for ways to increase the amount of cash your business has coming in. For example, you may want to offer your clients and customers cash reductions if they pay right away.

In addition to that, you should focus on maximizing what you have so that it will last for a longer period of time. For example, if you can reschedule outstanding expenses or lengthen the payment period, you should do that. Be willing to negotiate with vendors, but don't forget that a number of them are dealing with the same issues you are.

Finally, businesses should look at ways to increase their liquidity, such as taking out a second mortgage, securing a business loan, or looking into extended credit. In a number of states, small business owners that have experienced hardship because of the coronavirus can apply for a low-interest loan from the United States Small Business Administration.

Track Liabilities

According to the founder and principal of Procor Solutions, Frank Russo, documentation is more crucial than ever in the months to come. Expenses are increasing and businesses will be evaluating their losses. It's important for businesses to document these losses and impacts in a way that can easily be understood.

When a business keeps detailed and effective records, it's more likely that the business will be reimbursed for business insurance claims in a timely manner. Keeping records also makes it easier for businesses to receive government assistance or assistance from the local SBA.

There are two essential steps Russo believes business owners should take. To start, look at your cost accounting system and create a separate charge code or account number for costs and losses related to the coronavirus. Use this to track these costs throughout your business. In addition, you'll want to determine what the operating baseline for your company is. This means you'll need to review the last two or three years so you can compare your company's performance now to its performance post-pandemic.

It's crucial to maintain financial documentation and track how your company has been impacted by COVID-19. If you need assistance with these tasks, or if you need input from experts, you'll want to work with professionals that regularly deal with business interruptions, such as risk management consultants, lawyers, CPAs, and insurance brokers.

Connect With Contacts

During this time, you should try to be proactive whenever possible. This means you should strive to maintain regular communication with both collaborators and clients.

Make a point of contacting the people involved in all of your essential business relationships, from your customers to your consultants to your partners, suppliers, and any other parties that play a key role in your company. Check in and see how they've been doing. Share your experiences with them. Inform them that you want to see everyone get through this difficult situation, and let them know that you want to work with them. It's likely that everyone will appreciate this gesture.

It's important to show compassion within your professional relationships. Nearly all businesses will go through some struggles because of the pandemic. It's likely that most businesses will need to request that someone does something on their behalf that isn't covered by contractual or legal obligations. If you're willing to help out when you are able, it's likely that others will show the same goodwill to you.