Getting Your Business Finances in Order During Coronavirus
Being a business owner is challenging in the best of financial times and it is incredibly stressful during the coronavirus. COVID-19 has caused businesses to close, work from remote locations and cut back hours. What can you do during this time of uncertainty? Get a handle on your business finances. Start with your assets. Do you own any business real estate? What about inventory that you own and business equipment? Add everything together and this is your total assets.
Next comes debts and liabilities. Got a business loan? What are its terms? How much do you pay each month and when will you pay it off? Did you use collateral or is it an unsecured loan? What are your outstanding invoices? Add all this up and this is how much you owe. Your business savings is next. How much cash do you have set aside in savings? Have you gone through most of your savings during the COVID-19 pandemic or do you have some left? Do you have a business line of credit or business credit card that you can use when money is tight? Review all three together, assets, debts and liabilities and savings and you’ll have a good sense of where your business stands.
Understand Your Cash Flow
Cash flow is a challenge for any business but this is especially true during COVID-19. How much income do you have coming in each month? And what are your monthly expenses? Are you in the red or in the black?
Review Profit and Loss Statements
This report, also known as an income statement, shows sales and expenses and either a profit or a loss for a specific period of time. Create profit and loss statements for the months of COVID-19. How is your business holding up?
Make A Balance Sheet
Gather together your assets and debts. How does what you owe compare with what you own?
Make a Cash Flow Statement
This statement reveals how much money is flowing into your business each month and how much is flowing out. The goal is to have more money coming in each month than going out. How has the COVID-19 pandemic affected your cash flow?
Make Cash Flow Forecasts
Using the cash flow statements that you created, make a cash flow forecast for the coming months. Make sure to include all the ways the COVID-19 pandemic has affected your business in your cash flow forecast. If you see a month where money is tight, you may need to secure a business line of credit. So don’t delay in applying for one. Better to have the line of credit in place ahead of time then to rush to get one.
Stay Up-to-Date on COVID-19
Make sure you stay up-to-date with local COVID-19 policy so you can make the most informed decisions for your business.
Save Your Cash
Got cash on hand? Hang on to it as much as possible. If you’ve got income coming in, keep doing what you are doing and save as much cash as possible after paying your bills.
Cut Discretionary Spending
This isn’t the time for extras. So cut all the discretionary spending that you can. This will help to boost your cash on hand. Having a cushion of cash makes uncertain months ahead a little easier to manage. So cut all but the most essential spending for your business and bolster your cash savings.
Reach Out To Lenders
COVID-19 has affected the whole world. Your lenders may be willing to adjust your payment terms. Reach out before you fall behind on your payments and see what kind of new payment you can negotiate. Be sure to ask about temporary payment deferrals.
Reach Out to Landlords
As with lenders, you’ll want to reach out to a landlord about the terms of your lease before you fall behind. What kind of payment can you afford? Discuss it with your landlord.
Reach Out to Business Providers
Check with Internet providers and your payroll company about getting a better deal. Ask about a temporary rate reduction. You won’t know unless you ask.
Talk to Vendors and Suppliers
Ask if you can postpone a payment or negotiate a lower priced deal. You won’t get a better, more affordable deal, unless you reach out. So don’t hesitate. These are unprecedented times and you are looking for ways to keep your business going. Every little bit helps.
Get Federal Aid
The U.S. Congress passed the $377 billion CARES Act in the spring to help small businesses who were impacted by COVID-19. A new federal aid package may be available in early 2021.
Get State and Local Aid
State, local and county governments are issuing their own COVID-19 relief initiatives to help local businesses. Look for these initiatives in your local area.
Get Short-Term Financing
Your business is short of money and what you need is some short-term help. Consider getting a business line of credit or using a business credit card. These short-term measures can get you through a tough month or two. Pay back everything you borrow as soon as possible.
Many businesses have started fundraising campaigns to support themselves through COVID-19. Your customers may be happy to help with your campaign. So set up a GoFundMe account and spread the word that you are raising money for your business.
Apply for Grants
Private and non-profit organizations are offering grants to small businesses and so are cities, counties and states. So research grant opportunities near you. A grant may just give you the boost that your small business needs.
Prepare for the Long Haul
Unfortunately, COVID-19 is going to be with us a while longer, even as there is good news about vaccines. So it is important to keep your business finances in shape. Stay on top of your finances and move quickly if you see a shortfall coming. Negotiate new terms with lenders and other providers before you fall behind on a payment. Cut discretionary spending and boost savings as much as you can. Apply for federal, state and local aid. Do everything you can to keep your business up and running.
Don’t Forget About Business Insurance
Even when business is slow, you don’t want to neglect your business insurance needs. You are still liable if an accident should happen at your place of business. Let’s say someone slips and falls at your place of business and hurts their back. Without insurance you’d be paying for their medical bills out of your own pocket. But with general liability insurance you’re protected if you cause any damage to another whether it be bodily harm or damage to a client’s or another’s property. Some clients will refuse to work with you if you don’t have general liability insurance. So this is an essential insurance policy for any business to have at all times even during COVID-19.
General liability insurance is typically structured to cover financial settlements as well as legal costs involved with defending lawsuits. Events covered by general liability insurance include accidents and injuries that occur on business property or stem from its business operations, medical payments for minor injuries sustained by visitors to company properties and liability damage to another’s property in the course of doing business.
Another important insurance policy to have for your business is business property insurance, which is also known as commercial property insurance. Business property insurance helps to protect your business whether you own or rent your business property. Business property insurance protects a number of items in your business office including personal property items, tools and equipment, inventory stored at your office or warehouse, furniture including couches, desks, chairs and tables, the computers you use to run your business, accounts receivable and other important documents and outdoor landscaping such as signs and fences.
Coupled with general liability insurance, business property insurance provides a good level of protection for your business and that is protection that you will want to maintain during COVID-19.
So review your business insurance policies carefully. Reach out to your insurance provider if you need assistance with paying. Do everything you can to keep your business insurance policies in place.
Get a Free Commercial Insurance Quote.
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Quick and easy tips that every business owner should be doing.