You may be wondering, “is it safe and financially feasible for reopening a small business?” Well, after an extended period of closures to reduce the spread of the coronavirus (COVID-19), businesses that survived the economic downturn are starting to reopen.
In this article, we’ll review financial tips to help you with reopening a small business and stay open during these uncertain times.
1 | Avoid liability by complying with health and safety regulations
There are daily changes to city, county, and state requirements to help curb the spread of COVID-19. Live in California? Here’s the latest from Governor Newsom.
If your business has been closed for an extended period, you’re probably already running low on cash. Therefore, the last thing you need is to face costly fines or lawsuits for non-compliance. In addition, non-compliance could put the lives of your employees and customers at risk.
Research what is required to for reopening a small business such as yours. Stay informed of the latest changes.
Do your employees need to wear masks? Are you required to post signs about coronavirus? Must you implement touch-free payment systems? Change your business practices as required to keep yourself, your employees, and your customers safe and avoid unnecessary expenses.
2 | Don’t lose sight of deferred expenses for your small business
Have you deferred payments to vendors and lenders? Don’t lose sight of the fact that you may owe a large sum of money in the future. Deferring payment allows you to more time to pay your bills. However, it doesn’t eliminate your obligation to pay them.
Make a list of all the expenses you’ve deferred and include them in your cash forecast. Don’t be caught by surprise by large lump-sum payments.
Furthermore, are you worried that you won’t be able to pay your expenses by the deferred due date? If so, contact vendors and lenders now to make alternative payment arrangements. As a small business during this COVID-19 crisis, they may be willing to make further accommodations. They would much rather see you reopen your small business and make a late payment. It’s much better than no payment at all.
3 | Understand the Payment Protection Program loan forgiveness requirements
Did you receive a Payment Protection Program (PPP) loan to help you maintain pre-pandemic staffing levels? If so read our latest blog on new requirements for PPP loan forgiveness now to get the steps needed to have your loan forgiven.
Here’s the quick scoop: PPP loans are fully forgivable (you don’t have to repay) if you use the funds for approved purposes. At least 60% of PPP funds must be spent on payroll-related costs within 24 weeks of receiving the loan, and no more than 40% of the funds may be used for rent, mortgage interest, and utilities.
First, read our PPP loan forgiveness post first. Second, contact your lender. You’ll be asked to provide evidence of how you used the funds. Therefore, make sure you are tracking your expenses accordingly. Not using a payroll system or running your small business without a CFO? Drop us a line and let’s get you set up for success.
4 | Update your cash projections before reopening a small business
Your account balances may be sufficient now. However, when reopening a small business, your expenses will begin to go up again. What will your accounts look like in six weeks?
If you are uncertain of how to predict this, create a cash forecast that lists all weekly inflows and outflows of cash. Still not sure how to proceed? Send us a message and we can provide consultation as if we were your personal CFO!
A cash projection provides crucial information about when you may experience a shortfall. Knowing when cash will run low helps you act now to change your future financial circumstances.
5 | Start prepping your small business to weather the storm
COVID-19 is not going away anytime soon. Furthermore, the coronavirus has put a spotlight on the financial weaknesses of small businesses. Almost all of us have seen one or more of our clients press pause. Or, worse yet, our favorite small businesses close completely during the pandemic. Some yet to reopen.
Why? Due to local and state regulations. In addition, because there wasn’t enough cash to continue operating.
Therefore, here are a few key steps you can take now before reopening your small business. Ensure you are better prepared for reopening post-COVID-19, and for future financial emergencies.
Financial Steps to Reopening a Small Business:
- Build a cash cushion equal to three or more months of expenses. Treat savings as a monthly expense that you must “pay” to a separate savings account.
- Apply for a line of credit to draw from during emergencies.
- Consider alternate ways of generating revenue, including digital sales.
- Cut non-essential expenses.
- Identify alternate vendors to supply goods and services if your primary vendors can’t deliver.
- Develop business continuity and disaster recovery plans. Need help developing a specific financial plan for your small business? Contact us at 858.284.0314 or schedule your free financial consultation.
Final Thoughts on Reopening A Small Business
This is a stressful time for most small business owners. We are all navigating uncharted waters. Therefore, don’t hesitate to ask for financial help.
With thoughtful planning and careful financial management, you can rest easier knowing that you are better prepared to weather the current COVID-19 economic crisis.