The COVID-19 pandemic has caught many people unprepared—small businesses, in particular. Though you and your small business accountant may have been prepared to handle seasonal slumps, new competitors, and other challenges, nobody was truly ready to face the economic fallout of these hard times.
Many businesses are now suffering from high financial risk. The reduced productivity, lost business, disrupted supply, and many more are just some of the things many businesses are feeling, regardless of their size.
That being said, there are things you can do to lighten the weight of these uncertain circumstances. Right now, the focus is on survival. Think of this article as a survival guide for small businesses during the COVID-19 pandemic.
Assess your current situation
The first thing you have to do is to sit down with your small business accountant and to consider the current status of your business. This involves taking your assets and liabilities into account. Update your statement to find out where there are imbalances. Determine the causes of these imbalances, whether these are unfulfilled supply orders, low sales, or inability to collect receivables.
From there, you can figure out where you can improve your cash flow wherever possible. If your supplier has had a diminished capacity to provide you with goods, it might be better to rethink the terms of payment. After all, the supplies aren’t coming in as quickly as they used to and that could hurt your business.
The next step is to find various forms of financing. Find out what loans you can apply for, such as SMB/SME loans from banks. Just make sure that these loans have fair terms, especially since you might be at a reduced capacity to pay them if things get worse.
The final step in the assessment is trying to project various scenarios for the short and long term. That way, you can make budget adjustments and decisions, save money, and find alternate suppliers.
Take care of your cash flow
The conservation of cash becomes a paramount concern when expenses are higher than revenues. Collaborate with lenders, suppliers, and whatever entities you have to pay to create more equitable and easily-managed terms of payment.
If the demand is low, you could lower the supply you pay for by restricting or putting off future orders. Production can also be slowed down if that is an aspect of your business; in some cases, it might be useful to convert to a made-to-order model so that you don’t have assets lying around that are different to liquidate.
It might also be time to ask investors for capital investments to inject life back into the business.
Plan for emergencies
As we’ve mentioned before, there are plenty of ways funds can be obtained and used to help a business survive adverse circumstances. Now might be the time, however, to start planning for emergencies such as this. This might involve investing in insurance for businesses, setting aside an amount of money for disaster mitigation, and taking other cautionary measures.
Final thoughts
These are hard times for anyone. Both businesses and consumers have suffered the weight of current circumstances. That being said, one must always take a proactive approach. Every strategy and option must be exhausted for the survival of your enterprise.
You might also want to consult a small business accountant. We at The ECommerce Accountant, for example, can help you minimise your taxes and increase your profits.