The COVID-19 outbreak has wreaked financial havoc around the globe, leaving many business owners struggling in its wake. According to the National Federation of Independent Business (NFIB), as of March 30th—still early in the crisis—92% of small businesses said they had suffered negative effects as a result of the pandemic. Just 5% of small-business owners said they had experienced no effects at all.
Although the short-term outlook for businesses varies greatly by industry, it’s important to consider what recovery mode will look like once the economy begins to return to a state of normalcy.
One of the most important aspects to consider in a post-COVID-19 world is your business finances. If your business has been impacted financially by the pandemic or you’ve been able to learn valuable business lessons from this experience, now is the time to evolve your financial structure. Having an exit strategy in place for your business finances as we return to a new normal can help you hit the ground running.
Here are three tips to redefine your financial structure post COVID-19:
Redesign Your Risk Management Strategy
The pandemic certainly brought upon a whole host of business risks that many business owners hadn’t even imagined, let alone prepare for.
Although there’s certainly no cookie-cutter approach to risk that works for every organization, there are many areas within your business where, when given the necessary amount of attention and planning, risk can be avoided. Should a future crisis occur, it’s best to have the proper measures in place to avoid certain negative repercussions. You may want to consider setting aside cash reserves, creating a list of designated cutbacks to implement if necessary, and organizing your financial records for easy reference.
While revamping your risk management plans, it’s also important to consider other risks that may pose a threat to your business and its success. For example, cybercrime has significantly increased since the start of the pandemic—the FBI estimates that cybercrime reports have quadrupled in recent months. Data breaches and related incidents can be extremely costly for businesses, with recovery costing $200,000 on average.
Be sure to tighten your cybersecurity practices to avoid this type of risk. This might include hosting cybersecurity training sessions, utilizing virtual private networks (VPNs), or deploying software-defined wide-area networks (SD-WAN).
Consider Whether You’ll Need Funding
Unless you had a large amount of cash on hand going into the pandemic, it’s likely that you may need some working capital to jumpstart your business operations coming out of it. Businesses seeking financial assistance may want to look into loan programs offered by the Small Business Administration (SBA) like the Paycheck Protection Program (PPP), or other loans such as Economic Injury Disaster Loans.
Funding has been abundant within these types of programs due to increasing economic uncertainty. The Treasury and SBA have made recent attempts to increase PPP lending volume through incentive programs targeting women and minority owned small businesses. Although there is still funding available from this program in the short-term, it’s important to consider other long-term sources of small business funding, including:
- Small business term loans from banks, credit unions and online lenders
- Business lines of credit
- Business credit cards
- Vendor tradelines
- Accounts receivable financing
- Merchant cash advances
- Inventory financing
Each of these options have pros and cons, so be sure to conduct thorough research before moving forward with any of them.
If you’re considering financing to help rebuild, keep in mind that borrowing may be competitive, as lenders want some reassurance that loans can be repaid. Reviewing your business and personal credit scores, as well as your business and personal financial standing can help you gauge how likely you are to get approved for one of the aforementioned funding options.
Revamp Your Budget to Adjust for New Costs
Before resuming operations post COVID-19, be sure to take a look at your budget, new expenditures, and changes in incoming revenue. It’s likely that your cash flow will experience significant changes as you re-enter business as “normal.”
For example, you may need to spend money on hiring and training new employees or rehiring ones you had to lay off. Inventory may need to be purchased, and you might have to rev up your advertising budget again to start generating fresh buzz. In addition, you may need to increase your investment in cleaning and sanitizing services to ensure your workplace is safe, and you might also need to adjust your operating hours in order to carve out time for routine cleanings.
As part of your financial recovery plan, you should have a clear idea of what you need to be budgeting for and what you can cut to make the most of the revenue you do have coming in. The goal is to eliminate the monetary waste and get your operating budget as lean as possible. This way, you’re able to resume your pre-COVID-19 profit margins as quickly as possible.
Resuming business operations when returning post COVID-19 certainly won’t be the same as they were before. However, a bit of preparing and re-strategizing, especially when it comes to your business finances, can make all the difference in making this transition.