Guest Contributor – Shawn Rosenzweig, CPA, CA, B.Sc. – Partner SBLR

For business owners, the impacts of COVID-19 can be particularly difficult, and it becomes crucial to be proactive and respond rapidly.

As SBLR works closely with a large number of business owners, who are somehow being affected by the current situation, here are the five things we are asking them to consider doing during these uncertain times.

Make cash flow projections.

Given these unprecedented times, it is inevitable that everyone will suffer losses one way or another. Having said this, it is essential to get an immediate hold on your daily cash needs. Start by reassessing your short and long-term financial goals and create a weekly cash flow projection for the next 6 months.

The recommendation is to make a rolling cash flow for 24 weeks and keep updating your cash position for the beginning of every week. This will allow you to have a ‘picture’ and, since you have a history, you will have a better idea of the position you are going to be in and where the business is headed.

Remember that ‘knowledge is power’, and you need to be prepared with the facts to make business decisions as fast as possible.

Focus on your balance sheet.

Traditionally a business will primarily pay attention to its income statement, which presents profits and losses over a particular period of time. In today’s environment, it is important to shift the focus to the balance sheet, as it is vital to think of an approach that addresses payables and receivables.

Business owners must have the ability to prepare interim financial statements, by means of a financial program, and then have them interpreted properly. This analysis will let you know: how much debt your business has, how much capitalization, if you can take on any additional debt and how best to take advantage of the government programs available.

Your primary business goal should be to make it through the current crisis. Having an up to date balance sheet will provide insight on how to overcome any challenges.

Ensure access to capital.

In times like these, businesses need to preserve cash. There are actions you can take to finance the required capital your business needs to pull through this crisis.

Start by making adjustments to your existing credit facilities by negotiating flexible payments to minimize cash outflows. Look into your financial institution’s assistance programs, as it may allow you to skip payments, increase your line of credit, or utilize a larger percentage of your line of credit. Alternative lenders and Government Relief Programs can also provide added support.

Review your estate and tax planning.

When was the last time you updated your estate and tax planning? Now is the perfect time to review this in detail. More importantly, if you do not have any plan in place, you should consider setting something up. Look into that long-overdue estate freeze, estate re-freeze, transfer of assets to family trusts, capital gains planning or gifts to children/grandchildren. Now that valuations are suppressed in various situations, it will be a good time to carry out a lot of the estate and tax planning mechanisms available.

Make rational decisions.

Given the current economic environment, businesses are being forced to make hard decisions on how to operate. In any business decision that has to be made, it becomes imperative to take emotions out of the equation. The best way to do so is by having discussions with your trusted advisors, be it a family member or an outside professional. This will ensure that no decision is made in the heat of the moment and that you take a calm and reflective approach in taking the next steps for your business.

As previously mentioned, the goal is to come out of this crisis in the best shape possible. View this as a temporary situation and remain certain that, no matter what happens, this too shall pass.