As we approach the halfway mark of one of the most unprecedented years in recent history, many businesses are operating under completely different financial circumstances than they were when they outlined their 2020 budget. As states begin to reopen, now is a critical time to reevaluate your budget and forecast for the remainder of the year and beyond.
Below are a few key areas to consider:
Cash flow is critical during times of financial crisis. To get an accurate picture of your liquidity, you’ll need to evaluate how your business is operating under the current economic conditions.
- Identify any short-term liquidity needs over the next 6 months
- What non-essential spending can possibly be deferred?
- Analyze your working capital
By closely analyzing your spending, you can develop a strategic plan for the remainder of the year. Review your fixed and variable costs and determine those that are really necessary to run the business. Be sure to weigh the risk vs. reward of any cost-cutting measures—if you have applied for or received a Paycheck Protection Program (PPP) Loan, be especially careful here, as headcount and wage reductions may impact your loan forgiveness eligibility.
As mentioned above, the PPP is one of several loan options available to businesses impacted by the COVID-19 pandemic. Evaluate programs like the Paycheck Protection Program, Economic Injury Disaster Loan Program, and Main Street Lending Program to see if your business is eligible.
It’s likely that your customers are experiencing some of the same financial hardships that you are. Now is a good time to re-evaluate, and possibly renegotiate, your credit terms. Closely monitor your accounts, and try to be as timely as possible in collecting any receivables.
Your CPA, legal team, and lender can all provide insight into the best path forward. By keeping an open line of communication, you can best analyze your current situation and position your business to move forward.
If you have any questions about reevaluating your 2020 budget in light of the current circumstances, leave comment below, or feel free to contact me directly. I am happy to help! For information on the Paycheck Protection Program and other helpful resources, visit our COVID-19 Resource Center.