How to Approach Financial Planning During COVID-19

Guest Post by Michael Deane

COVID-19 has caught many business owners unprepared. Small businesses are particularly vulnerable in this crisis as most are not as well established and might have already been struggling prior to the pandemic. The present circumstances demand that it's time to develop a new strategy, a new financial plan that will help you get back on your feet.

If you’re in a dilemma as to what to do to help your business recover, here are a few guidelines for your small business financial planning amidst COVID-19.

Perform a financial health check

The first step of financial planning for small businesses is to figure out what you're up against financially. An assessment is needed to see the status of your business and to identify your next step according to the results.

Assessing your current situation is essential for developing a financial plan. This includes analyzing your cash flow and whether you’re able to carry on with your business in the next 6–12 months. Consider the following questions: 

• What is your current position?
• Do you have enough funds to continue?
• For how long? 

Based on your cash flow assessment, you will have clear insight into your financial situation, and you’ll be able to make a decision: continue with your business or put a halt on some or all of your operations. 

If your cash flow analysis clearly shows that you can’t operate for the next six months with your existing assets and revenue as is, you can consider shutting down some of your operations or making the difficult decision to let some of your employees go. 

Recreate your budget 

Using the results of your previous cash flow analysis, start working on a new budget to keep your small business alive. Your previous budget from before the pandemic is no longer relevant because circumstances have changed drastically. In times of global crisis, we must adjust our spending. More importantly, we must learn from this pandemic and prepare for similar future events. 

While crafting your budget, keep in mind all the issues (however improbable they sound) that might affect your business. The reason why many small businesses have struggled amid the coronavirus is the reality that they did not have an emergency fund that would keep them going until things would go back to normal.

If at all possible, consult a financial expert to help you with your cash flow assessment and budgeting, including a plan to save for future crises. 

Cut unnecessary spending

Spending money on unnecessary things during regular times is hurting your business, but doing so during the COVID-19 crisis can easily ruin you. If you’re struggling to keep your business alive, you need to cut all the unnecessary costs such as software subscription, advertising, and so on. Cut all the things that are not absolutely essential at the moment. 

Another way to cut spending is to reduce your working hours. Consider canceling orders if the contracts allow it or at least delay them. Reach out to your debtors if you have any and see if you can get some payments. 

Given the circumstances, your debtors are probably in a similar situation as you are so you a little understanding is necessary. However, you can discuss the possibility of smaller, periodic payments at least. 

If you have to let employees go, consider automating tasks using AI-powered solutions. AI technology does not only cost less than a full-time employee but can significantly boost customer service experience. These bots can work 24/7 either independently or in collaboration with human agents. 

Apply for government assistance

Global leaders around the world are trying to help businesses recover from COVID-19 by releasing relief and stimulus packages for entrepreneurs. These packages include help for businesses that keep their current staff and/or hire new employees. 

Examine your eligibility for government assistance and make sure to apply on time. This financial aid from the government can ensure the survival of your small business. You could keep your staff and continue to operate without shutting down any segments of your business.

Read more: Paycheck Protection Program 101: How to Get a Business Loan under the CARES Act  

Another option is to seek investors that could provide a much-needed financial injection. 

Contact your bank

Contact your bank and discuss the ways your bank can help you overcome the hardships of this pandemic. This includes getting payment extensions on mortgages and loans, seeking a refund for any unused premium policies, etc.  

Contact your landlord 

If you had to shut down your business temporarily, you’re probably in no situation to continue paying your lease, at least not the full amount. The best thing you can do is reach out to your landlord and consider negotiating a new arrangement. 

Given the global situation, there is a high probability your landlord will understand your position and reduce your rent since you’re not using the premises. Additionally, various cities have implemented or are considering implementing moratoriums on evictions from both commercial and residential properties. 

Stay up to date 

Staying informed is crucial during this crisis. Follow the important information on COVID-19 released by the government and trusted sources that may affect your small business. 

Governments are also working out ways to help small businesses, and it is important to stay up to date with the changes so you don't miss any opportunities for relief via special loans or grants. 

COVID-19 has disrupted the entire world, and we can expect the consequences to be felt in the next six months or longer. How we prepare for this upcoming period is crucial. 

Michael Deane has been working in marketing for almost a decade and has worked with a huge range of clients, which has made him knowledgeable on many different subjects. He has recently rediscovered a passion for writing and hopes to make it a daily habit. You can read more of Michael's work at Qeedle.