FAQ: COVID-19 Response a Template for Future Contingency Plans

As businesses across the nation react to the COVID-19 pandemic, one thing is certain. Policy and best practices seem to change in the blink of an eye. A flurry of information continues to flow in – and if you’re like many small businesses, you may not know where to start.

The reality is you must do something. Things beyond your control have changed, and you’ll have less revenue coming into your business. While the government response is in progress, that doesn’t mean you shouldn’t start planning now given what we know at this point in time.

Following are questions that we are hearing from many businesses. It’s important to realize that everyone is going through this. You are not alone. If you have a question, please reach out to us.

Frequently Asked Questions

  • How can I keep bringing in revenue?

    • Take a hard look at shifting some of your goods or service delivery to an online model. While you can’t feed cattle or fix a broken arm online, many industries have the flexibility to continue providing goods and services online. If you can’t provide your goods and services, you may have the option to provide advice and guidance to your customers through phone or videoconference meetings, among other solutions.
    • Examine your existing payment terms and see if you can negotiate with your top customers at least for partial payments, if not full. No one wants to ask for payment at this time, but as government relief programs become available, cash may be freed up enabling your customers to pay you.

  • What do I tell my employees?

    • Keeping members of your team up to date is critical. Tell them your plans and any important updates that may impact them personally. Be honest about what you know and what you don’t know. Invite their suggestions about cost cutting and continuing operations at a reduced level. They may have ideas that you haven’t thought of.
    • Empower your employees to work from home, if possible. Guidance continues to trickle in from the WHO and CDC and the number of people recommended in group-settings continues to decrease.  Working from home looks different for every business, but think through what could be done remotely – payroll, accounts payable and receivable, answering phones, etc. Talk with your IT provider about how to make remote work viable for as many employees as possible. If you’re new to having employees work from home, check out this resource.

  • What if I can’t pay my employees?

    • Determine if you can keep your staff by reducing their hours. The Kansas Shared Work Program provides certain workers whose hours have been cut between 20 percent and 40 percent with partial unemployment benefits to offset the wages they have lost.
    • Should you need to lay off employees, do so sparingly so you can keep functioning. Be honest with employees and help them through this as much as possible with expedited employee benefits or unemployment benefits. Make sure to let your employees know you are filing a mass layoff claim so they don’t unknowingly duplicate efforts. When you get the unemployment process started, it’s quicker and the employees’ claims are often reviewed faster. They get unemployment benefits sooner. For you, it’s a time-saver, too. Instead of reviewing employee claims individually, you can review them all at once. Plus, it’s one way to maintain employee goodwill during an incredibly difficult time. It also decreases the opportunity for unemployment fraud.
    • If you’re in a layoff situation, think about which crucial functions of your business can be outsourced to a team of experts that aren’t on your payroll. Learn more about outsourced accounting and the benefits of outsourced payroll.
    • Be human with your team. This is an unprecedented time and your employees may be experiencing anxiety and stress.

  • What resources are available to me and my business?

  • What can I do to cut spending?

    • Review your cash flow situation and determine if any expenses can be postponed, canceled altogether, or adjusted. If you were planning to buy new computers next month, can this purchase wait? Talk to your plan provider about suspending the employer match for your retirement plan. Both the federal and Kansas income tax filing deadlines have been pushed to July 15, so if your company has cash reserves normally designated to pay taxes, you have the ability to use that cash for an additional 90 days for emergency purposes.
    • It’s going to be more important than ever to keep your business as lean as possible while keeping your operations going.

  • How can federal income tax changes help?

    • In the proposed bill (passed by the Senate, expected to be passed by the House and signed into law by the President), there is a provision that will allow immediate write-off of qualified improvement property.  This applies to any improvement to an interior portion of a nonresidential building that’s placed in service after the date the building is first placed in service – except for any expenditure attributable to the enlargement of the building, any elevator or escalator, or the building’s internal structural framework.
    • The law has retroactive effect to 2018, which creates the possibility of tax refunds. Combine this with another law change allowing for net operating loss (NOL) carrybacks (if you have now created or increased one for 2018) and the potential for tax refunds increases.
    • Check with your Adams Brown advisor on how tax refunds can increase your cash flow.

  • What are my financing options?

    • Contact your banker soon. Now is a good time to form a banking relationship if you don’t already have one in place.
    • If you have a business bank loan or line of credit, discuss loan modifications with your banker if you think you will have difficulty making your regular payments. Banking regulatory agencies have given banks wide latitude to work with business borrowers during the COVID-19 crisis.
    • The U.S. Small Business Administration’s disaster loan program may be a viable resource. The Federal Reserve Bank also recently announced its intent to make direct loans to small business owners, though this program is still in the discussion stage. Contact our office and keep checking in on our Coronavirus (COVID-19) Resource Page for additional up-to-date information on these potential sources of capital and how to apply.

  • What about my assets?

    • Take stock of where you’re at currently with liquid business assets. What do the next three to six months look like? Do a six-month forecast based on realistic expectations, and consider how to increase your liquidity.
    • If your business is a pass-through entity, take stock of your personal wealth assets. What kind of income do you expect to take out of the business, or what can you inject back in to help make it past the crisis?

  • How do I plan ahead?

    • The successful strategies and tactics you use to get through the COVID-19 crisis will serve as a template for the next crisis – because you know another one will come one day. Use the lessons learned from the COVID-19 crisis to create a strategic contingency plan for your business. Though contingency plans should be customized to your industry and your business, the three essential parts of a strategic contingency plan are:
    • Debt load. When disaster hits, you don’t want a lot of debt on your books. Keep debt to a minimum as much as possible.
    • Invest in the technology resources that are available in your industry. Technology resources can help you move your financial management and, perhaps, some operations to the cloud, and can make it easier for your employees to work from home should the need arise. The cost-benefit can make the difference between survival and business failure during a crisis.
    • Cash flow. Protecting your cash flow can free up precious cash for operations. A complete cash flow analysis can help you identify areas where costs can be cut and revenues accelerated.

This is just a partial list of recommendations for businesses to get through the COVID-19 pandemic. You may have questions that are not included here. Please contact our advisors with any questions you may have, and continue checking our Coronavirus (COVID-19) Resource Center for updates. We are here to help.