Preparing Your Business for the Effects of the Coronavirus – Emergency Business Planning
With the rapid onslaught of the Coronavirus already disrupting business operations in the U.S., there are three ways you can face the future: panic, do nothing, or plan. As we work with business owners through these tough times, we know the best way to do this is to plan, making the situation under your control as much as possible.
By now you have probably read all the communication from your local, state and federal governments on how to prepare for the actual virus itself, and hopefully you are moving forward with those preparations. But what should you, as a business owner or responsible manager, do to prepare your business?
Assess the Impact on Your Business
The first step is to assess how the changing environment might affect your business. How will the virus affect the revenue and cash flow of your business? Not all businesses will see a revenue decline, and for others, the decline could be catastrophic. For some, it won’t be a question of getting or keeping the business, but labor shortages that might make it impossible to deliver your product or service. Consider these possibilities:
Sudden Drop in Demand – Many service businesses including restaurants, fitness and health clubs, and other services are already seeing a sharp drop in revenue as customers stay home. It will be made worse as authorities force businesses to close or operate for fewer hours, or as contracts from state agencies are stopped. If you are in the construction industry or a manufacturer, most likely you have contracts that will continue through the next months, so this might not be an immediate issue, or you might find yourself unable to perform to your contractual obligations through limitations in your workforce.
Sudden Increase in Demand – Some businesses are seeing huge increases in demand like supermarkets and resellers of products needed at home, and of course, suppliers of medical products. This could hit manufacturers as well if their competitors can’t deliver due to labor shortage or supply chain issues. Here, you’ll want to consider how to keep your existing customers happy, so they stay with you after the virus passes.
Labor Shortage – You will probably be affected by a drop in labor as workers are forced to stay home. The possibility also exists one of your employees is infected and your entire staff is required to be quarantined. To prevent this, you must be sure your staff is comfortable with staying home when they feel ill. This could be an issue if your company has a very authoritative management style and your employees are afraid to be honest with you. You might want to coach your employees to practice social distancing while they are not at work. Additionally, your workers might be afraid to come back to work for fear of getting the virus.
Supply Chain – If you are a manufacturer, you’ll need to assess the supply of all of your component parts. Some companies are already experiencing shortages of critical parts. If you resell products from other suppliers, you will likely have similar problems, requiring you to be resourceful
Long Term Impact – If the situation continues for many months, the long term impact will be hard to predict – but in this situation, the possibility of this lasting a long time is high.
Create an Emergency Disaster Plan
Once you have a plan, if you are facing a sudden drop in demand and a steep revenue decline, it’s time to plan for action NOW. The immediate impact of actions to mitigate the spread of the virus will probably last 6-12 weeks or longer, and your first task is to preserve cash to make it through the lean times. Make three different plans for a 10%, 25%, and 50% or more reduction in business – or “slowdown”, “significant drop” and “disaster”. If you see your revenue decline hit one of those targets, enact the plan accordingly to that category. Consider these steps in each of the plans:
Identify Non-Essential Expenses – Depending on the size and complexity of your business, access to reliable financial data about your business is critical. You will need to quickly identify and stop all non-essential expenses to preserve cash as soon as possible.
Defer any discretionary capital expenditures until the acute illnesses caused by the virus are in decline. Some projects are such that sustaining a delay will have a significant negative cost impact. On the other hand, with the federal funds rate now at zero, banks will be able to lend at historically low rates, so it may be a good time for capex. Projects with high net present value (strong justification) should be pursued, but projects with borderline justification should be delayed.
Delay payments to vendors where possible and ask key suppliers for help – they might extend additional credit or give you more time to pay.
Talk to your Bank – When the entire economy tanks, they are in trouble too. Be assured, they are working with the government to minimize the impact on their bottom line and they are fully prepared to listen to your needs. They might delay installments, cancel interest payments or provide cheap bridging loans.
If you run a non-profit, reach out to all donors and volunteers and ask for additional assistance to get your organization through – and be specific in the ask.
Essential Expenses – Decide which essential expenses need to be cut in order of importance and cut them in that order when you have to.
Employees – Plan for movement of essential employees to virtual, at-home work assignments or part time. If layoffs are necessary, stack rank your employees based on their criticality to maintaining operations.
Contact your suppliers – To understand the impact on your business, it is essential to know where your suppliers stand. Have they stopped or decreased production or has demand for their products increased to the extent that you might face shortages? Consider logistical challenges as distributing products is typically not a stay-at-home job.
Contact your customers – As much as you need to know the status of your suppliers, your customers have the need to understand your situation. In times of crisis, customer-centric organizations make a difference and will be remembered.
Reassure Employees – Be open and communicate your plans with your employees. They dread nothing more than uncertainty.
Avoid Travel – Avoid travel if possible. This is the time of year when there are lots of industry meetings but getting on a plane or staying in a hotel right now is a risky proposition. Look for opportunities to meet suppliers and customers virtually. Get out front in communicating with your customers to reassure them of the steps you are taking to keep them whole through this crisis.
Use Time to Work On Your Business – Work on the gaps in your business during the slowdown so you can come out stronger when it’s over.
Pivot to New Realities – Think about any way your business can pivot to take advantage of the new realities. There will be fundamental changes in the way we do business moving forward, and only the agile will capitalize on them.
Get Advice and Help – Discuss and develop these plans with outside help – your business coach, peer advisory board or other business mentors should help you identify areas to focus on – especially trusted advisors already familiar with your business.
Take Appropriate Action
Now that you have a plan, you must commit to taking action. Any additional delays will cause your cash to run out sooner, putting the long term health of your business in jeopardy. Hard decisions may be necessary to save your business.
Finally, discuss the potential impacts with your key advisors – your business coach, accountant, or fellow business owners. By having the discussion, they will give you essential ideas you might not have considered. By sharing their expertise and unique perspectives with each other, they simply increase their chances of success.
The Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns has been extended from April 15 to July 15, 2020. All details and updates are available here: https://www.irs.gov/newsroom/payment-deadline-extended-to-july-15-2020.
Who is your company’s perfect client? Tapping into the demographic that your product or service best-serve can help create a loyal consumer base that provides potential patrons for years to come. Not to mention, satisfied clients and customers are the best kind of advertising with positive reviews and word of mouth. Narrowing in on your loyal target audience will involve profiling and finding the perfect fit for what you offer, which takes research and marketing strategies.
Discover the perfect clients for your company, business, or brand, with these tips:
Know What you Do
Before you can recognize your ideal consumer and target audience, you need a full understanding of what you are selling. Watch, listen and observe to determine how your product or service is being used by your customers and measure changes in buying habits or patterns over time. Be an expert when it comes to conveying what you do.
Obtain Honest Feedback
In order to determine who and how your product is being used, you need to get feedback from your buying audience. This may be achieved with surveys or other tools and through offering promotions and rewards for participation. Follow-through will be impeded if there are technical issues or glitches so make sure that you choose a platform that will work smoothly for your reviews. Know that preferences, interests, and opinions can change over the course of time so survey and engage your buyers regularly. Social media is another platform that makes it easy for customers to reach you and share their experiences. This inside information can better help you find the client that is perfect for your product or service.
Stay Relevant and Current
Always update information pertaining to your consumers and keep your contact list of clients current. Maintain a simple spreadsheet or database with contacts, promotions, and campaigns- as well as the outcome and conversion rates of these efforts. A thorough and accurate customer contact list is gold; maintain and protect it.
Find your Audience
Go a little deeper to differentiate potential patrons from perfect clients by finding out a bit more about them. For instance, information pertaining to gender, job, and interests can help point to whether they are a good fit for what you offer. The more information you can elicit, the more streamlined and accurate you can make marketing efforts in an attempt to lure them from rivals or competitors offering similar goods or messages.
Target your marketing efforts toward your perfect clients with these tips. Got other business-related questions? Rely on the industry experts at BMH Accounting, with locations across South Florida. BMH Accounting specializes in serving the needs of small businesses with monthly accounting, bookkeeping, tax planning, and payroll services. Call to learn more today.
Every business, no matter how small, has several tax obligations that it must meet. This includes taxes at the federal, state, and sometimes local level along with payroll taxes. At BMH Accounting, we understand that keeping track of so many obligations can be challenging. However, doing so is essential to avoid fines and possibly other sanctions from the Internal Revenue Service (IRS) and your state or local governments.
In terms of withholding from employee paychecks, you must deduct federal tax, state tax if applicable, social security, and Medicare. Below we outline how to determine your tax obligation at both the federal and state levels. Before you arrange to pay any taxes, however, you must first choose your tax year.
How to Choose the Tax Year Most Appropriate for Your Business
Choosing a tax year to coincide with the 12-month calendar year is the most common among business owners. This typically works well for companies without special accounting situations that would require the business owner to choose another alternative. If your accounting cycle doesn’t end on December 31, using a fiscal year instead of a calendar year will work better for you. If you have a special situation such as operating your business only part of the year due to starting or stopping it, you should select a short tax year for your filing status.
The type of structure you choose for your business determines the categories of taxes you pay and how much you pay for them. You may be subject to one or more of the following types of federal taxes:
Employer tax: This covers specific payments you must make such as contributing to the workers’ compensation and federal unemployment programs.
Estimated tax: As a self-employed business owner, you must make estimated quarterly tax payments to the IRS.
Excise tax: The IRS only charges this on specific services or goods such as alcohol and tobacco.
Income tax: This is the amount of federal tax withheld from employee paychecks based on their income and number of exemptions.
Self-employment tax: People who employ themselves are subject to the full amount of social security and Medicare, currently 12.4 and 2.9 percent.
Each state creates and enforces its own rules regarding employment taxes. If your state collects these taxes, the types and amounts you pay will depend on your business structure and physical location. If you’re a sole proprietor, for example, you will pay state taxes via estimated payments and include your income and expenses on your personal tax form. Corporations, on the other hand, pay taxes as a separate entity from the people who own the business.
Get Help with Proactive Tax Planning and Meeting Your Tax Obligation
BMH Accounting is available now to assist your small business with strategy to reduce your tax burden and gain a better understanding of the tax obligations you face. Please contact us today to request your initial consultation.
When it comes to Tax Planning, being proactive pays. Being vigilant and precise with your tax reporting and expenses can minimize your tax liabilities- and save you money at year’s end. Tax prep and documentation should not be something that only occurs at tax-time; proactive tax planning is something that happens year-round to avoid nasty penalties and maximize deductions.
Some tax planning tips include:
Prepare to be vigilant about keeping track of business expenses- which can be a bear! A good rule of thumb is that if you plan to deduct an expense, you will need some sort of proof of the purchase, like a receipt, invoice, or canceled check. You can also use bank records, if needed, to document purchases related to business that you do not have an actual receipt for when it comes time to complete or file your taxes and reports.
Always save invoices or receipts for all your business-related purchases. It helps to write and attach a note explaining the purchase for documenting later, when you may have forgotten the specifics surrounding the expense.
Make sure to keep personal accounts separate from business accounts whenever possible. It can make accurate record-keeping nearly impossible and you could suffer by missing out on certain business deductions this way.
Don’t misclassify your workers as the income-tax withholding and employment taxes are quite different. While you do withhold federal income tax and FICA taxes from your employees, you also are responsible for unemployment taxes and your own share of FICA. When you are dealing with staff that are actually independent contractors, you are not required to withhold taxes, making the individual responsible for their own self-employment tax liability. This also eliminates the need to pay separate FICA or unemployment taxes. Talk to your accounting professional to learn more.
Pay the employment taxes that you collect from the wages of your employees and staff for federal income tax and FICA (Social Security and Medicare) taxes promptly. The IRS is not tolerant of delayed payment and noncompliance penalties can be severe.
Industry experts offer tax tips for small businesses, including that you need to be careful and cautious when making tax deductions. This may look suspicious and trigger an audit, further reinforcing the need for organized documentation. The IRS frequently assesses business tax deductions, like vehicle use and travel expenses, to ensure you are sticking to their guidelines and limits.
Consider Hiring Help
Take the worry out of your business taxes with some professional help from BMH Accounting. If you own or operate a company or brand, outsourcing your financials and tax reports to a certified accountant makes good business sense. Don’t risk penalties and fines by going it alone; hire a tax professional today.