We’re all dealing with uncharted territory during the COVID-19 pandemic. But now that we’re a couple-three weeks into it, most of us are getting used to making infrequent trips out, and a lot more time at home than we are used to. Like every crisis or disaster, once we are in the middle of it, preparation is a thing of the past and planning becomes the best option.
Lucrum is actively monitoring the situation, doing our best to stay up to speed on the latest developments, mainly from a tax/legislation/financial standpoint. We are helping clients with planning, modeling changes to their business, communicating with lenders, as well as managing cash flow. Here is some of the advice or areas that we are focusing on currently.
Start/Update Your Forecast Now – With any uncertainty or sudden change to business practices (which this COVID-19 mess certainly is) it’s important to plan and model the impact of any change. Given the fluid situation and how fast things are changing, it’s probably not prudent to forecast or model more than 12 weeks. Like ripples in a pond, any change today has an ever-larger effect the farther it gets from the initial impulse. Instead, focus on making sure that your 4 to 8-week plan is as sound as possible and spend time on what we can control today or tomorrow.
One key thing we are considering with our clients is determining if the change to their business model over the past weeks is a timing or permanent difference. Meaning a hair salon or restaurant likely has had a permanent difference; those revenue dollars won’t be coming back. But a construction company or accounting firm probably has a timing issue; work is probably delayed but not cancelled or timing of the payment is deferred but will still happen. Like sit-down restaurants doing take-out, try to shift resources to those areas of business that are unaffected or less affected than others. Lucrum has a paving client who has delayed all retail shopping center work and is focusing on HOA work for this very reason.
Manage Cash Flow – Thankfully Federal and NC have extended the 4/15 tax return due dates and the payment date to 7/15. While this saves cash flow and eliminates penalties, NC has not eliminated the interest requirement. Several CPA’s we’ve spoken to expect that to change, but interest is part of the General Statutes and the Governor cannot simply waive this requirement without General Assembly involvement.
Other cash flow ideas include starting the conversation with lenders and landlords now if the 12-week forecast above shows a dire cash flow situation. We have heard that South State Bank and First Citizens are offering interest only or deferred payments for 90 days to their customers in good standing. Anyone hearing a deferral or adjustment request will likely want up to date financials so be sure to stay on top of your books. We recommend deferring capital expenditures until absolutely needed or prices crash and a certain item the business needs (not wants) is too good to pass up. Start considering alternate sources of cash whether it is drawing on lines of credit (part of the bank conversation), cash value life insurance, retirement accounts, etc. While we don’t have to act on these cash sources, everything should be prioritized and included in the plan.
Communicate w/ Employees – With any crisis, silence is the worst option. It is more important than ever to lead and communicate with the team. Short, consistent and frequent messages are much better than long speeches. People make assumptions (often wrong ones) in the absence of clear, direct, information and in times of stress this can be devastating to morale. We are advising our clients to have regular meetings with their team and to share their plans to weather the storm and how they are going to handle it. Even if there is bad news to share, it’s better to be direct and honest; they might not like it, but they will appreciate the sincerity.
Given Mecklenburg County’s “Shelter At Home” directive declaring only Essential Businesses are allowed to remain open, we are advising clients who operate Essential Businesses to write letters for their employees to hold in case they are questioned by law enforcement. It’s important they have identification, both government-issued as well as something that identifies them as part of your team. In the letters we wrote, Lucrum included the applicable section of the Mecklenburg County directive that describes which type of Essential Business the company is.
Communicate with Customers – Just like your employees want to know, so do clients and customers. It’s important to share the plan, even if we know it’s going to change tomorrow. Lucrum has had several clients who earlier this week said, “Come to our office” and by mid-week are encouraging us to stay home. Our plan was to offer standard service to our clients (onsite or remote) according to their preference. We shared that plan with them giving them the opportunity to make the call that best suits their needs. Even in time of crisis, clients and customers need reassurance that vendors and service providers are thinking about them and helping them navigate through the rough times.
Don’t Stick Your Head In the Sand – Working from home is tough. There are a lot of distractions and it takes a special person to be as productive as possible. Most of us aren’t used to it so there’s a feeling of putting things on hold or allowing ourselves to put in 6 hours instead of 8 (assuming child care isn’t an issue). Instead of doing that, do things like look for growth opportunities, focus on projects you haven’t had time to get to, learn/implement new technology, etc.
Assuming business is down and things are slow, use this as an opportunity to improve. I stopped to get take-out Mexican and the staff was hard at work cleaning, painting, and re-decorating. I was impressed!
We can choose to bemoan circumstances beyond our control, or we can choose to keep our staff busy (to the degree we can afford to) and accomplish tasks we weren’t able to otherwise. We recommend you choose the latter.
As is always the case, but especially during these confusing times, Lucrum is here for you. If you have questions about anything that results from the quarantine, don’t hesitate to give us a call.