Stacey McKibbin and Matt Garrett Discuss Risk Management in the Face of Coronavirus

With the new normal becoming a reality for everyone, how can we prepare our businesses to survive and thrive during this unprecedented time? TGG Founder & CEO, Matt Garrett, and Stacey McKibbin, CEO of Consilio Consulting discuss the importance of the numbers in your business, and how to better understand how to come out of the COVID-19 pandemic on top.

What have we been seeing over the last few weeks? 

A: Historically, we have never seen this volume of unemployment. In the 2008 recession, unemployment rose to 8.2 million over a six-month period. Now, we are seeing 20 million people file for unemployment over just a few weeks. It is unprecedented and frightening for many business owners and, of course, for those people who have lost their jobs. There will be long-lasting repercussions on the economy, but there will also be businesses that survive and even thrive. In order to be one of those small businesses, it is important that owners look at the decisions they are making right now in order to come out of this recession with a fully functioning business.

This interview was originally produced for the Walmart Foundation.

Providing more than $1 billion in cash and in-kind to support programs that align with Walmart’s philanthropic priorities.

The businesses that will survive will have to adjust to the new normal. As a whole, working remotely will be business as usual, travel expenses and budgets will be decreased, as meetings, communication, and selling will be done over Zoom. 

Companies will need to focus on innovating and rethinking their business plans to alter them to fit the new normal. Investing in things like digital marketing and finding ways to make the available options as cost-effective and efficient as possible will create more opportunities to be profitable. 

Workforces will need to be highly efficient and accountable. This is a time when businesses can’t afford to be sloppy, we have to deliver results to our customers…and your workforce is responsible for that. Company culture will need to be a focus as well, inspiring employees to be great, will encourage better performance and employee retention.

Maybe the most important thing to do is to stay sane during these uncertain times!  Reevaluate how your fear of the unknown is influencing your daily actions. Matt Garrett says that the way he comes back to reality is through reverting to the things he can count on, and for him, that is the numbers.

So what is the best way to assess risk in a time like this?

Declining sales is the most obvious risk to address. But, how can you combat that? One way is through scenario planning. Map out your work chart with job descriptions that are explained using objectives, analyze performance based on achievement, and map out a scenario of revenues declining 25%, 50%, and 75%. Who would you need to lay off? Where could you cut unnecessary costs? This exercise will give you a deeper understanding of how your business can survive. 

Another thing to consider when planning for the future is cash flow forecasting. At TGG, we have created a Cash Flow Forecaster that forecasts out 13 weeks and beyond, predicting revenue and cash needed to survive as long as you can. If circumstances are worse than expected, companies will have prepared and can adjust accordingly. 

Consider where your cash comes from. Are you collecting directly from customers? Ensure that contracts are air-tight to protect yourself. Divide customers into A, AA, AAA customers based on their reliability for timely payments. AAA customers will have layered terms, like late fees, interest, etc. This can become an SOP for the future.

What about discounting, will that help business owners? If you need cash, ask suppliers to discount anything in exchange for a longer-term contract. If you are considering discounting, ensure that there is an exchange between the two, like a higher initial price, or extended contract.

Be ready for when the economy is back on track. Ensure that you are working efficiently to give yourself the best opportunity to thrive in the new economy.

What are the government programs small businesses can utilize?

Disaster loans, aka the EIDL, is one avenue most businesses know about or have taken advantage of.  EIDL loans were available for up to $2 million dollars for any purpose. As of April 17,  2020 the EIDL ceased accepting applications due to depleted funds. 

The SBA Payroll Protection Program has recently been refunded. Publicly traded companies who applied for and were granted these funds, aimed to help the Small Businesses have started returning their improperly gotten funds.  Small businesses can still apply for the SBA PPP.  However, it is not free money. Ensure that all your expenses using this loan are tracked and allocated to the correct pages. At TGG, we have created a PPP Payroll Tracker to make sure that your expenses are being accounted for correctly to help secure loan forgiveness.

Small businesses should also be utilizing their ability to refile their tax returns. By taking advantage of losses in prior years that have been suspended, or when you have put money into buildout, go back and refile to build cash.

Finally, here are a few tips and tricks to ensure profitability through this time. Look at everything.  Cutting expenses always counts.  Consider all office expenses, if you can re-negotiate your rent with your landlord you should. If  you are not in your space, ensure that your utilities are off and you are not paying for things like internet access. 

Take this opportunity to look at your business and find areas in which you can innovate and expand in order to stay ahead of the curve. A situation like this is a time of pressure that can result in massive expansion for businesses and innovation. If you need more information on how to protect your business, please contact us.

Thank you to Stacey McKibbin (Consilio Consulting) and Maresa Friedman (Executive Cat Herder).

This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.

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