COVID-19 Best Practices for Businesses
There’s no doubt that COVID-19 is going to have significant impact on the U.S. economy for businesses small and large. I am going to share some of my thoughts and views on dealing with the COVID-19 Pandemic that hopefully will help business owners deal with the evolving situation.
Being based in Arkansas, I was not terribly worried about COVID-19 last week. On Thursday March 12th, I had several conversations where I expressed my concerns about COVID-19, but included my opinion at the time that the media may have created unnecessary panic and that things should get better within a few weeks. It was the next morning on a call with Profit Soup founder Barbara Nuss that I began to rethink my position on COVID-19. In our conversation, Barb said “But you are not in Seattle Tom” and explained the extent of the situation in her city and the potential economic impact it could have.
That evening, I discussed the situation with my wife and we agreed that even in Arkansas, it was time to put a plan in place to address the COVID-19 risks. We did that over the weekend and contacted our team members to inform them of the plan that we were implementing. You can find that plan/protocol here.
Going back to the conversation with Barb, the call was part of our 10 Weeks to a Better Business program and the topic of break-even basics and additional assignments from the call were very timely. Only if we had prepared 90 days ago could they have been timelier. Our participants were challenged with coming back to the next session with assessments of how COVID-19 could impact their businesses and what steps they would be taking to address the COVID-19 risks both physically and financially.
Best Practices for Remote Work
One thing that positioned PCO CPA to address the physical risks quickly was our investment in the equipment, applications, servers and training for our team members to work remotely. We have been implementing this for the last 3 to 4 years and effective on Monday March 16th we were 100 percent operational with most team members working remotely. For a few employees that had not previously worked remotely, we had them setup to work from home by the end of the day.
Companies should be evaluating the design of the work their employees perform and where possible develop systems and processes that allow employees to work remotely. I understand that not all companies can have a remote workforce, but every company has some positions that can work remotely. We’ve found that our team is generally more productive working from home and they appreciate the savings of time an money as a result of not commuting to the office. In the normal cadence of our business, most employees work in the office on Monday’s to allow for socialization and for company meetings. We’ll return to this as soon as possible.
Since we meet every day for a short 10 minute huddle that we call the “10:10 meeting”, our employees are already accustomed to meeting virtually and sharing what they are working on along with any “stucks” they need help with. We also cover our weekly score card in one of the 10:10 meetings each week to keep everyone informed on how we are performing individually, departmentally and company-wide.
Summary Best Practices for Remote Work
- Design work so that team members can and do work remotely as part of your normal business operations.
- Invest in the technology, process documentation, software, hardware that allow employees to work remotely.
- Build a daily virtual meeting into your culture that brings together all employees. Make it short and communicate what you are working on, along with any items that you need help with.
- Communicate individual, department and company performance so that all team members understand the impact they have on the business.
Financial Best Practices
If you are not already in a cadence with your financial and accounting processes, use this time to change and implement some best practices. By developing and following a cadence focused on daily/weekly/monthly/quarterly/annual financial and accounting processes, you’ll have data to support your decisions and understand how your business is actually performing rather than just looking at the bank account.
Develop and monitor the Key Performance Indicators (KPIs) that are critical to your business and monitor these KPIs so that you can make adjustments to the changes in your business. A good place to start is building your P&L to track EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization), Fixed Costs, Variable Costs, Gross Margin, Cost of Sales and Revenues.
Even if you don’t have your P&L setup in this format, start looking at your expenditures now and determine where you can reduce fixed and variable costs. In a down economy, you need to be prepared to reduce staffing and other variable costs if revenues slow down. Be prepared to make adjustments now in order to protect the company over the long-term.
If your company is fortunate enough to be liquid or have borrowing capacity, do everything that you can to preserve the liquidity during any potential downturn.
Structure invoicing to minimize collection risks by setting invoicing and collection terms and conditions with customers. Consider breaking larger projects into segments and invoice those segments as you begin working on each phase of the project. Also, consider how you will collect. By accepting credit cards or setting up an ACH system you improve collection risks and along with the time to collect.
When it comes to paying employees and bills, look at payment systems that eliminate paper checks. Today, employees should be paid via direct deposit and when an employee does not have a bank account, paycards are a great solution. By paying vendors via an online bill pay system or process, you have better control on approval and payment of bills. No need to write checks and drop them in the mail when your supplier can email bills and you in turn can approve and pay the bill electronically.
Summary of Financial Best Practices
- Develop and implement a cadence for your financial and accounting processes.
- Understand and monitor the KPIs that are critical for your business to succeed.
- Gain and understanding of your fixed and variable costs. Review these costs and make reductions now to address any anticipated downturn in your business revenue.
- Preserve the business liquidity and access to borrowing.
- Improve your invoicing and collection process and terms to minimize risks.
- Pay employees via direct deposit or paycards.
- Implement a digital bill pay process to better manage payments to suppliers.
At Porterfield & Company CPA, our mission is improving people’s lives through relationships, sound guidance and leadership; serving as accountants, auditors and advisors. We help franchisees, pharmacists and small business owners create long-term value using the principles shared in this post.
If you are looking for a CPA that can guide you to meet your financial goals, we can help. Call us at 844-309-4930 or contact us via our website.