If there is one thing we can all agree on, it is that the recent COVID-19 crisis has affected our economy. There are thousands of unemployed people, many of them unable to get unemployment compensation. Although companies are starting to open back up, the financial impact continues. It is essential that businesses and individuals have a viable financial plan to recover and sustain during these trying times.
Financial Planning for Businesses
The key to success for a business in 2020 is to be technologically savvy. Understanding how to adjust and change to these new normals is a crucial factor.
Companies are learning to use digital features, curbside pick-up, and social distancing within offices, stores, and other businesses. Finding creative ways to serve your customers will make you stand out from others.
- Expect to spend money on meeting health regulations. Masks and social distancing may mean that your business has to spend some money to make some money. You may need to raise your prices to meet these demands.
- Engage your employees in the new processes. Allow them to voice concerns and address those concerns. Show them your plan, so they get on board from the start.
- Use incentives for workers and customers to shop at your business over someone else's. Added discounts, special shopping hours, giveaways, and other ideas will jump-start your business as you return to work.
- Assessing the damage is a vital part of recovery. Make sure your current numbers are up to date in your system and run P&L statements to see where you are. Do you need to rehire employees or find new ones? Have you lost a portion of your customers and need to up your marketing program?
- Get help if you need it. The Small Business Administration offers counseling services and loans and grants to assist small businesses during these difficult times.
- Look at your competitors. Finding out what's trending and applying it to your business can bring you to the forefront.
- Take a look at your business plan. What is still working, and what is not? Eliminate expenses that are no longer beneficial to your company.
- Consider using remote employees permanently if this works for you. You may be able to switch to subcontractors and do away with employee expenses.
Get Your Business Prepared
For some companies, this shut-down was devastating. Now is the time to get prepared as economy swings can happen at any time. Building an emergency fund is more important now than ever. You may need to cut certain expenses or find new ways to work more efficiently.
Financial Planning for Individuals and Families
One of the most prominent concerns individuals and families have right now is the loss of income. Even if you haven't been furloughed or let go, you have seen a drop in your investments.
In March, the CARES Act went into effect. With this new law, relief came for companies and workers alike. The changes that may help with income loss are:
- 401(k) allowed loan amounts doubled, and the 10% penalty tax was removed. Also, retirees who have inherited IRAs are permitted to defer their required minimum distribution in 2020.
- Economic impact payments of $1,200 per adult were implemented for taxpayers earning less than $99,000 or $198,000 for joint filers. Parents of children under 17 received $500 per child.
During the quarantine, you most likely spent more money on groceries and entertainment to keep yourself, and the family occupied. Now is the time to reassess your spending habits and consider making some changes.
- Take a look at items that automatically draft from your account for subscriptions. You may be able to cancel some of those.
- Invest more in preparing for the future. It may be tempting to halt those payments. But if you can continue to invest, it is often the best way to financial security.
- Consider refinancing your mortgage. Rates are very low right now.
- Make a budget and stick to it!
Preparing Yourself for Next Time
It is easy to think this is over, but statistics point to more problems down the road. If not, it is always wise to prepare for a crisis.
- Work on your emergency fund. Financial experts are now saying that you should have at least one year of income saved.
- Look for ways to decrease your spending so you can increase your savings.
- Refinance high-interest credit cards and concentrate on paying down your debt.
Let Us Help!
Chandler & Knowles CPAs can help you, whether you are an individual or a business struggling with the impacts caused by COVID-19. Contact us today.