Business Finance in a World Transformed by the Pandemic

If you’re in business, you’re probably wondering, “What now?” Last year threw everyone a huge curveball with the worst health crisis in a century, and it isn’t over yet. As 2021 begins, cases are continuing to spike, and deaths are continuing to rise. But with vaccines rolling out (and they can’t come fast enough) alongside variant strains popping up, it’s hard to know how to prepare - especially when it comes to your business finances.

Some answers may depend, in part, on what kind of business you run. Service industries, retailers, and food processors/preparers will continue to face different — and in many cases more daunting — challenges than companies that can adapt by working remotely.

Whatever your specific situation, here are some ideas on how to proceed safely, work toward securing your business finances, and make your business operations viable in 2021, regardless of what happens next.

Look at past performance

The good news about 2021 is that you’ll have some idea how the pandemic affected your business, based on the last nine months of 2020. Analyze your income, expenses, and cash flow for that period and compare them with figures for the same period the previous year.

What trends do you notice — both related and unrelated to the pandemic? Do you foresee those trends continuing, and have you adjusted to account for them? Analyze inventory levels, staffing levels, and assignments to see what’s working and where you need to adapt further. Then pull it all together to look at the big picture.

Create more than one budget

If 2020 taught us anything, it’s that you never know what to expect. So it’s important to plan for numerous eventualities. Create best- and worst-case budgets that account for different situations moving forward. Then account for smaller variations and plug in numbers based on your experience.

Use stable, predictable costs as your baseline: What’s the minimum you need to stay in business? Do the same thing for your income, identifying the least you can afford to make. Then build from there, incorporating variable expenses and income fluctuations, while identifying what caused them. Are they pandemic-related, seasonal, or related to supply and demand?

Once you’ve accomplished this, forecast and factor in major one-time or annual expenses. And don’t forget to set aside an emergency fund so you have a cushion in case the worst happens.

Review your credit

Your business is separate from your personal finances, but your company will still need good credit to operate successfully.

The U.S. Small Business Association advises you to look at five basic types of credit:

• Business credit cards, which can be used to make business-related purchases.
• Retail credit, which involves issuing branded credit cards for your specific place of business.
• Service credit, to set up cellphone, cable, internet, and related services.
• Supplier credit, which can be used to purchase supplies in return for a promise to pay at a later date.
• Vendor credit, which can be used to purchase products or services using short-term financing.

Being able to borrow money when you need it is more important than ever in times of uncertainty, so be sure you build and maintain good credit for your business, just as you would with your personal finances.

Examine your insurance

Insurance is as important to your business as it is to your personal finances. Individuals might look at their health, life, homeowner’s, and auto insurance policies. If your business offers transportation or delivery services or requires other road transportation, you’ll need to consider coverage for drivers on company business.

Other forms of insurance you’ll want to look at might include:

• Commercial property insurance, if you have significant physical assets.
• General liability insurance, to protect you against losses related to such pitfalls as injuries, property damage, medical expenses, and lawsuits.
• Home-based business insurance, which might be worth considering if you or your employees are working remotely.
• Product liability coverage, to protect you if a defective product causes injury.
• Professional liability coverage, to guard against losses from negligence and malpractice.

Also, if you’re a home-based business, your house is more than just your residence. If something goes wrong, it can sidetrack your entire company. So it’s worth thinking about a home warranty to protect you against disruptions that can occur as failures to essential heating, plumbing, and electrical systems. You also might want to consider a genset to keep you running in the event of power outage.

Final thoughts

As you plan for an uncertain short-term future, remember that the decisions you make now will have long-term ramifications for your business. The decisions you make today will be crucial: As of September, 60% of businesses closures caused by the pandemic had become permanent. You don’t want that to happen to you.

Look at all your options in terms of reducing expenses. If it’s feasible, you might be able to save money — in addition to minimizing potential exposure to the virus — by having employees work from home. There are many possibilities to consider. As you move forward, do your research, stay flexible, and be willing to make the hard decisions necessary for your business to survive.‍