Understanding the financial impact brought on by the global pandemic has proved challenging for many accounting departments in the past year. A host of complex problems has surfaced as a result of operational struggles during uncertain markets and constant fluctuations in an onslaught of new, unexpected business needs.
Luckily, it’s never too soon to start scenario planning on how to rebuild revenue in 2021. By knowing where your business stands and the difficulties that may lie ahead, your business can prepare to get ahead this year.
Accounting Problems Brought on By COVID-19
Several key components of business infrastructure were deeply impacted as a result of the changing economic climate in the wake of COVID-19.
Staffing difficulty has been a challenge for many businesses as they attempt to bring on new hires. Everything from relocation, the mass exodus from major US cities, as well as increased salaries to encourage hiring, has made for more competition than ever before.
Staffing departments were not anticipating many of these challenges and have had to make new policies. This created cash flow problems and accounting headaches as new hires and old employees factored into managerial decisions.
Due to the pandemic, many companies have resorted to more expensive, domestic manufacturing. This comes at a higher cost. However, on a positive note, it also reduces lead time. These changes are all felt by accounting departments who are trying to make sense of shifting financial forecasts.
Changes in manufacturing have impacted many businesses’ inventory. From an accounting standpoint, this has led to renegotiations of their manufacturing relationships as their delivery timetables and payment schedules have been impacted. As a result, accounting departments are trying to manage and account for these fluctuations.
Many businesses are looking for their next strategic step after a difficult year.
One bright spot for some struggling businesses is that a second round of the Paycheck Protection Program (PPP) has been extended to May 31, 2021. Of note to SMBs in this second round of relief funding is that businesses no longer need to show positive income to qualify. This is also extended to self-employed individuals. Businesses that recorded a loss can still apply.
Tips for SMBs to Navigate 2021 Finances
Whether your business suffered significant losses, or experienced unprecedented growth as a result of the pandemic, there are four key considerations that can help your accounting department keep your business on track for 2021.
Know Your Cash Flow
Understanding your current cash position and cash outflow is essential to sustain your rebuild (post-Covid) and ramp up your growth. What many business owners don’t understand is that cash flow does not only refer to dollars in the bank.
Your cash position is a complete picture of what your revenue projections look like in the next 3-6 months, paired with accurate financials, and a projection of upcoming projects in the pipeline. For accounting departments wanting to understand how to simplify their cash flow projections, here is a helpful resource provided by the AICPA.
Understand The “Why”
Understanding the “why” behind your revenue growth or decrease is essential to understanding what works and how to replicate it month after month. During periods of uncertainty in cash flow, it can be incredibly helpful to know what drives revenue and why it works. It is also valuable to know your expense growth/decrease for prudent financial decision-making.
Know When to Spend
It is essential to know when critical expenditures such as staffing or inventory cash outflows are occurring. Many businesses don’t realize that certain terms in negotiations are available to help you navigate uncertain times financially speaking. Many SMBs don’t negotiate favorable terms, because they either don’t know when to plan for these expenses, or they aren’t aware of how much negotiating power they actually have.
Accurate Record Keeping
More than ever before, accurate bookkeeping and accounting are essential for keeping everything straight amidst a sea of change. Businesses are looking for help in an advisory capacity, who weren’t otherwise prior to the pandemic.
Business needs range from navigating changing revenue streams, personnel changes, and maintaining the foundation of their businesses.
VaroTeam Can Help With Complex Accounting Problems
VaroTeam specializes in assisting clients with every facet of growing a business post-pandemic. We can help your team with all aspects of the PPP process, or we can help you anticipate future staffing needs by looking at your budget and cashflow.
VaroTeam can also work with you to negotiate more favorable terms such as better lead times and wider windows on payment of invoices, for inventory and staffing contracts.
In 2021, VaroTeam is dedicated to helping clients rebuild strategically by helping them manage critical KPIs. Our skilled team can help you ensure that these complex issues don’t create more business losses. Instead, we help you to translate your strategy into ROI and revenue. If you are ready for a dedicated financial team to help your business navigate 2021, schedule your free consultation to learn how we can help your business run more efficiently.