Tips for Managing Your Business Financials Interview with SharpCFO

We recently sat down with our friends Rob Simon and Ryan Dietrich from SharpCFO to discuss a few questions about how businesses should be approaching their financials, especially given the COVID-19 pandemic.

Watch, listen or read the conversation using the resources below.

So what are some things businesses should be looking for in their financials given the recent events?

Rob Simon:

There are a few weekly key indicators that you’ll want to pay attention to when it comes to your financial reports. Focusing on your sales this week, or some of your costs for the week might be a better approach rather than relying on monthly data reports. This will give you a better indication of your finance situation versus what you’ve previously been relying on.

The other aspect you should consider is starting to separate, or use expense coding to track new, unexpected costs that are associated with the COVID-19 outbreak.

This could be things like providing mask equipment to your staff, additional office cleaning and so on. What this will do is make it easier for you to compare periods without being bogged down by new costs associated with the pandemic.

So there’s a lot of talk out there that cash is king. What does that mean to the small and medium sized business owner and what should they be doing? How much cash for example should they have on hand?

Ryan Dietrich

I think that, so this kind of goes along with number one in my opinion, where the phrase cash is king to me means, how much cash do you need to have that you can use right now? So liquidity, right? Like how much money is sitting in your bank account, not how much is tied up in equipment or how much is tied up in your building or something like that.

People need to know exactly how much they have available in their credit lines. It’s a good idea to know your business credit standing if you need to take out any additional credit right now.

Even further in that is I’m sure that you guys actually talk about the cash flow projections. I don’t know if you do 90 days or up to 13 weeks, we recommend a 13 week rolling cash flow statement or projection. 13 weeks is really hard to project right now. So really just knowing four weeks is really important, so that you know how much money you need to keep in your bank account all the time. And constant communication with your staff, with your clerks, with your bankers, your accountants, etc. 

This is the time when everybody should be looking at their books to see what they’ve done in the past, where they need to go with that, how they need to react and how much money to keep to survive very short term.

 

Rob Simon:

Obviously it’s the fact that you want to be really, you want a business to be self-generating from a cash standpoint to have what you need. But a big part of that obviously is you need, you have to monitor what you have and what’s coming in and what you’re expecting both from a perceivable end standpoint as well as a payable out standpoint so that you can be well geared and well understood as to where your balances are and what you have.

So with the many businesses that I’ve certainly worked with, I know that we’re all very aware, a lot of them have seen their markets completely disappear or at least substantially do so. What’s your advice for them as we deal with all this uncertainty and starting back up?

Ryan Dietrich

We’ve been talking to several folks that we have in our network that deal with marketing and how they can help people to identify new uses for products that they have sitting on the shelf. Or if they have like this inventory, how can they get rid of some of that inventory? Maybe for example a restaurant who has a ton of stuff in the cooler can host some classes online on YouTube and teach people how to cook, right? And maybe monetize that. Maybe some manufacturing companies that have been previously making a can, can switch over their process to making up pen.

The reason we all started our business is because we’re entrepreneurs, we wanted to solve a problem – now we have a new problem that we all have to learn how to solve differently and we weren’t ready to do it.

Rob Simon:

I think entrepreneurs and business owners are resilient and adjust. So I think part of it too is a matter of looking at, you have to ask yourself: “are there additional services or products now that we can offer that are wanted by the market.” 

If it was something that’s been talked about before now that you can readily and easily branch in. So it’s just a matter of kind of again, knowing your customers, knowing your market, knowing what you can deliver and what’s there.

Ryan Dietrich:

A little bit extra on that one is to remain vigilant with showing relevance to your network and community. So there was a guy here in town that owned a Red Deer franchise and he is still posting Facebook Live videos where he’s delivering pizzas to the police station. And he’s picking people up and taking them for a ride. Like socially distant wise, he’s still staying in front of his community and his network. So maybe instead of saying, “I’m seeing everything dry up,” just again, find a way to stay in front of people and it might not dry up as quickly.

 

What are some things that business owners need to be considering when it comes time to opening back up?

Rob Simon:

When looking at inventory, come at it from a standpoint of what do you have, what do you need, and what do your customers want? And are there items either in any stage of inventory that have expired now that you need to replace. 

Then obviously in addition to that, there are going to be other cases related to policies with employees from the standpoint of the distancing that needs to be done, wearing masks, taking temperatures, having policies for that. I mean policies from the standpoint of where people are still going to work remotely from home, and then how that’s going to be handled across the board and across employees as well.

Ryan Dietrich:

Additionally on top of that, there is going to be some obvious safety concerns that everybody should be thinking about. Whether you believe in it or not, there’s a business reason for why it’s important to be aware. And that is, it’s a lot cheaper for a business owner to be prepared safety-wise than it is to be sued because somebody got sick in your building. So now’s the time for a business owner to be, if you have a contract with a cleaning company, diligent about keeping a log of when the company came in to clean your building and aware of what chemicals they use to clean your building.

Ryan Dietrich:

Maybe even ask visitors to your building or customers, as crazy as it sounds, that there’s no liability on the business if you get sick while you’re there. In other words, a waiver of responsibility. If you’re a business owner, develop a waiver maybe through your attorney that everybody coming in has to sign, just to protect yourself. 

Additionally, I mean if you can, take temperatures at the door, whatever you really got to do to kind of protect yourself and your own assets from any claim that might be made later. An image is difficult to clean up sometimes, but it’s easier to be positive and maintain a safe image early on I think. So in my opinion, that’s what they should be thinking about, as well as not overspending right now. So a lot of companies that we’ve noticed are upgrading their facility or their kitchen or their waiting room or whatever. Great, fine, maybe invest some into that a bit. But be a little bit frugal without money, number one. And number two, don’t use PPP money for it.

So on the PPP money side, what’s some advice you have for folks who are running their financials and have this money coming in, or other similar money’s coming in? What’s some advice for them to make sure that they’re in good standing as things ramp back up?

Rob Simon:

Keep track of what you’re spending it on. Just have whatever you need and keep the backup record for it as well, because you’re going to need that to prove back on how the money was used relative to the possibility of the forgiveness on PPP portion. So that this can be very important to have an essence that you keep a spreadsheet running tab and quite frankly, the amount of money received and then each item that was spent on realizing that it’s payroll, rent, insurance premiums, debt obligations, utilities and interest expense under all allowable, because within that the total you receive, 75% of it has to be spent on payroll for it to be forgivable to begin with.

Rob Simon:

And then the other aspect is that it’s also over an eight week period of time, it was adjusted by the eight weeks is when the money is … Eight weeks start from the money received as well. And to keep in mind obviously to remember the other mandates in a lot of cases where that is that you are not going to decrease employee count either. So if you do decrease employees from what you originally reported, there will be some percentage allocations then on this, the money you were given. So there’s going to be a portion of that probably will not be part of the grant amount. And that the calculations so to speak to for employees too is also based on a full-time equivalency. So a part-time employee doesn’t count as one employee. If you get two employees, they’re working 20 hours a week, that would count as one employee.

So they’re just a few issues to watch on, something too, with that PPP it’s extremely important to have a strong relationship with your CPA and to be in touch and in concert with your CPA as well relative to that. Because there are a lot of rules that are changing and most of the rules for the forgiveness aspect are not totally finalized or written by the SBA yet. 

There is a cost to that free money. It’s not really free either, but there’s a cost. So yeah, I mean just to keep going on that, I mean it’s important to track what you’re using it for. It will be audited.

With everything that’s going on, what’s something that’s really inspiring you?

Ryan Dietrich:

Oh, well honestly, something that is really inspiring to me is that … Actually two things. Number one, I have more free time at home than ever before to work on things that I didn’t really do before this, like putting in a garden. And I can sit here and have meetings while digging holes in my garden and talk to people about these kinds of things. I’m not doing that now obviously, but it is a great opportunity to be outside and experience things you don’t get time to do.

Number two, it has forced us to network in a whole different way. That is, I spent more time on LinkedIn than I think I ever had before. Rob and I were actually on a call this morning with somebody on the West Coast that we wouldn’t have met because I wouldn’t have taken the time that needs somebody out there who does what he does. And it was a really great connection that we made. So I think this is the time to maximize the ability to connect with people in a different way and new people and to find activities that you didn’t have time to do and go do something new.

Rob Simon:

I see a lot of cases. I think there’s, and it just goes back to the idea of business notch mirrors and the resiliency and the adjustments. But just there definitely is a belief and a positive and just I think that obviously this is going to be a speed bump. It’s going to probably be a big speed bump from what forecasts are now. But we’re going to be, we’ll be fine. We’re going to be fine when we get through this. Everything, it’s all going to be good. Obviously yes, there’s going to be some pain and some hiccups, but I think there’s a no group. I think there’s an aspect there of everything would definitely be overcome.