Many businesses were caught flatfooted when the pandemic started in 2020. They had to close after the authorities issued shelter-in-place directives to stop the spread of the virus. The situation resulted in low to no revenues for these businesses as their customers stayed home to avoid getting infected.
Some businesses were able to stay afloat after they went online. But these businesses had to dip into their savings to increase their online presence. This highlights the importance of savings so that companies have funds to help them get through a health crisis.
Reduce Unnecessary Expenses
With the pandemic far from over, businesses should reduce or eliminate unnecessary expenses. Even if these expenses are small, they can take up a good part of the monthly budget of companies. For instance, the business can reduce its budget for snacks for its employees, especially if it reduces its manpower due to the pandemic.
These cost-cutting measures can help increase the revenues of businesses. They can also help improve the business’s profitability, which is essential at this time due to the uncertainty of the situation. Companies can also end gym membership for their employees, especially if they are working from home.
Instead, these businesses can use part of the money it saves for their employees’ health insurance. They can also increase the contributions to their employees’ pension to encourage them to stay with the business.
Aside from removing unnecessary expenses, businesses can also reorganize or restructure their monthly expenses. For instance, they can renegotiate their contract with their landlord if most of the employees are working from home. Businesses can also move to a smaller office space to save on rent expenses.
Businesses can also reach out to banks and loan companies to negotiate a deferment on their payments until they can increase their revenue to pay off any loans. Similarly, businesses can approach credit card companies and request the reduction or elimination of interest so that they can get back on their feet. Businesses can also work with their suppliers and ask for better pricing on the items they buy from them. This can help companies to increase their revenue and become profitable during a health crisis.
Businesses can also check if they can file a claim for property capital allowances. Companies can claim these tax incentives on some of their assets, including office fixtures and equipment. Since the process is complicated, businesses should hire a company that can work with them in these instances.
Seek Assistance from the Government
Businesses can also ask for assistance from government agencies, especially if they experienced losses due to the pandemic. The US Small Business Administration (SBA) offers a loan program for small businesses to help them recover from the effect of the pandemic.
The economic injury disaster loan (EIDL) allows businesses to use the proceeds of the low-interest, long-term, fixed-rate loan for their operating expenses, which include rent, utilities, payroll, and other costs. They can also use the proceeds of the loan to pay the business debt.
The maximum loan amount that businesses can get is $2 million, but the SBA will only start approving loans of over $500,000 on October 8. But they should also remember that loans of at least $200,000 will require a personal guaranty.
Taking out a loan from the government allows businesses to save on monthly expenses since their monthly payment is lower compared to getting a loan from a private financial institution. They can also defer payment for the first two years of the 30-year loan term.
Hire Independent Contractors
When businesses start to grow, they will likely look for additional staff. In this situation, they can hire independent contractors rather than full-time staff, especially if the work does not entail the contractor to work full time with the business.
In this situation, the business can save on the cost of providing benefits to the contractor. But companies should make sure not to misclassify an employee as an independent contractor, or they will have to deal with the consequences of this misclassification.
They can hire independent contractors when they need short-term services, such as designing a website or creating a logo. These contractors can work for a couple of days or weeks, and the business will not need their services once the contractor delivers the product.
Aside from saving on the cost of providing benefits, businesses also save on training expenses since these contractors already have the skills to provide their services.
With the uncertainty of the situation, businesses should find ways to reduce expenses and save money until everything goes back to normal. This can be helpful in the long run.