As provinces across the country get set to begin the reopening process, business owners and self-employed individuals are getting ready to ramp up their operations as well. But we’re not out of the woods yet from COVID-19. Economies will reopen in stages. Social distancing, strict hygiene protocols, and other measures are likely to be with us for some time. And short-term periods of shutdown may still arise in the coming months and years.
As one of Canada’s leaders in the virtual bookkeeping and accounting firm, we’ve been advising business owners to step back and take stock of their finances prior to reopening, particularly their cash flow and expense management. Why? Because regardless of whether you’ve been able to operate more or less as usual, have changed your service model entirely, or have put your activities on hold, there are lessons to be learned.
Here are 12 steps you can take to evaluate and improve your business cash flow and expense management prior to reopening.
Step 1: Look Back and Reassess
Pull out your business expense and cash flow reports for the months prior to Covid-19. Look at the expenses you chose to cut back in March. Now that you’ve been without these (products, services, software, equipment, staff, etc.) for a few months, ask yourself, have you missed anything that was cut? More specifically, have any of the cuts negatively impacted your business? Be sure to only add back expenses that are vital.
Step 2: Analyze Your Business Model—Old and New
The necessity of working from home has pushed many businesses to adapt by changing their service model and moving internal processes online. If you’ve developed new delivery methods, products or service offerings, how will these fit into your business model as you reopen? Will they remain relevant and useful? For how long? What pre-Covid services and products will you reintroduce? Are there further adaptations you can undertake that will make your businesses nimbler and more adaptable to future disruptions?
Because of the financial impact caused by the virus, it can be tempting to welcome every client right away when you reopen but that may be more damaging than helpful to your business. One of our favourite downtown Toronto salons NOIR Beauty+Bar has set up some changes to their operations that may not get the most traffic, but will ensure safety and satisfaction of both clients and employees. They have planned an alternating schedule to avoid people coming at the same time and have added cleaning time before and after clients to ensure everything is properly disinfected. Additionally, they will be disinfecting hair stations, tools, and hair sinks frequently and promoting frequent hand washing.
Step 3: Take a Look at the Data
While it’s true that there remains a great deal of guesswork and uncertainty when it comes to future planning, decisions about changes to your business should still be informed by solid financial data. Ask your bookkeeper to provide you with Profit and Loss Statements or customized reports that will enable you to assess the value and potential that new products, services, and processes have in terms of profit generation, savings, and so forth.
Step 4: Trim the Fat and Refocus
If you haven’t done so already, now is also a good time to do away with any products or services that have been underperforming. For example, perhaps a year ago you began a new service offering that costs a fair bit of overhead but doesn’t generate much revenue. Now may be a good time to redirect those resources towards high-performing services or some of the new services you’ve recently developed. Again, your Profit and Loss statements can be a useful assessment tool here, and your bookkeeper and accountant can provide helpful insights.
Step 5: Evaluate Your Current Expenses
Take a look at your current expenses. What’s changed? Are there expenses you didn’t cut at the start of the pandemic that, in light of new online operating procedures, could be cut now? If you’ve taken on new expenses (eg: video conferencing services), how useful or effective have these been for your business? Will they remain part of your business model going forward? Do they make other expenses redundant? If so, cut the redundancies.
It’s best to build an additional expense such as Personal Protective Equipment (PPE). NOIR Beauty+Bar has taken this into consideration and they will be offering guests hand sanitizers and disposable single-use masks, which would be required for them to keep on during the appointment. Their staff will be wearing masks at all times as well as gloves during hair washing.
To read more on what NOIR is communicating to their clientele and public, please see NOIR’s COVID-19 help section here.
Step 6: Up Your Marketing Game
Lots of business cut marketing activities during the Covid-19 shutdown to save costs, but remaining visible in the market actually sets up your pipeline for the reopening. And, since many other businesses have halted their marketing, there’s an opportunity here to actually boost your visibility. Even if your business is not part of phase one reopening plans, consider continuing or restarting your marketing efforts so that you can hit the ground running.
Besides hair and makeup services, NBB also offers digital marketing and branding as a service for clients under the umbrella Noir Creative media.
“Our motto is More than a salon, we want to be a community of professional who offer a space for beauty, wellness, and creativity. We want to provide beauty services in a collective space where other entrepreneurs can offer their craft as well. We also promote entrepreneurs on our social platforms.”
– Massiel Valenzuela, Noir Beauty Bar Co-Owner & Digital Creative
Step 7: Analyze Your Cash Flow and Spending Habits
Let’s say that, before the shutdown, you spent $50 a week on lunch with clients at your favourite restaurant. With the restaurant closed, you’ve saved $400 over the last two months. Sure, it’s not a recurring expense like a monthly software subscription, but it is a spending habit that eats into your cash flow so ask yourself, is that expenditure necessary? Or just nice? Is it a need, or a want? Your bookkeeper can help you to scrutinize your cash flow usage for spending patterns and help you make a plan to eliminate or reduce your spending as your business ramps back up.
Step 8: Build Your Cash Reserve Today
Tomorrow is unpredictable, so it’s best to be prepared. If your cash flow is strong, save as much as possible, and get your bookkeeper to help you build savings into your budget. As always, be sure to collect on your receivables. Times have been tough, so we suggest you continue to offer clients flexible payment terms and credit card payment options. Remember, the easier you make it for them to pay you, the more cash you have in hand.
Step 9: Secure Emergency Funds
Best practice is to set up emergency funds before you actually need them. Even if you haven’t felt the need to seek government loans thus far, it may be worth applying for a loan before the option disappears. If you qualify, then you can hold onto the loan as a security blanket. Another option is to open or request an increase to your line of credit. Just remember, loans and credit should be used sparingly, only as needed.
Step 10: Start Paying Off Debt
Nothing kills your cash flow quite like business and consumer debt. And in the context of Covid-19, you may face other debts such as an overlap of CERB and wage subsidy payments that will need to be paid back. The best thing to do is talk to your bookkeeper and accountant about developing financial forecasts and building debt repayment into your long-term financial plan.
Step 11: Make a Plan and Automate
Old habits die hard. If you truly want to set your business up for success in the context of the new normal, you have to make a plan. Why? Because as soon as your favourite restaurant reopens, you will want to drop that $50 there each week. Your bookkeeper and accountant can help you to set up short-term and long-term forecasts and budgets, and by taking advantage of cloud-based accounting tools can help you to automate payments and processes to make your business plan easier to execute.
Step 12: Update Your Bookkeeping
With so many new and complex policies in play and so many important business decisions to be made, accurate financial records are more important than ever. The CRA will audit Covid-19 support programs eventually, and we just don’t know at the moment what additional subsidies or tax deductions will become available to business owners and self-employed individuals in the future.
Keep. Track. Of. Everything.
Clear, accurate, and up-to-date financials are the best tool you have for making sound business decisions about how to better position your business and manage your cash flow and expenses moving forward.
Blueprint’s commitment to help
Are you a Salon or a Barbershop and have fallen behind in your bookkeeping, or would like more information on how to prep your books and your business for the reopening? Contact us to set up a FREE consultation.
Blueprint will do everything we can to ensure that businesses have the accurate and up-to-date bookkeeping and financial records they need in order to speed their applications for benefits, financing, and lines of credit.
For businesses struggling to implement the CEWS (75% wage subsidy) or the Temporary Wage Subsidy (10% subsidy), apply for the CEBA loan ($40K loan), we are here to help you do so as fast as possible.
Contact us today for a FREE consultation
NOIR Beauty+Bar is located in Toronto and their team can be reached at [email protected]. They are looking forward to seeing you there!