Aside from the effects it may have on our health and personal safety, the spread of COVID-19 in the U.S. has generated economic anxiety and uncertainty on a mass scale. Among those most impacted are SMB owners and entrepreneurs who wonder, “Will my small business survive the coronavirus pandemic?”
As business consultants and CPAs, we urge you to stop, breathe, and calmly consider a few important developments before making hasty decisions that could negatively impact your small business in the long run.
Here are a few things to know and consider before hitting the panic button:
Tax Deadline Extensions
Yesterday, the Department of Treasury issued guidelines that allow all c-corporations and individuals an extra 90 days to make tax payments that would be currently due. However, keep in mind that taxpayers still need to either file their taxes on time or file an extension on or before April 15th.
Recommendations to Help Your Business Survive the Coronavirus Pandemic
Our nation is in a panic over the COVID-19 outbreak, and small businesses are already starting to feel the pain. Social distancing brings fewer customers through your doors, less money in the bank, and a huge wave of economic uncertainty.
1. Avoid making rash business decisions.
It’s tempting to make rash decisions in order to get you by in the weeks (or months) to come, but I want to urge you to fight that urge and push through. The best thing that small businesses can do at this time is to prepare for the worst but hope for the best, while trying to hold off big business-changing decisions for at least a couple of weeks.
Our nation’s leaders are working hard to pass bills that will help get this country, and your small business, through these trying times. I want to urge you to not make a permanent decision to fix a temporary situation, but definitely start making your plans in case big changes are needed.
2. Stall layoffs for as long as possible.
Many businesses are choosing to reduce their workforce in an effort to get through these difficult times, but this is not necessarily the best decision for your business or your employees.
The House has already passed Phase 2 of a bill to help businesses survive the outbreak, and it is making its way through the Senate this week. This Phase primarily pertains to paid leave and will provide employees with 14 days of leave at full-pay and will then continue to pay them two-thirds of their regular wages for up to three months where employers cannot.
This bill will allow employers to retain their workforce until things return to normal (or as close to normal as our nation will be after this is over). I suspect that this help might only apply to current employees and not to those who have been terminated, though terminated employees may be able to get their own benefits apart from their prior employer.
A smaller portion of this bill pertains to new options with the SBA for struggling businesses to get fast, short-term lending relief with very favorable terms. In addition, Trump has now introduced the beginning of his Phase 3 request, which proposes more than $850 billion in spending.
The details of this next one are just now starting to unfold, but I expect it will try to offer a complete zeroing of the payroll tax, both for employees and employers of small businesses for at least six months, likely along with provisions to cover additional paid leave needs.
With these pending government relief efforts, if you still find that a reduction of your workforce is necessary to get your business through this pandemic, I would highly recommend that you consider temporary layoffs rather than making permanent employment decisions.
3. Remember that there are signs of economic recovery.
Our client and trusted partner, Dr. Thomas Black, thinks we will know a lot more about what to expect from this outbreak in 2-3 weeks when enough testing has been done to get an idea of how quick and wide the virus is spreading.
Hal Lambert, another of our clients and a financial expert, believes that the market will bottom out by the end of March and points out that the market leads ahead of the actual health situation; in other words, the market is down now before we really know how bad things are and will also go up before things start getting noticeably better.
He pointed out to me that the media usually turns to financial expert Warren Buffett when wanting to know about the market, and no one has heard from him yet. Hal feels this is likely because Buffett is seeing this time as a great buying opportunity and knows that, if he said so, the discounts at which he is currently able to buy would be greatly diminished. I think that’s a great theory, and it points to the fact that our economy will recover from this outbreak.
As always, we are here to consult with you on business decisions and the impact that they have on your financial situation. While we are in the midst of a busy tax season, please don’t hesitate to reach out to us if you need help strategizing ways to get through this situation, and we will be happy to schedule a phone call or video conference with you.
Pine & Company CPAs is here for you and your small business.
God has a great and perfect plan with all of this; of that I am certain. Someone sent me a funny text yesterday that said something along the lines of: “If God really does plan for everything that happens in this world, He must be a bad planner.” While that text gave a good laugh, I couldn’t disagree with that statement more. We don’t know God’s plan, but we can be certain that it is perfect and good, even though we don’t currently see or understand how right now.
Please take comfort in the fact that this nation and its economy will recover and, by avoiding any rash business decisions, your business will as well, Lord willing.