Given the unprecedented economic downturn, CFOs and accountants are spearheading strategies to help shore up their organizations’ finances. While The CARES Act and Paycheck Protection Program (PPP) have both been a boon to businesses big and small, the ongoing lockdowns are weighing heavily on everyone.

With so much uncertainty about the future, it is incumbent on the strategic CFOs and Company Controllers to take the helm and help navigate the ship through the storm.

Here are critically short and long-term strategies you can implement to come out on the other side in a strong position.

Manage your liquidity and debt

Managing your liquidity buffer during this time is paramount, particularly in the instance of highly-leveraged companies. It’s essential to make sure you know of and use every tool you have at your disposal:

  • Check your business interruption insurance policy

  • Implement an emergency budget

  • Apply for PPP, EIDL, or other low-interest government loans

  • Check your state programs as many of them have different plans (i.e., California’s tax relief program)

The CARES Act has provisions that allow businesses to apply for debt restructuring with creditors without falling under the category of a Troubled Debt Restructuring (TDR). However, these measures don’t currently mitigate the Federal tax implications of a significant modification to the terms of a loan. Now, the IRS and the U.S. Treasury Department have not provided guidance that will relieve issuers and holders of outstanding debt instruments from severe tax consequences that could arise as a result of the widespread forbearance and loan payment accommodations related to COVID-19.

For more information on this process and how to best mitigate tax implications, read our related article on California Debt Restructuring Under The CARES Act.

Many businesses have also taken advantage of PPP Loans to keep staff on payroll. A PPP forgiveness bill recently passed the Senate and has now triple the time allotted for recipients to qualify for loan forgiveness. Businesses can also now use up to 40% of the loan to cover rent, utilities, and mortgage interest (up from 25%). However, the guidelines for utilizing the funds are very stringent, and you can learn about the steps to take to have your PPP loan fully forgiven here.

Implement operational improvements

Some of the operational changes you can make to bolster your business’s bottom line include the following items:

  • Forecasting: Rather than models based on the status quo, CFOs should implement a scenario-based forecasting model.

  • Reduce costs: Look for any way to cut costs without sacrificing long-term growth plans. This is also the time to be re-evaluating your financing and liquidity strategies, your cash release decisions, and execute your tax planning strategies.

  • Diversify procurement: Diversify your supply chain and lock in critical contracts and drive new bargains.

  • Asset Management: Determine which of your assets can be disposed of, and if you can afford to, now is also an excellent time for strategic acquisitions.

The pandemic is also a wakeup call for many businesses who have not yet made a shift towards modern enterprise resource planning (ERP) solutions to begin doing research. These solutions use artificial intelligence to pull relevant data across all segments of a business to provide a real-time overview of the health of a business. It also empowers CFOs to spend less time on financial stewardship and more time on strategic analysis and planning.

Some CFO responsibilities that are transformed by being a data-agnostic business include the following:

  • 360 View of Accounting Data: Allows a CFO to view real-time procurement, invoicing, and cash flow simultaneously.

  • Improve Controls: Systems that include audit tracking and financial oversight to reduce financial errors and ensure the accuracy of all accounting data.

  • Financial Planning: Data from various operational components of the business provides business cases for cash management, borrowing, restructuring, equity raises, etc.

  • Real-Time Compliance: ERP reporting provides an investigative interface that helps ensure tax compliance and remediate issues.

Communicate, communicate, communicate

The COVID-19 pandemic amounts to a crisis, and your communications with both internal and external stakeholders should reflect this. You’ll likely be having near-daily calls with the executive leadership team. The frequency that you hold status calls with investors should increase, and you should be laying out the concrete steps being taken to deal with the financial crisis.

It’s essential to have a game plan for both short term survival and how the company is poised for growth long term, and be able to communicate that succinctly.

California businesses look to Greenough Group to manage their COVID-19 loans, accounting, and expenses

The COVID-19 pandemic has a lot of moving parts, and financial policies are continually shifting. Though some lockdowns are being eased, there is no telling if we’ll see further waves of illness, or when we’ll be able to reach a state of normality finally.

Along with your pre-existing business loans, you may also be juggling your Paycheck Protection Program loans or SBA Disaster Loans. With so much financial uncertainty, having a part-time accountant or CFO with decades of experience provides much-needed stability.

Greenough Group’s CFO consultants can help you manage your debt restructuring, and assist you with the following services during this trying time:

  • Financial and accounting oversight and management

  • Managing employee layoffs, furloughs or salary reductions and the associated finances

  • Managing finances to meet the requirements of an SBA Disaster Loan or PPP Loan and The CARES Act

  • Uncover and implement novel ways to cut your expenses

  • Documenting all loan expenses

  • Fielding your employees’ questions about financial matters

  • Updating employees on the rapid changes to the laws