Category: Accounting & Financial

There’s been a lot of news about layoffs due to the coronavirus outbreak. Scandanavian Airlines laid off around 10,000 employees temporarily. The number of employees laid off is nearly 90% of their staff. MGM Resorts immediately let some staffers go and said it would furlough workers and begin layoffs over the coming weeks. The Port of Los Angeles said they let go of 145 drivers after ships from China stopped arriving.

But small businesses are taking a much harder hit. As Americans have practiced safe social distancing and pulled back from daily routines, consumer spending has dropped. And local shutdowns have forced many small businesses to close their doors temporarily. And more are grappling with the fact that they might not make payroll as a result.

No business owner wants to let employees go. After all, 8 in 10 business owners say they care about their employees like family. And 1 in 3 has used their own money to cover payroll in the past. They’ve taken financial hits, so their employees didn’t have to, according to a 2019 survey of construction business owners. Business owners are well aware of the financial implications a layoff could have on their employees, their business, and their reputation. But many don’t have a choice. Thankfully, business owners have alternatives to explore.

8 alternatives to employee layoffs

1. Eliminate extravagant costs immediately

That means no more team lunches, coffee runs, or nonessential office supplies. Explain to your team that money is tight, and you have to make some sacrifices. Get rid of unnecessary costs before you consider getting rid of your people.

2. Lower your overhead costs

For many businesses, overhead costs are a major line item. Think hard about how you can reduce your overhead costs or eliminate them for the next few months. Scale back on your marketing budget. Double down on your online marketing efforts. Search for new ways to continue serving your customers during this time.

If you’re a restaurant, consider offering curbside pick-up or delivery services. If you sell products, ramp up your online presence and appeal to your loyal customers. If you sell services, now might be a good time to offer a great deal on gift cards. That way, money will still flow in, and you’ll have a long list of customers ready to contact you when the trouble passes.

3. Consider cutting wages from the top

If you can afford to pay employees before you pay yourself, even at a reduced rate, do it. Ultimately, your financial sacrifice pays off in employee loyalty and your business’s reputation.

4. Apply for a grant or low-interest loan to cover payroll

Consider applying for a small grant or loan to mitigate your revenue losses and carry you through the next few months. The Small Business Administration is offering disaster assistance loans up to $2 million for small businesses affected by the coronavirus. Business owners can use these low-interest loans to pay off debts and bills and cover payroll. Facebook even announced they’ll be offering $100 million in cash grants and ad credits for up to 30,000 eligible small businesses.

On a state level, New York, California, and Washington have committed to offering small businesses encountering cash flow problems financial assistance. And more states are likely to join them. Check with your local governor’s office for the latest news and updates on state-specific assistance.

Several banks, including Capital One, Citi, and Wells Fargo, have issued statements saying they’re willing to work with customers experiencing financial difficulties. They’re waiving service fees and donating to public relief efforts.

5. Furlough employees

During a furlough, employers take workers off the payroll, but workers still receive healthcare benefits. In many cases, employees are also eligible to apply for unemployment pay during a furlough.

6. Enforce employee sabbaticals or leaves of absence

Employee sabbaticals can be either unpaid or paid at a much lower rate (i.e., 50% of a worker’s salary). Employees on sabbatical or leaves of absence are still employed by your business and are guaranteed a job when they return. – Read more

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The events that have the biggest impacts on your business are often the events you have no control over. An emergency preparation plan can help you minimize the financial effects of a disaster situation and help you restart business operations quickly. Use this guide to write and implement an emergency preparation and recovery plan for your business.

Risks for business owners after an emergency

Small businesses face various risks, some of which can impact their company’s financial performance in the future.

• Physical assets: Disasters like storms or fires can damage or destroy buildings, warehouses, and inventory.
• Relationships: Customers may start buying products and services from your competitors. Some of those clients may not return once your company is up and running again. Businesses may also lose relationships with suppliers and other vendors while they’re recovering from a disaster.
• Income stream: Most importantly, an interruption in your business may prevent you from paying your staff and yourself. If you can’t restart your operations quickly, you may lose members of your staff.

You have a great deal at stake when a disaster strikes. So every business owner must implement an emergency preparation plan.

What you need for your emergency plan

Outline your emergency plan in your procedures manual, which documents every routine task your company performs. When a disaster happens, your staff can refer to the emergency plan and respond.

• A way to access user IDs and passwords: It may sound simple, but everyone in your organization needs access to a single location for all user IDs and passwords. Your business may use dozens of systems that require this information, so your staff needs quick access in an emergency.
• Cloud backup: You should back up your entire operation to offsite servers using the cloud. Cloud computing allows your staff to work more productively, and it can help you recover quickly after a disaster.
• A plan for working remotely: Employees may be able to work remotely using the company information on the cloud. Think through your operation to determine which tasks can be performed remotely and which must be performed on-site.
• Access to capital: Get access to a line of credit for your business, even if you only borrow a small amount to operate each month. In an emergency, you’ll need access to capital to reopen your doors. Don’t wait until you’re in a crisis to get access to cash.
• Flood insurance and other coverage: Have a conversation with your insurance agent to determine your business needs. For example, floods are the most common natural disaster in the U.S. But the typical homeowners’ or renters’ insurance policy doesn’t include flood insurance. Make sure that you protect your physical assets with the right insurance. Even if you have coverage, you may incur costs to restart your business before your claim is paid.
• Train your staff: All of these issues need to be addressed with your staff, and you should walk through your disaster recovery process once a quarter. Training your staff will help everyone take action if a disaster occurs.

When you prepare your annual budget for the next fiscal year, review your emergency plan, and make any necessary changes.

How the emergency plan works in action

Julie owns Marshall Sporting Goods, a business that sells sporting goods equipment online and at three retail locations. Half of Julie’s staff works online, and half operates the retail locations. Julie and three executives manage the business in an office attached to one of the retail shops.

Julie’s employees have access to a document with all of their needed user IDs and passwords, and the business operates on the cloud. Julie meets with her insurance agent each quarter to review her business’s insurance coverage.

If a disaster impacts a retail location, the operations manager refers to the emergency plan that instructs him to notify every worker by text and email. Each store location has an agreement with a nearby retailer where the staff can seek shelter in the event of a store fire. In the event of a tornado, the staff at each store location follows a procedure to move to a basement area with emergency supplies. Julie’s operations manager checks on their supplies—including weather radios, batteries, and freshwater—each month.

Julie’s staff works with the store manager to secure the building and assess any damage. Then Julie notifies customers about store closures via email, social media, and the company’s website.

Once Julie and her managers determine how long a store location will be closed, they attempt to staff store workers at other retail locations. The marketing team reaches out to existing retail customers by email and offers to fill orders online. Julie also contacts her insurance agent to file any needed claims. – Read more

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