It’s Back to Bookkeeping Basics During COVID-19

Business success is strongly tied to transparency, or knowing where you are financially, and, for business owners, your financial outlook will be the basis for many of the day-to-day and key operational decisions you make. It’s my goal to revisit the bookkeeping basics that are fundamental in maintaining well-organized and accurate financial records that support your decision-making efforts.

During the COVID-19 crisis, some of these decisions have been daunting for business owners forced to ask themselves whether reductions in workforce are needed, how long operations can be maintained, or what business model changes are necessary in today’s evolving business atmosphere. With US coronavirus cases still rising, the trouble isn’t over. In Massachusetts, the Baker-Polito Administration has issued new orders, effective November 6th, placing restrictions back in effect to mitigate rising case numbers. To ease some of the stress associated with making business decisions, I encourage businesses to budget effectively, prepare accurate cash flow projections and cost analyses, and make optimal decisions in support of their short- and long-term goals.

Budgeting Effectively

Useful cash flow projections and effective cost control efforts both begin with proper budgeting. To see where you are financially, assemble a strategy team and take a look at restatements of your current year capital expenditure and operating budgets. Measure your projections and forecasts against your actual cash flow, and readjust as needed. 

In preparing forecasts, include if/then situations that allow you to plan ahead of deficits and manage any shortfalls. Consult your outside advisors as well. In working with my clients on cash flow and budgeting analyses, I also assist with budgeting for the possible implications associated with business model changes. Since the onset of COVID-19, changes to business models have become a common occurrence, as businesses must adapt alongside the rapidly evolving needs of both the business and its clientele.

Maximizing Cash Flow & Controlling Costs

You’ve heard it a million times before... Cash is king. A properly prepared budget and accurate financial records allow you to assess your working capital and liquidity needs, to determine your ability to borrow, and to assess any need to discuss lending option specifics, such as loan consolidation, renegotiation of terms, or an increase in your line of credit, with your financial institutions.

It’s equally important for businesses to meticulously keep track of expenses. Efficient bookkeeping shows where non-essential expenses are, which may allow you to reduce or eliminate expenses in certain areas. It also allows you to review your contractual obligations, from those with your vendors and suppliers to those with your utility providers and equipment lessors, and negotiate or shop around for lower fees or contract pricing, as appropriate.

It’s always best practice to keep tight control and oversight of accounts receivable and accounts payable. It becomes an even higher priority in times of economic challenge. Regularly review your aging summary reports, so you may take action if needed. Ensure timely accounting for payments received and targeted collection efforts. Some businesses have implemented incentive programs that reward customers who pay in-full as well. On the flip side, you want a strong grasp on what obligations you have going out; therefore, it’s just as important to closely monitor accounts payable. 

Planning Ahead

Keep your dialogue open with your bookkeeping and management teams, as well as with your legal, tax, and business advisors. Conduct regular meetings and check-ins, with both your in-house and outside advisory teams.  

If you do not already have one in place, take this opportunity to create a contingency plan and tighter bookkeeping controls ahead of any future issues. If you do have strategies in place, take the opportunity to find out where your plans could use improvement. The pandemic won’t last forever, thank goodness, but it doesn’t hurt to remain at-the-ready, as economic implications continue to unfold and uncertainties remain, as we do our best to move forward.  

Contact Livingston & Haynes

L&H is a leader in providing thorough, full-charge bookkeeping services. That’s why we work closely with our sister company Emerging Business Partners, Inc. (EBPI). Learn more about how their bookkeeping team can assist with developing bookkeeping and business strategies that focuses on the financial and the operational sides of your business. Together we can also help you stay ahead of the game by ensuring you understand the bookkeeping basics needed to implement your strategic plans. If you’re ready to take the next step, contact me today. 

by Steven Haynes, MBA

Steven J. Haynes, MBA, is an administrative partner at Livingston & Haynes and specializes in bookkeeping, payroll, and business advisory services for privately held businesses. Steve’s firm, Emerging Business Partners (EBPI), became an affiliate of L&H in 2007. EBPI was founded in September 1992, and, today, broadens the bookkeeping, payroll, and tax consulting services available to L&H clients.