Now that we are several months into the economic crisis associated with COVID-19, many small business owners feel at a loss for how to make informed decisions about whether the business needs economic disaster recovery assistance – or further assistance! – and how to cover expenses moving into the future. Many have also discovered that the bookkeeping practices or systems that they had in place prior to the crisis were not adequate to help the owner understand costs, pricing, future cash flow, and profitability. Thinking through these matters is something with which Business Consultants at America’s SBDC Iowa can help. Our Business Consultants are knowledgeable about core elements of business management, educated about recovery assistance programs, understand what small businesses are experiencing and want to help.
Here is an example of how the financial part of a conversation with an SBDC Consultant would
start during COVID-19 response and recovery:
ï‚· How are doing right now? Do you have enough cash to cover your current expenses?
Are you worried about current or future ability to cover your business expenses?
ï‚· What are your normal monthly fixed operating costs such as rent, utilities, insurance,
software subscriptions, and fixed (not variable) payroll expenses?
ï‚· What are your normal variable costs such as variable (not fixed) payroll, freight,
materials, and costs associated with sales?
 How do you pay yourself (salary, owner’s draw, distributions)?
ï‚· How much in sales do you need in order to cover your cost of goods sold plus your
operating expenses? In other words, what is the level at which you break even? If you
do not know, think about what was the last month your profit was $0 or close to it. That
should be close to your break-even number.
ï‚· How much profit do you need to be able to make in a normal year?
ï‚· In a normal year, what are monthly sales at this time of year?
ï‚· What percentage are your sales of this year compared to last?
ï‚· For what assistance (e.g., EIDL, PPP), if any, have you already applied? Have you
received any funds? Are you expecting to receive any funds?
ï‚· What will those funds cover? For how long? Do they need to be repaid?
ï‚· What other expenses need to be covered? Over what time period?
ï‚· When do you think that sales (and other activities affecting cash flow) will return to
something like normal?
A Business Consultant with America’s SBDC Iowa can also assist with putting together monthly cash flow projections based on educated assumptions about recovery. If there is a financial gap, the conversation would then move into discussion about the assistance programs, qualifications, allowable uses of funds and how to assign expenses needing to be covered to various expense buckets in order to find the right programs. If there is still a gap, the Consultant would try to figure out any other options for bringing in capital as well as strategies for reducing or deferring expenses. In the conversation, the two of you might also consider the projected impact of these options on your balance sheet. Moreover, Consultants at the SBDC can advise on how to start or improve a bookkeeping system. It is important for business owners to know how to use their system to access information pertinent to making sound financial decisions.
The team at America’s SBDC Iowa is a resource partner of the U.S. SBA and stays informed about the latest federal, state and local programs for assisting small businesses during COVID- 19 response and recovery. An appointment for confidential, no-cost business advising at one of our 15 regional centers across the state of Iowa can be requested on our website: https://iowasbdc.org To prepare for a meeting with an SBDC Business Consultant, it would be helpful to gather together recent income tax returns, payroll reports, an itemization of other expenses, and documentation of monthly sales records for this year and for last and any other information that you have that you think is relevant to understanding your financial situation moving forward.
In the meantime, for management and financial management tips during the disaster response, please see our Back2Biz Guidebook:
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We look forward to working with you!
About The SBDC and the Author
The Iowa SBDC provides no cost technical service and advice for Iowa Small Businesses and individuals looking to start a business. The 15 centers throughout Iowa are run by small business experts and counselors who have the experience and expertise to confidently help on a number of topics.
Scott Swenson is the Regional Director of the SBDC at Kirkwood Community College in Cedar Rapids. He has been with the organization since October of 2013. He has experience in business disaster recovery as well as marketing, sales, and entrepreneurship.
Dr. Laurie Pieper is America’s SBDC Iowa Tech Director. She leads the Rural Iowa Development Initiative and works with clients and resource partners around the state to develop opportunities for the successful commercialization of business technologies, products, and services.