Millions of Small Businesses Could Close Due to Coronavirus

In a sudden change around the world, many businesses were forced to close their doors because of the COVID-19 outbreak. These changes in commerce have had an undeniable impact on the economy, with millions of small businesses struggling due to a lack of revenue.

Many businesses shut down for weeks because of local stay-home orders from state and county government officials. At the same time, certain essential businesses have been busier than ever trying to keep up with the demand. Everyone has been forced to change the way business has been done, and every industry has been affected by the economic response to the pandemic.

Small Businesses vs. Large Corporations

Even though large corporations are struggling, it appears that small businesses are taking the brunt of the economic fallout. When a mom-and-pop store closes their doors for a few weeks or months, they don’t have the cash reserves to cover overhead costs without revenue. Many small businesses feel like it is an inevitable ticking time-bomb… struggling to hold on in hopes that an economic recovery will be enough to keep things afloat.

According to the Chamber of Commerce, a recent poll said that 24% of small businesses (1 in 4) are two months or less from permanent closure. 11% (1 in 10) of the small businesses that responded to the poll indicated they were a month away from going out of business.

The temporary shutdown in response to COVID-19 could be the final tipping point that makes it impossible for small businesses. These local companies were already competing with online giants, and many consumers have turned to internet shopping even more to minimize their exposure in local stores.

Government Support for Small Businesses

The federal government has implemented stimulus plans to not only support families, but also provide the immediate care needed for struggling businesses. Even though trillions of dollars have been approved through the original stimulus package and follow-up support funds, it’s still not enough to help all of the small businesses that have been struggling. Franchises and corporations pulled in millions of dollars through the stimulus packages, reducing the money that was left for the small businesses that are the lifeblood of our communities.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act offers three categories of provisions. If your small business is struggling or you are an individual who has lost income, then you might consider accessing the funds offered for unemployment and more. Small businesses can benefit through several details of this stimulus act:

  • 90-day delay for federal tax payments and 2019 filing
  • Temporary cancellation of payroll taxes
  • Small Business Administration (SBA) disaster loans

This support is designed to reduce the risk of small businesses failing because of the COVID-19 outbreak. Keep in mind that the funds only offer short-term solutions. All businesses need to be proactive in finding ways to adjust to the “new normal” – helping their customers feel comfortable coming into the store to shop.

Current Challenges and The Future Ripple Effect

The thing that small businesses need to know is that it won’t be “business as usual” as locations start to open up again. Consumers are hesitant to spend too much time in public spaces. Plus, unemployment has reached levels that we haven’t seen in a long time. As millions of people are unemployed or underemployed, families don’t have as much cash available to spend. This causes the economy to continue a slow progression in the future.

If small businesses can hold on for a bit more time, will there be enough spending to bring the business back to the previous levels of success? The economic impact will have a long-lasting impact, which means that many of these businesses could be facing the challenge of bankruptcy and/or closure in the coming months. Even with the available stimulus money, it’s not enough to make up the difference.

A recent report shows that 3.5 million businesses are currently in danger of permanent closure. Only time will tell how business trends will play out in the future.

How to Protect Your Small Business

Right now is the time for strategy and innovation so you can keep your small business going in the current challenges. More than ever, you need to be thinking outside the box to serve the needs of your customers. A little bit of creativity can go a long way to keep your doors open and help your small business weather the storm.

Here are a few things you might consider if your small business is currently struggling due to the COVID-19 closures:

  • Virtual Offerings: Is there a way that you can interact with customers through an online setting? It might be a good time to implement virtual customer service or online shopping options. Even if you don’t have a website with this capability, curbside pickup can be a good solution. Some stores are offering online orders or phone orders, with the purchases brought to the customer’s car in the parking lot.
  • Go Digital: Even though it is often said that “cash is king,” many businesses are choosing to go digital with all payments to minimize the spread of disease. Credit cards and mobile payment apps are safer than handling cash. If possible, have the customer handle the payment without the need for a cashier to touch the card or the phone. If the payment needs to be handled by an employee, consider a team approach for managing the product and payment. For example, one employee runs the register while another employee brings out the customer’s food – with no cross-contamination between the two.
  • Business Assistance: Don’t be afraid to ask for help if you need a little support to get through the hardest times. The Paycheck Protection Program (PPP) loan could be a way to help you maintain overhead costs. These stimulus offerings were created for a reason, so you might as well take advantage of your options while they are available. There are a few approvals and hurdles that need to be handled, so don’t delay in getting started as soon as possible.
  • Communication: Your customers need to know what you are doing in response to the pandemic. Put up signs at the store to show that you are still open and offering curbside pickup. Send out emails and social media posts to tell customers about the available options if they would like to shop. Talk to current customers to see if there is anything else that you can do to support their needs – and be willing to adapt where it makes sense.
  • Cash Management; More than ever, it is critical that all small businesses manage cash flow. If you don’t already have a good accounting and bookkeeping system, then implement a new software program as soon as possible. You need to know how much money is available, where the money is going, and what you need to do to prepare for the future. A good accounting team can be an invaluable resource to help with tax strategy, cash flow management, and more.
  • Consider Inventory: If all of your cash is tied up in inventory, then it might be hard to keep up with the monthly payments. Instead of maintaining the same ordering schedule, it is important to anticipate how shopper’s habits are changing. Adjust your inventory management to provide the highest demand products, while minimizing inventory on things that might not be in demand right now. Additionally, keep in mind that trade routes are affected across the world, which could delay your shipping timelines. Be proactive so you don’t end up in a situation with interested customers but no products to sell.
  • Networking Options: Are there any local networking options to bring in business? Some communities have small business programs to highlight services that are still open during the pandemic. Or, you might find a way to partner with other companies in the area to offer package deals that will bring customers through the door.

Your small business can make it through these hard times if you are innovative and creative in the ways you are moving forward. For some industries, the COVID-19 pandemic could be a turning point to help them reach higher levels of success in the future. The key is to not sit back to see what happens. Instead, it’s time to get rid of systems that are no longer working, while looking for ways that you can provide more value to your customers.

Professional Small Business Accounting

Our team at Easier Accounting understands that many small businesses are struggling during this time. We offer account and bookkeeping solutions to help with your cash management and financial strategy. These services are more than basic accounting – we strive to provide a personalized approach and ongoing support for your company.

If you need help with the numbers, then contact the small business accounting experts. Our outsourced services can be an important part of helping your business succeed right now while preparing for the future. Call for a consultation: (888) 620-0770.

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