Why dual-mode business planning is vital in the time of coronavirus

John S. Stoner, BridgeTower Media Newswires

The coronavirus pandemic and resulting mitigation efforts have had an historic and unprecedented impact on companies and organizations around the world. It seemed like overnight we went from "business as usual" in a stable and growing economy to severe disruption in an economy ground to a virtual halt. Businesses without the option to work or deliver services remotely have watched their revenue streams dwindle, and in some cases, vanish completely. Even well-established businesses with proven models, documented contingency plans and risk management strategies face significant challenges.

Since the start of the pandemic response, most owners and executives have been in fire-fighting mode, trying to get their arms around day-to-day challenges and the fundamentals necessary to stay afloat. As emergency funding begins to flow from federal and state government relief measures, it is equally critical to focus on scenario planning as it relates to people, process and profitability over the longer-term. This dual focus on present needs and long-term planning can help businesses successfully adapt not only to the current crisis but also the yet-to-be-defined new normal that awaits. Below is a guide through short and long-term impacts and corresponding areas of focus for business planning.

Short-term impacts

Business closures and significant loss of revenue have resulted in employee pay cuts, layoffs and furloughs. A large segment of the region's workforce is simply unable to work due to the coronavirus disruption and emphasis on personal health and well-being.

The federal government has responded with unprecedented financial relief provisions. Chief among these efforts is the Payroll Protection Program (PPP), which provides loans to qualifying small businesses. PPP has a loan forgiveness feature designed to incentivize businesses to retain and rehire their employees and restore compensation levels for a 60-day period after receiving the loan. The intent is to avoid overburdening state unemployment compensation systems.

Short-term business planning

Cash flow monitoring and forecasting are essential to successfully navigate this crisis. A clear understanding of cash resources, borrowing capacity, revenue and expense activity and projected future results will help owners and executives reassess the situation and make informed management decisions. This "current state" analysis will also help pinpoint eligibility and need for other government relief measures for businesses, employees, unemployed individuals and taxpayers.

While there are still many unanswered questions related to PPP loan forgiveness computations, businesses can take important documentation and record-keeping steps now to substantiate eligibility, including:

- Gathering the appropriate data

- Evaluating how workforce changes during the 60-day measurement period impacts payroll spending

- Properly accounting for and documenting qualifying expenses that must be reported to PPP lender

Longer-term impacts

COVID-19 will fundamentally alter standard business practices, human interaction in and out of the workplace and consumer preferences, all of which will result in a new normal. While there is no way to know what life and business will look like on the other side of the pandemic, business leaders can take a small measure of comfort that competitors, customers, prospects and vendors are all experiencing similar upheaval and hardships. The recognition that we're all in this together and all on a level playing field is one that can be easily overlooked amidst the isolation of social distancing.

Moving forward, a partial or full re-engineering of existing business models may be necessary and could result in benefits such as operational improvements, better use of technology, improved workforce utilization and new innovations or strategies.

Longer-term business planning

Scenario planning and longer-term financial forecasts will be needed to support any required adaptations or re-engineering. These exercises also help owners and executives understand likely outcomes for their business against different assumptions and conditions and offer a realistic best case/worst case perspective for the foreseeable future.

Reevaluate any strategic plans developed prior to the pandemic, as objectives and timelines require alteration or complete overhaul. Also, consider how the company's mission and vision holds up to the new normal it should reflect lessons from the COVID-19 fallout and response to the disruption.

Operational planning will be required to implement the government's phased approach to economic and social reopening. Owners and managers must be sensitive to consumer confidence levels and develop a cost-effective game plan to resume their business safely and align operational capacity with customer demand.

Many of the new government relief provisions are ambiguous and complex, so it is best to consult with a business advisor or expert to ensure maximum benefit and regulatory compliance. Businesses may have internal resources to handle cash flow forecasting and scenario planning, but outside assistance and independent feedback is important to provide a reality check and challenge institutional biases or habits.

Time is always a precious commodity, but now more than ever, businesses that devote equal attention to short and long-term impacts and planning will be better positioned to survive disruption and chart a course for future sustainability.

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John S. Stoner, CPA, CVA, is a partner in the Consulting Services Group of RKL LLP in Lancaster. Stoner has more than three decades of public accounting and advisory experience across a wide range of industries including healthcare, advertising, manufacturing, professional services and not-for-profit. He can be reached at jstoner@rklcpa.com.

Published: Fri, May 01, 2020