In February 2020, economic indicators seemed stable with positive business and consumer sentiment. But then the world was hit with a global pandemic that completely changed the way this country and the entire globe does business.
Contractors have had to deal with stop work orders or even terminations of a project because the area where the work was being performed was too risky or expensive to operate in. Additionally, when the pandemic first hit and strict travel restrictions were put in place, supplies and services became more scarce and expensive, which negatively impacted a contractor’s ability to maintain an existing schedule or stay within budget.
This continues to be an issue and many government contracts continue to be delayed because of concerns regarding health and safety. These delays can directly result in cash flow challenges for companies that are looking to keep employees in place while they anxiously await new contracts to take effect.
Like many, what lies ahead for government contractors remains unclear. With that said, no matter the situation their business is in, below are steps that contractors can take to help their business survive this difficult stretch:
Ensure that your loan is current: If your company has a business loan, then it is essential that you keep the loan current. Keeping the loan current may end up making a crucial difference for contractors applying for access to relief lending programs.
Understand your cash flow: Now, more than ever, it’s important to understand your company’s cash flow. Analyze what lines of credit and lending options you have as well as what opportunities you have to take advantage of applicable business insurance.
Prioritize execution and planning: Contractors must continue focusing on execution and planning. The first priority needs to be successfully operating your business over the next several months. Also, focus on implementing business continuity plans to safeguard your employees and stakeholders. Do what you can to ensure there is limited disruption to your operations.
Reforecasting budgets: Analyzing short-term budgets and long-term financial plans takes precedence now. Instead of reforecasting these budgets every so often, look at these regularly, maybe even as often as weekly. When looking through these budgets, understand any possible liquidity constraints that the business may have moving forward. Take any necessary measures to tighten up your financing in the event that this pandemic leads to an even more drawn-out economic downturn.
Cybersecurity is key in these times: At this point, your business may be an exclusive remote working environment. With this working situation, it’s important to remember items like cyber and data security, including the actions of your employee’s spouses and children. Threats to cybersecurity should be taken seriously.
Leverage technology, smartly: With the proper safeguards in place, contractors should use technology to their advantage. Given the new realities this pandemic has created, business owners should throw out old patterns and use assets that can be helpful to them and their employees moving forward.
Mergers and acquisition process: The world looks different for contractors who were beginning to work on monetizing their business through a mergers and acquisition (M&A) process. Once your business becomes steady and you have the capacity and time to manage effectively, it is necessary to reevaluate your pre-M&A planning work.
The appropriate course of action for each contracting company is complex, but your team will be measured on how you navigate this chaotic environment. If possible, it is encouraged that you track any coronavirus related impacts on your business like contract delays, overtime costs, sick leave, supply disruptions, increased transportation costs, etc.
Additionally, it is important that your company continues to review the latest Paycheck Protection Program rules and regulations put in place by the Small Business Administration. These regulations can determine what financial assistance opportunities are available for your business.
Eric Thompson, CEPA, is a financial advisor at Barnes, Thompson & Singor, UBS Wealth Management USA.
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