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Salt Lake City Bookkeeping Blog

The PPP Won't Save Your Business

Posted by Matt Roberge on Nov 12, 2020 7:15:00 AM

PPP loans

No, the PPP won't save your business.

It was designed to save the economy, but not your business.

It definitely helped your employees because it guaranteed their jobs and income during some really uncertain times. And with all the employees countrywide staying on payroll, the economy dodged disaster.

But by now I'm sure the majority of those funds have been exhausted. So what now?

Understanding Your New Business Market

Business markets and environments are always changing. However, the most recent pandemic was a very large change that happened very quickly. 

COVID-19 affected every business. Some greatly benefited, some businesses were slightly negatively impacted, some severely negatively impacted, and others were devastated or made extinct. 

The old business environment that you operated in before COVID is not coming back.

I think a lot of businesses approached the PPP as a lifeline to get down the road so they could continue operating per normal. The thing is, the business environment that you previously operated in is gone and completely transformed.

Adapt, Pivot, and Forecast

Never before in my career have I gone through such a dramatic change so quickly where the ability to adapt, pivot, and forecast became so crucial. 

Most businesses went through a dramatic change pretty quickly that had some sort of negative effect on their business. Some businesses were forced to completely shut down, which obviously instantly shut off their income stream. 

Nearly every business was forced to assess their business financial situation and changes to their marketing overnight. It became incredibly important to have access to updated and accurate financial information.

I myself sat down and assessed both my business and personal finances. Luckily my books are updated every single day and I know that most businesses don't have the luxury of having updated financials at their fingertips as I did.

Updated financial reports made it incredibly easy to assess my situation, understand where things were going, as well as develop and execute a strategic plan. I also had the ability to quickly adapt when new changes or curveballs were thrown my way. 

Cash Management and Cash Flow Forecasting

As COVID continued to affect the economy one thing became clear; access to cash was extremely important.

All of a sudden the majority of business owners were obsessed with cash.

How much cash do I have in the bank?

How much cash can I personally afford to influx into the business if necessary?

How much cash can I access through my line of credit?

How much cash am I eligible for through government assistance such as the EIDL, PPP, etc? 

Cash was once again king, but cash has always been king.

It became incredibly important to size your business up very quickly. How much cash do I have? How much can I get? How will I use it to survive or even thrive? What will that look like? 

Accurate bookkeeping and financial reports made it easier to understand how to move your business forward through a pretty difficult time for a lot of businesses. Access to accurate financial information was critical. 

Making Executive Decisions

Most business owners have had to make a lot of high-level decisions in 2020; some fun, some not so fun. Typically, most business owners enjoy developing a strategy to move the business forward. As 2020 continued to unfold it seemed like there were impossible decisions that needed to be made where nothing was the right decision, just the best one given the situation.

As business owners started to get their PPP applications into the banks, accepted, and funded there seemed to be this immediate relief or calm. Then when the money was actually in the bank and able to be used everyone had to assess how best to use it.

I had business owners calling me with confusing or impossible questions.

"So Matt, I'm supposed to just pay everyone even though I am not allowed to be open?"

Shoulder shrug and confusion, because I didn't know. As stated before to the point of annoyance, there is no playbook for this situation. If there was a class in college called "Operating A Small Business In A Pandemic" I missed it. 

There was no global correct answer of what to do with the PPP money because not every business found themselves in the same situation. If you couldn't be open and take in income should you pay all your employees just to hopefully comply and receive 100% forgiveness? Sure that is one approach.

However, it may make more sense to hold on to that money as a 1% loan so that you will have capital when you are able to operate again.

2020 has been an interesting year for many business owners with a lot of learning lessons. Certainly, business owners got a solid lesson in the value of having update books.

They also should have learned how to use those books to understand cash flow, forecast where they are going, and how to make solid decisions that they have confidence in.

Do you wish you were more organized financial throughout COVID and with your PPP application and forgiveness? 

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Topics: Small Business Consulting