I wanted to make sure you are enacting this accounting practice in your business as soon as possible.
How are you tracking your expenses related to the Coronavirus? Be sure to add a line item in your accounting system to track the costs incurred related to the Coronavirus. From cleaning supplies to time spent managing your team remotely to new IT expenses, you want to capture any expenses you wouldn’t normally have.
There are two important reasons for tracking. For one, if there’s government assistance or insurance available, you will be able to clearly show what expenses you had. Additionally, in the future should your financial history be reviewed, you will have a blip during this time. Now you will be able to account for it and your history can be recast.
What practices have you implemented recently? I’d love for you to share your ideas.
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Great suggestion! I would also include the following steps during this critical time for small and medium sized businesses: 1. Understand your business before COVID-19. Meaning, what was your financial state before the impact? You need to know your starting point before the impact – revenues, expenses, sources for each, etc. 2. Complete a very thorough review of your expenses, analyze what is essential (critical to your business’ mission) and non-essential. 3. Reduce or eliminate non-essential expenses. I would add that people are essential. Eliminating staff should be a very last resort. The long-term implications of eliminating staff can be even worse to your business. 4. Assess revenues going forward. That means to look at revenue sources and their likelihood of maintaining business with you. You will need to adjust your Revenue forecast downward. 5. Put it together in a new budget. It might be ugly, but a necessity. Banks will need to know your current state and future projections if you’re in need of a loan.
And, most importantly, no one is going through this alone. Help is only a text, call, post or email away.
Thank you for your timely tips Mike, really helps!
Good luck and all the best!
Great idea! I’ve done this as my accountant suggested it. I’m a solopreneur so the costs aren’t much, but these tips you mentioned are also helpful. I use an app to keep track of receipts, and I simply write a “C” on the receipt before snapping a photo. I tag it in the app, but the visual cue will help down the road.
Hi Becky;
Thanks for info! What app are you using? Genius! I’m still doing everything by paper!
Logitech 930e
Great advice Mike- I’ll add that in for my biz taxes
I love your books and found them immensely helpful. Sorry but not a huge fan of the podcast. I know you have fun with it and try to keep it light but I so enjoy direct insight more than the lighter tone of the podcasts.
The last couple of videos I think is Great Content.
Great idea. I would recommend businesses using an accounting system that has classes, tags or dimensions might use a function like this and continue using this your original GL structure. This is for two reasons. Eventually you will have to pull apart the Coronavirus GL and disseminate the data into existing GLs for income tax purposes. Secondly, tax credits and insurance claims will likely have limitations around the nature of expenses that will qualify. Save yourself the headache later and start tracking in the system but outside a new GL. I will leave you with this thought. Tracking by expense related to Coronavirus by your existing GL structure with the methods mentioned above will give you additional insight into the types of expenses you need to more actively manage during this time. In other words, your GL with a class, tag or dimension will show you where your costs are on the rise and help you recast budgets and forecasts and also help you find the rising costs you might be able to manage down. It’s keep you system simple, visual and intuitive.
This is a great tip! I will implement on my practice and my clients’
Thank you for the guild lines…very valuable and needed to keep the owners attention focused.
Brilliant and thanks for sharing Mike.
Stay safe my friend.
This is a great idea. I’m a CPA who works with small businesses. I’m going to share this video with them. I think it’s also helpful to separate revenues during this period. Obviously, some business are still thriving (due to demand) while others have come to a grinding halt. It’s also a time to pivot; offering new services/products that have been created as a reaction (I’m not talking about being an opportunist, but tailoring services to help a new pain point clients may have). These endeavors should be tracked separately as well. It’s helpful data when examining what has worked in the business and what hasn’t, allowing you to quantify the success (or failure) of reinventing yourself during a challenging time.
Excellent ideas and feedback
Thanks so much for the tip. I will be sharing this with my followers. Stay safe!
Excellent idea. Thank you
I haven’t got that far yet I am just getting started with my Company but will keep this for future reference. I can’t wait for Monday to get here so I can open Profit Account and continue to look for new accounts for my business ELITE COMMERCIAL CLEANING
This is brilliant!! Thanks so much for mentioning it. I’ll pass this on to my clients who have bigger businesses than I do and who definitely have expenses already as well as losses unfortunately.
Great idea. We will also add a line item on the balance sheet for discounts we provide to customers for early payment
We started a separate job number (ticket number, order number, whatever your business uses) to track time and expenses against this pandemic.
Thanks for the tip! I own a dog daycare and boarding business and we calculated the expected income we lost when clients who had travel plans during spring break canceled their dog’s boarding reservations. It was substantial. And future reservations continue to be canceled.
Thank you haven’t thought of this
Mike,
Great wisdom…will do it and will work with all of our clients to get on this asap.
For what it’s worth…the Seattle Times just reporting an article stating, “the typical small business in the United States does not have enough cash on hand to cover even a month of expenses if its revenues are completely disrupted, according to research by the JPMorgan Chase Institute.”
We have surveyed a large sampling of our clients and found they have around 78 days cash-on-hand in a scenario where the “faucet” of revenue were to completely shut down AND they were to operate at 100% of current expenses. Aaron Walker (and lots of other biz owners) are singing the PF praises bro.
Can I claim lost revenue resulting from the 95% cancellations in services already scheduled?
Great idea Mike, I will implement this. I have chosen to keep my furniture store open. Adjusting store hours as well as dedicating the first hour of everyday to the elderly and disabled. It is definitely a challenging time and sales are down but it is to be expected. We are pushing for more online sales and keeping our social media pages especially active to stay “top of mind” for when the time comes that life will be back to normal again.
Great Idea I hadn’t even thought of accounting for extra expenses yet. However, as an accountant, I would recommend instead of a GL account using a class to capture the additional COVID -19 Expenses, its easier to pull an itemized report with Cleaning items, remote work, etc. broken out and its easier to remove/segregate those items from the P&L for future reference.