COVID-19 has brought about a lot of changes, and changes are likely to continue as time goes on. We may see gradual re-openings and re-closures as governments try to balance the health of the economy with the health and safety of people. There are many accounting considerations for businesses these days, too many to enumerate in this short article, so we’ll do a brief overview of some only:
Business growth is heavily dependent on that business’ ability to secure financing in the form of loans, arrangements with suppliers, and other contracts. During a recession, lenders may become more reticent to lend, and borrowers may not experience the growth that they’d expected, making it difficult for them to meet their obligations. During this time, it’s important to establish which relationships are most important to you, and which loans to prioritize.
Modifying your business plan is a good idea right now; we are, collectively, in a “worst case” scenario (aside from the few businesses who have seen their bottom line increase as a result of the pandemic). Growth will be slow, if not non-existent, and you might even see shrinkage in your bottom line. Make sure potential lenders are aware of this – honesty, as always, is the best policy.
There are some great programs that have been introduced by the federal government in an effort to shore up businesses during this pandemic. They range from deferred income tax payments to interest-free loans. These programs all have a variety of tax and accounting implications – to understand them in detail, it’s best to speak with your tax accountant in Winnipeg.
Businesses who are looking to understand what government benefits may be available to them will be well-served by an online tool developed by the Government of Canada. Through it, you can find support based on the province your business operates in, your industry, the number of employees you have, and other variables.
During this time, you may face difficult decisions regarding your employees; when businesses face a drastic drop in sales, it can become impossible to pay salaries. The government has attempted to help out this problem with the Canada Emergency Wage Subsidy, which will pay a portion of your employees’ salaries if you meet a number of conditions.
Should you opt to lay off employees, it’s important to remember that finding new employees when the pandemic is over will come at a cost – hiring and training new staff can be cumbersome. There will also be significant changes to your accounting if the number of people on your payroll drops. When you’re facing a number of changes to your business, consulting with an accountant is an excellent idea; they’re trained to help you find hidden costs and benefits to guide your decision making.