How to Prepare Your Business for the Second Lockdown

 

As Ontario faces another lockdown on Boxing Day, businesses have a short period of time to prepare for the financial health of their operations and for the wellbeing of employees. While the lockdown is certainly going to be financially taxing on many SME's, the silver lining is that this is not the first time businesses have been through the challenges of either closing completely or operating with restrictions in place. 

If you haven't already, now is the time to lean on your experience over the last year to ensure that you are as prepared as possible for the second lockdown. Here are five tips to help you do just that:

1. Look back at your response to the first lockdown

A successful business is introspective. It's important to look at what went well, and what didn't during the first lockdown and make changes accordingly this time around. Keep in mind that what went well from your perspective may differ from others. Take the time to talk to your employees, partners, suppliers, vendors, and customers to talk about what worked and what you should do differently.

2. Expect and anticipate shipping delays

There have been more shipping delays than usual this time of year because of increased online holiday orders as consumers bunker down and stay home. That may mean that essential business goods or shipments out to customers are taking longer to arrive.

Be patient and remember that essential workers in the shipping and trucking industries are working harder and putting in extra shifts and long days. Despite their efforts many companies are still struggling to keep up with demand and make deliveries on time.

From delivering essential food items to the COVID-19 vaccine, those in the trucking and freight industries are giving up time with their own families and putting themselves at risk. This essential and thankless job is keeping Canadians fed, comfortable and secure and allowing business in Canada to continue. The best way to deal with these delays is to know the reality of the situation and place orders well in advance of when you need them.

3. Identify bottlenecks

Procuring and delivering goods may be one bottleneck to deal with during lockdown, but are there others? Common bottlenecks that can put your business at risk include staffing and cash flow.

Are you ready to cover shifts of employees who may be unable to come to work because they've got symptoms or are waiting for a COVID test result? Have a plan in place and trained staff on standby just in case.

4. Get Your Finances in Order

Many businesses across the country have been relying on government subsidies and programs to continue to operate. That may help you get through the lockdown, but it's not a long-term strategy. For businesses with reduced hours (or those who will be closed), take advantage of the time afforded you and get your finances in order. In an article for the Chartered Professional Accountants of Canada, business consultant Eitan Dehtiar suggests that businesses "look at an overall cost reduction plan, trying to transition as many fixed costs as you can to variable costs so that you have the ability to turn off the tap and adjust."

In addition to reducing costs, advice from EY (formally Ernst & Young) includes evaluating short-term liquidity and closely monitoring cash flow to stay on top of potential shortfalls.

5. Remember, Cash is Always King

Cash flow is always critical to the health of a business, but even when business is good, if customers don't pay what's owed, things can go sideways. Even businesses that have never missed a payment with their bank, like Carl Gatt, owner of BLB Transport Group, may be denied credit when it's needed.

Earlier this month, FreightWaves interviewed Gatt, who shut his trucking business down after a financing dispute with his lender, RBC Bank. Gatt, who is planning on retiring, ended up paying his drivers from his own personal savings after his business accounts were shut down as the dispute went to court.

Luckily for Gatt's drivers, RBC Bank and the courts agreed that he could sell his business to Ready Go, who agreed to buy the company's assets and hire most of Gatt's employees. "When I met Carl, I saw how much he cared about his employees," Ready Go owner and General Manager Ajay Virk told FreightWaves, adding that "we didn't want to see these guys losing their jobs."

While Gatt's story ended on a somewhat happy note, this isn't always the case. Now, more than ever, it's important to get a hold of your cash flow, ensure your accounts receivable are up-to-date, and have a plan should any government programs or subsidies you're using disappear.

Relying on your bank for credit is risky. Instead, consider invoice factoring as a safer way to ensure your expenses are covered. With invoice factoring you'll get paid instantly for your invoices so you can pay your employees and cover expenses. Give the team at J D Factors a call to learn more. Our contactless process means we're able to help your company get control of your cash flow, even during the lockdown.

 

 

 

How Accountants Can Use Factoring to Simplify Tax Season for Clients

Many small and medium-sized enterprises (SMEs) are first drawn to an accountant's services when they realize they have made a mistake on their taxes or are facing an audit. As an accountant, you bear the duty of telling your client the bad news, that they are in tax arrears. It’s only natural to want to help them out of this unfortunate situation.

When you’re helping these clients fix mistakes in their own accounting process and find ways to pay their back taxes, factoring may be a great option to help achieve a positive cash flow and assist with tax arrears. Here’s how:

Pay the CRA with Money Owed

Factoring allows SMEs to immediately convert their accounts receivable into cash and allows them to get the money they are owed immediately after sending out an invoice. This predictable, positive cash flow can give your clients the ability to pay their owed taxes right away, preventing them from incurring more penalties from the CRA.

If your client has had difficulty putting aside and remitting HST in the past, J D Factors can help. We can only hand over the gross amount of your client’s invoices, retaining the HST. Thus, your client never has the HST on hand and does not need to pay to maintain a separate account for it. This saves your clients time, money and hassle.

Of course, if we hold back your client’s HST we will remit it to the government on whichever schedule they prefer, or are mandated to use, whether yearly or quarterly. This saves your client the time and hassle of making these remittances themselves. They won’t have to wait at the bank and won’t have to worry about forgetting to remit.

Payroll and payroll taxes like the Canada Pension Plan (CPP) and Employment Insurance (EI) are other major hurdles for many SMEs. Those who struggle to keep a positive cash flow and who can’t make payroll will fail to retain their top talent. They will also struggle to remit CPP and EI on time. In fact, these non-remittances carry the highest penalties.

Why Should You Recommend Factoring?

Your business clients look to you as a financial guide, and the more potential solutions you have in your pocket, the more value you can offer them. Factoring is one option that your clients may not have heard of, and that can benefit your most vulnerable clients, those in tax arrears.

Factoring offers a win-win, benefiting you as an accountant, too. You won’t have to deal with calls from the CRA if your client fails to remit their HST or payroll taxes because J D Factors will be submitting these funds on time for them.

J D Factors is also dedicated to working with companies that are unable to gain traditional financing from a bank. We can help your client’s business stabilize again. If they recover from their financial troubles, they’ll be around for many years as your loyal client.

Reach out to us today to learn more about J D Factors and how factoring can help your clients.

"my customers really are the best... I think"

Small business owners would like to think that their customers are never going to leave them high and dry because of the relationships they develop and the comfort level they have with their customers. They  believe they will  always get paid and be able to deposit their hard earned cash without issue or delay because the customer would never "not pay them".

However a lot of business owners ignore the warning signs of trouble from their customers such as slowed payments, ignoring and or not returning collection calls. These warning signs are sometimes ignored because they are friends, some because of a long standing relationship. While other business owners simply can't afford to put collection pressure and risk  loosing  a key account while holding on to the hope and belief that they will not be taken advantage of.

No business owner ever enters a business relationship  thinking that they will not be paid. This however is happening  more often then not in this current economic environment. Even if you take the steps to check credit references or take a down payment you are still  not guaranteed to be paid. It only takes one bad credit decision or one bad debt to sink the ship and put your small business in jeopardy.

If only there was a way someone could guarantee that you will  be paid for your goods and/or services eliminating all future bad debts forever. Luckily for small business owners there is.

Using JD Factors  non recourse factoring programs allows you the peace of mind that you will never have a bad debt again. JD Factors will not only provide you with working capital, it will provide you with the security and the peace of mind required to fully concentrate on growing your small business.

I welcome all  questions and comments. If you would like to protect your businesses from future bad debts, please contact me to learn more.

Christian Hernandez

289-242-3178

chernandez@jdfactors.com