COVID-19: 5 Key Accounting Considerations
Businesses face unprecedented challenges due to the COVID-19 health crisis. Business owners must be proactive to analyze their current situation, seek resources, and prioritize a plan of action to protect their cash position and workforce. Now, more than ever, it is critical to have a clear picture of your current financial position to make quick decisions in a rapidly changing environment.
Management should prioritize keeping accounting records up to date even when typical business operations are disrupted. Transactional data generates important data points and the reporting manager will need to appropriately plan and make informed business decisions. Key considerations include:
- Increase the frequency for processing transactions and reconcile your bank account daily for access to more timely and relevant information to diligently monitor your cash position. Explore the functionality of your accounting software to automate and report transactions in real-time. Many software applications allow for direct sync with your bank and credit card accounts to automate the transaction flow and eliminate the need for manual reconciliation.
- Review and analyze your Accounts Receivable and Accounts Payable aging reports. These standard reports identify outstanding customer balances and vendor commitments. This will be the starting point to drive critical conversations with your customers and vendors to assess expected cash inflow and outflow.
- Loan applications require the disclosure of financial information. Having information updated and at the ready means, you can move more quickly to pursue financing.
- Set-up new general ledger accounts to segregate COVID-19 related expenses from typical operating expenses. Reach out to your payroll service provider to understand options for tracking paid sick leave and family leave wages that may qualify for tax credits under the Families First Coronavirus Response Act.
- At this moment, using the information available to you and taking thoughtful action to ensure your company’s survival is the highest priority. When we emerge from crisis mode, identify any gaps in your accounting processes that may have made it difficult to obtain necessary information and metrics timely. Evaluate cloud-based accounting and other software applications such as Bill.com and Expensify for the automation and efficiency they can bring to provide timely access to data.
The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.