While we all struggle with the unknown implications of the Coronavirus on our families, friends, and business associates, there are some things a company may wish to consider doing to address the impacts of conducting business in this financially distressed climate. Here are 10 tips you may wish to consider:
1. Maintain Communication with Clients, Customers, Employees and Vendors. This is the time to cement your relationships with your clients, employees and vendors. Doing so will serve you well far into the future. Everyone’s lives have been turned upside down. People may be feeling confused, scared, frustrated and isolated. Anything you can do to stay in touch with the people who are important to your business – whether it’s just an e-mail asking them how they are doing and wishing them well, or offering assistance – may be well received and long remembered. Communicating by telephone or video conference that allows people to hear your voice and see your face will make the outreach all the more meaningful.
2. Review Your Contracts. This is a good time to ensure you understand your contracts, including the provisions addressing deadlines, notices, covenants, force majeure, and termination. Calendar the important dates to ensure you’re ready to act if need be. In particular, you may wish to confirm contract termination provisions, security for obligations, cure periods, performance deadlines, third-party obligors – like guarantors and bank-issued letters of credit – and assignment provisions. If necessary, this may be a good time to amend certain contract provisions, particularly if the counter-party is under financial duress. While it’s difficult to bankruptcy-proof a transaction, there are certain protections you may consider if a counter-party files for bankruptcy.
3. Assess the Viability of Terms in the Current Business Climate. Try to determine early what modifications you may need to make to contracts to address any financial instability that your company or a counter-party may be suffering from. This may help to foster a productive and continued business relationship with important clients and vendors. People typically do not work well or think rationally under severe financial stress. Act early to avoid that situation.
4. Be Creative. This is the time for creative approaches and solutions. The same old way of doing business may not be practical in the current climate or foreseeable future. Think about alternative ways to communicate and monitor transactions when it can’t be done in person. For instance, if you have inventory that your customers are coming to purchase, think about whether on-line selling is possible or whether you can offer your goods through some type of pop-up kiosk or window where your customers can obtain goods in a contactless fashion, without getting out of their cars or being exposed to others.
5. Be a Good Partner. We’re all in this together. The financial distress of your counter-parties may affect your financial situation. The more you can be flexible and help a counter-party resolve its financial distress the more your company will benefit by creating a relationship in which the counter-party may be more flexible when you encounter a problem in the future.
6. Take Care of Employees. The concern about revenues can become all consuming, but businesses can’t survive in the long term without their most important assets: The people who keep them operating. Take care of your employees and communicate with them as the situation continues to evolve. Honesty is the best policy, and will enhance the trust and respect you enjoy with your employees.
7. Make Sure Payroll Taxes are Paid. While it may be difficult in these tumultuous times, it’s important to ensure you’re meeting your payroll tax obligations. The consequences of failing to do so may include getting into a trust fund tax dispute. In that case, the owners, officers or directors of the company may become personally liable for company’s payroll tax obligations. The CARES Act provides some relief in terms of an employee retention credit for the employer’s portion of matching social security taxes and a payroll tax deferral, among other tax related benefits. It may be wise to contact us to discuss what financial relief recent federal legislation may offer to your company.
8. Check Insurance Policies. Make sure you understand what coverage you have and the exemptions. While at this time insurance companies may be overwhelmed and not likely to increase the scope of existing insurance policies, it’s advisable to find out where additional coverage may be needed and ask your broker when that coverage can be obtained.
9. Assess Your Equipment. This period will test the efficiency and quality of your equipment. Outdated software, hardware and web-based programs may be especially detrimental in a crisis and may adversely affect your efficiency, productivity and competitive edge.
10. Consider Government Assistance. There are many programs being offered to help businesses and employees impacted by the Coronavirus. We have published numerous blogs on the most recent coronavirus legislation, and will continue to do so as long as the pandemic is with us. We’re happy to discuss with you the provisions of federal and state law that may apply to your business.
In sum, there are a number of steps that exist that may help address and potentially ease the burden of operating a business in a financially distressed climate. Perhaps most importantly, do not feel you have to brave this all alone. We’re all in this together.