When things are rough, being self-sustaining for an extended period is deeply important. Rachel Daddesio of Montgomery explains why being a going concern is vital.
With how the coronavirus has affected businesses across the world, especially in the United States, many businesses are questioning whether they can continue with their status as a going concern, being able to be self-sustaining until this blows over. Rachel Daddesio of Montgomery discusses how things are going for businesses, as well as some safeguards which may be implemented to help them out.
Rachel Daddesio of Montgomery: How has the Coronavirus Affected Going Concern Companies?
The coronavirus has been a major difficulty economically, especially to smaller businesses that do not have the cushion that larger ones do. A going concern company has a lot of strength during this, but it’s also important to note how unprecedented this situation is. As Rachel Daddesio of Montgomery notes, going concern companies are being taken off guard more than normal. One of the best approaches to take, the SEC notes, is to be more forward-thinking, due to the aforementioned unprecedented nature, and that historical information is less relevant than it used to be. Some companies have been hurt more than others; travel and dining have taken quite the beating, and nonessential businesses, such as GameStop, suffered quite a bit.
Caution goes a long way, Rachel Daddesio of Montgomery notes, and you should speak to consultants about the financial health of your company through financial accounting. It’s better to know what’s up now than ever. Management must take charge of this, as preparing financial statements will help shareholders as well as the employees of your business, all of whom will have a concern about the continued sustainability of the company. The assessments made must take into account many things, ranging from what we already know to what may come to pass over the next year or so, while being required to disclose any uncertainty regarding the sustainability and contingencies that exist or may exist to maximize the sustainability. Always make sure to have people on staff who can help you better understand the feasibility of these potential methods and contingencies. Rachel Daddesio of Montgomery also notes the importance of clarity, ensuring that the relevant parties understand why the assessment is the way it is. This disclosure is not set in stone; Rachel Daddesio of Montgomery points out as circumstances change, you may need to change the assessment in turn.
While larger businesses have a more pronounced financial cushion, the process is notably more complicated, whereas a smaller business has fewer resources but has less to assess. Thankfully, there are systems in place that seek to “equalize” the situation, Rachel Daddesio of Montgomery notes. The CARES Act, for instance, has a loan program to help small businesses, including a Paycheck Protection Program loan which ended just recently, offering to help retain employees during trying times. An Economic Income Disaster loan, meanwhile, helps companies meet operating expenses, though not payroll expenses. The Main Street Lending Program, meanwhile, is expanding to accommodate more businesses than before, due to the pandemic. These are just a handful of options available. Whatever path you take, make sure to do it concisely and accurately, to ensure that everyone is on the right page and that all ducks are in a row, Rachel Daddesio of Montgomery recommends.