Businesses need to keep tight control of expenses

MOSES LAKE — Small-business people need to keep careful track of their money and communicate regularly with their creditors if they’re going to survive the economic disaster caused by COVID-19-related shutdowns.

That was the advice of Ron Nielsen and Steve Burke, certified business advisers with the Washington Small Business Development Center during a statewide webinar Wednesday afternoon on how businesses can best reduce their cash flow.

Nielsen, a former small-business owner himself, said even small businesses need cash flow projections — maybe even daily cash flow projections — in order to keep on top of what money may be going in and in order to choose which bills they should pay.

“During a recession, you need to be doing this on a daily basis,” Nielsen said. “It’s very important to know where you stand. You don’t want any surprises.”

Nielsen used the example of a small business with $19,000 in receipts. In normal times, that business owner could pay all of their $13,000 in expenses and still have a tidy profit. However, in order for that business to survive a drastic decline in receipts to $1,500, Nielsen said the business needs to pare expenses down significantly, even if it means arranging with creditors not to pay bills.

Many creditors — like banks, landlords, utility companies and suppliers — understand the situation and may be willing to work out payment arrangements.

“Communicate with the people you owe,” he said. “It may hurt your credit, but the important thing is to preserve your business.”

Communication is especially important with state and federal tax collectors, Nielsen said, who may also be willing to work out arrangements regarding employee withholding, payroll taxes and quarterly business and operation taxes.

The one place, however, business cannot forsake the state is in the payment of sales taxes, Nielsen said.

“Sales tax money is not yours, it’s not part of your income,” he said. “So never use it for operating expenses and always pay it on time. Otherwise, you end up in a trap.”

Nielsen said the Small Business Administration (SBA) has a toll-free number for information on the status of Economic Injury Disaster Loans (EIDL) applications — 800-659-2955. But callers need to request “tier two customer service” which can deal much more effectively with any problems a business lender would have.

Each EIDL borrower is eligible for an EIDL advance up to $10,000, all of which would be converted into a grant. Nielsen said the average EIDL advance grant size in Washington is $4,400 and is based on the number of employees a small business has.

Borrowers who have been approved but who have not received their money will get it, Nielsen said, noting that in two weeks, the SBA received 3 million applications and approved 600,000 of them.

“Be patient, and pay attention to your inbox,” he said. “Hopefully, your EIDL advance will come.”

As part of the $2 trillion relief package approved roughly a month ago, Congress approved $10 billion for the EIDL loans — which are borrowed directly from the SBA. A $480 billion additional relief package just passed by the Senate includes an additional $50 billion for EIDL loans.

Charles H. Featherstone can be reached at [email protected].