Inspiration Lab member Alisha Thomas is the owner of Wait. What? Consulting, which helps small business owners in creative fields manage their finances. Alisha studied design in college and co-founded or joined several arts-inspired companies (like the nationally known Freaker USA) before using the financial knowledge she gained along the way to start offering her own bookkeeping services. Below, Alisha shares strategies for handling the financial fallout of the COVID-19 pandemic.
While a lot of people's work lives have been scaled back due to the COVID-19 pandemic, if you’re in the money world, they sure have ramped up. One thing we all have in common during this time is dealing with the financial impact of this global crisis. Whether it’s small business finances or your household budget, the coronavirus has made us think about our pocketbooks a little bit more. Here are some tips I’ve shared with the small business creatives I work with.
REMAIN CALM: Take it day by day. Take some time to look at your bank account and cash flow so you can adjust accordingly. Don’t go pulling all your money out of the bank or cashing in bonds. The same goes with your business — think things through.
CUT OUT EXTRAS: Cut out any apps or extras that aren’t directly making you money. You can always pick them back up when you feel things are more stable. Look at your bank/credit card statements and see what recurring charges you could cut.
I will say, if you have the funds, now is a great time to support your local economy. Google “CSA box” and order fresh local veggies, get curbside takeout from your favorite restaurant, or take an online class from a local business. Part of the reason the government gave stimulus checks is because they want you to stimulate the economy and buy stuff. BUT, if you need that money for food and shelter, then by all means, use it for that and you can support locals down the road.
DON’T LOOK AT YOUR 401K/IRA: Your 401K/IRA should be your last resource for cash. Of course, if you need it, then use it. It’s your money. But I would do everything in my power, especially if you’re younger, to not tap into investments. The market always comes back.
THINK DIFFERENTLY: Think of ways you can create new income. Professionally or personally, now is the time to think outside the box. Do you know how to sew? People are buying masks, especially homemade ones. Are you a great photographer? Teach an online class on how to use a camera. Or maybe this is a time for you to cultivate relationships that could turn into a sale later. Chat someone up on Instagram or Facebook.
KEEP THE LINES OF COMMUNICATION OPEN: If you feel like you can’t make that credit card payment, reach out! Call your banks, lenders, and vendors and see who will work with you. AND vice versa — if you are in a position to give someone a break on a payment or extend terms, I’m sure they would appreciate it.
FIND FUNDING: This is an unprecedented time for unemployment. Originally, unemployment was only available to workers who had been laid off or had reduced hours. Now it’s open to freelancers and workers whose unemployment has been exhausted. You can call or apply online, but be ready for long wait times. Also, REMEMBER unemployment is taxable. It depends on your financial situation, but I would highly advise checking the box to have taxes taken out of your check. But if you need more cash now, you can reserve your right to pay the taxes later. You can also change your tax preferences anytime online under “tax withholding information.”
The Paycheck Protection Program (PPP) is new to everyone and no one at this time knows exactly how and what will be forgiven. If you have employees (or you’re an employee of your own company), you can apply for the PPP through a lender to get a potentially forgivable loan. (HERE is a great list of lenders.) The money can be forgiven if you use it on payroll and other specific business expenses. You can’t use it to pay contractors. (There are certain guidelines you have to follow.) If applying, I recommend you only ask for what you really need.
If you received a PPP loan, you MUST keep records of how you spend the money. Some CPAs recommend opening a second bank account just for your loan — that way you have a clear audit trail. For my clients, we’re tracking everything in QuickBooks and we’ll have the bank statements to back it up. If you’re interested in this opportunity, you must act fast as lenders are closing applications ASAP.
TAX DAY IS NOW JULY 15: The deadlines for federal and North Carolina tax filing and payments have been moved to July 15. That means, if you owe money, you can use that money now to float yourself and your business for the time being. I would still talk with your CPA, though, and get your taxes filed sooner rather than later.
LEARN FROM THIS: I know everyone is just trying to get through this, but this crisis is why you need to have a savings account and actually use it. The upside of savings is you might not always need it for a worldwide pandemic. Maybe instead you could use your savings for a fun opportunity or something that can grow your business. I recommend keeping at least three months of expenses in your savings.
Alisha Thomas is not a lawyer, CPA, or CFP. These are only her opinions and not meant to be legal or investment advice.