YOCFO's Financial Intelligence Blog

Payroll Protection Program (PPP) and Financial Planning: What happens now?

Posted by Jeff Bruno, CEO on Apr 22, 2020 3:38:53 PM

Unprecedented to say the least...

Who would have thought that the US government was going to—in a matter of a couple of weeks—approve and fund $350 billion dollars for small business to sustain payroll and operations?

As Sully Sullenberger, the pilot of US Airways Flight 1549 that landed in the Hudson in NYC, was quoted (in the movie) as saying “Everything is unprecedented until it happens for the first time.” 

The first round of PPP funds have been released. So what happens now?

  • Was your business operating on the border of insolvency anyway and this lifeline, will only be a short respite before you need to hang it up?
  • Did you expect to grow aggressively in 2020 and ramped up with the requisite talent and in a matter of a couple weeks demand for your product or service dry up completely?
  • Did you have extra inventory on hand for the coming spring months when people would start to venture out more to frequent restaurants, retail stores, events, or, to buy stuff for traveling, etc.?
  • Have some of your employees decided they are not coming back until August (taking the spring and summer off) because they are getting more money from the souped-up unemployment comp program by $600 a week unemployment insurance?
  • Wondering when your product or service will have demand again? How do you plan for a new reality?

You may be wondering: What is the best way to use PPP funds to help small businesses stabilize? What is YOCFO doing at this time with our clients?

We are recommending several different approaches for rolling out the payroll protection funds.

Set a 2-Month Budget for the PPP Funds

Set up a 2-month budget plan and then a subsequent 6-month plan. Look at what funds you will need in your account to sustain a further downturn or at a minimum very few new sales over the full 8-month period to the end of this year.
  • Why two budgets? One is to use the PPP to its best effectiveness to gain the most forgiveness you can, but not to disrupt your planning over the next 6 months. 
  • How many people can you bring back or maintain on payroll and who is critical for revenue generation, business execution and customer servicing? Perhaps this is a time to bring in a couple of extra bodies that can streamline your operations and save valuable dollars or open new channels of revenue to help you sustain over the next 6 months. 
  • If you had a 50% demand hit, do not expect it to get better over the next two months as  the world will continue to be in a fear stage for a lot of the rest of 2020, so don’t anticipate levels returning to pre-Covid status.  Whatever you think it will be, knock off at least 25% to make sure you have enough cash to get through the year.

Identify Better Ways of Doing Business

If you see a potential opportunity within the COVID-19 crisis with more  remote work or new ways to monetize online activity, do it FAST! Everyone  is trying to pivot in this way.
  • Is the size of your office in line with a new reality or is more space needed now? One of our clients was astonished at how their team works so effectively remotely that have decided they are not going to renew their lease after November as part of their 8-month plan.
  • Perhaps new delivery channels have opened up allowing for lower cost shipment and processing of goods rather than through the normal FedEx or other routes. 
  • Amazon hired an additional 175,000 people for the increased demand, so this clearly shows how this market could continue to expand exponentially. How does your business fit within this new paradigm?
  • Take the time with your key members and stakeholders to evaluate everything from the various suppliers to the relationships that have helped you succeed in the past and will continue to do now. Find a way to do more business with them and it will come back in spades when things start to stabilize.

Organize Your Small Business Data

Make sure your financials are structured to give you real time metrics, so you can pivot or scramble accordingly as this is not going to be a straight line recovery of any sort.

  • Reorganize your chart of accounts to make sure you tightly track profitability of your best performing products/services. The old 80/20 rule will most likely apply. Spend your time on the best-selling and highest margin “stuff” during this crisis.
  • Setup weekly calls with your financial advisors, YOCFO Team (wink) or other stakeholders that are helping you manage cash, the 8-month look and stay on plan. This is not a time for major deviation as this could cause many tens of $1000’s of dollars of potential harm. 
  • Go back to the banks that helped you with the PPP and put together a plan, with a projection model that shows how you are planning on getting back to growth and profitability. Then when - in 6 months - you can show them the progress you have made, you can request extensions on lines or other types of financing to help you further get ahead of this extraordinary event. 

These are just a few ideas, plans and action items to consistently manage as an owner during the Coronavirus pandemic.

As COVID-19 continues to cause major disruption across the world the US Government has stepped up to be the backstop for the SMB marketplace in order to get it back to health. Here we sit as money starts to flow into bank accounts across the country into 10’s of thousands of small businesses at about an average amount of $200K. 

Just today the Senate passed an additional $484B for the PPP and EIDL programs!

This crisis was a big awakening for the small business market and hopefully it embeds in our minds forever that staying ahead of your financial planning, managing consistently into the future AND having adequate liquidity is paramount for survival.

Calculate the FIGSCORE™ for your business

The Financial Intelligent Growth (FIGSCORE™) is an essential calculator Your Outsourced CFO has developed to help small business leaders score their financial health – in “quarterly real time” - and provide a baseline for understanding both challenges and opportunities for growth, profitability and longevity. Connect with us for a free evaluation and calculation.


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