Mar 16, 2020
Coronavirus and Cash Preservation
Written By: Nate Williams
Last week we sent out some guidance regarding your investments during a panic/crisis like the one we’re currently experiencing. During this crisis, many people will panic and sell at low values. During this crisis there will be very little real, long-term wealth lost; but there will be massive amounts of wealth transferred. This wealth will transfer from weak to strong hands and from scared to brave hands.
But this note is not about investments, it’s about surviving in your practice during a time where business may stop. We are getting a lot of questions about cash flow and what to do with employee pay. Let me try to address those generally. To get specific answers, please contact your PFG advisor directly.
Effective immediately, we recommend the following action to keep more cash on hand in your business:
- Cut your take-home pay – please let us know what you can cut this to.
- Stop tax withholdings, federal and state (PFG will do this on your behalf).
- Stop investment contributions (PFG will do this on your behalf). This is not a contradiction to Friday’s post (here): if the market is down, invest; but first, make sure you can put food on the table.
- Pay the minimum on your credit cards (you manage this; use your judgment).
- Request temporary lower rent payments to your landlord (you manage this).
- Request from your banks a reduced payment plan or grace period (you manage this).
- Contact your business insurance agent to see if you have “business interruption insurance. This is not disability insurance.
Again, the goal is to keep cash in your business to pay necessary expenses to keep your business alive during a health crisis. Once this storm passes—and it will—you can quickly get back on track with everything.
The big question around your employees is this: if you have to shut down your office, should you keep paying them or not? The answer to this question is up to you – it’s your call (barring government intervention and laws forcing you to pay). But if you ask me, here are my thoughts:
In life and in business, each one of us must make this choice: do I put myself or my people first? My whole life’s experience shows me that those who put others first end up winning in the long run, even if their “reward” for “winning” is merely peace of conscience for being a good person. So if you ask me, my answer would be to do whatever you can to take care of those people who work for you. What exactly does this look like? Each case will be different, but here are some things I could see myself doing if my office was forced to shut down:
- Sit down with each employee and make a plan as to how they are going to survive. Do they have family that can help? How much do they have in reserve?
- Look for things they can do to work while the office is closed. Are there systems they can improve? Office policy and procedure manuals that can be revised? Office training that can be done?
But if it were me, I would not let my people go hungry. Most of your employees live paycheck to paycheck, so not having money for food is a real possibility for many of them. I view the people who work for me as an extension of my family in many ways. As I see it, I have a personal, moral responsibility to do what I can to help them. Yes, this will cost me money, and yes, it may delay my retirement. But in my mind, it’s an easy question to answer.
If you want more on this topic of taking care of your people, and more convincing that this is a core component of true leadership, please check out this video: Why Leaders Eat Last
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Regardless of economic cycles or pandemics, the work we do needs to get done. As far as I know, the government still expects us to file tax returns. If we have to shut down, the work we need to do may be delayed, but the work still needs to get done.
At this point in time we’re not willing to or interested in working for free; however, if you are really experiencing a cash crunch, let your advisor know and we can work out a plan to temporarily reduce or postpone your fee to PFG. This would work like a bank loan deferment – you could pay us less now during the crisis and make it up later.
We love you. We’re grateful for the opportunity to work for you. We’ll do anything and everything we can to help you succeed. Regardless of how bad and scary things get, don’t give in to fear. This is a time for courage and leadership, a historic time where we define who we are – our resilience and character. May God bless you as you lead the people close to you through this storm.