Start Working Financials Now
If you are worried about the impact of COVID-19 on your business—and who isn’t—the one thing you should do immediately is to start analyzing its impact on your financial position.
“Get your financials in order,” urges Dave Kohl, professor emeritus of agricultural finance at Virginia Tech. He spoke today on a webinar on COVID-19 sponsored by the Professional Dairy Producers of Wisconsin.
He has already done so for his businesses—a dairy farm and creamery. To gauge the impact, compare current financial performance to the average of the past three or four years to get a better sense of trends.
Also, take your monthly loss and divide it by your equity to determine burn rate. “Then reach out to your lender,” says Kohl.
That burn rate number is really important as you visit with your lender, he says. Some are offering interest only/principal deferred payment options to get borrowers through the current crisis.
If your situation is dire and you are considering bankruptcy or liquidation, be sure to reach out to your accountant for the tax implications of such an action. Because taxes were deferred when many assets such as machinery had been purchased in the past, their tax basis could be zero when you liquidate. That could lead to huge tax liabilities, warns Kohl.