The National Federation of Independent Business reports that small business optimism is the highest it's been since 2006.1 However, in business as in life, things don't always run smoothly. Perhaps your business is seasonal and facing a lean stretch. Or, maybe you're concerned about the financial burden of switching your point-of-sale card terminals over to EMV technology before the October shift in liability for fraud.
Here are some tips to help keep a temporary situation from becoming more serious:
Estimate the actual costs of making the switch to EMV.Many merchants already have terminals with a slot for chip card acceptance, but it may not be activated. If that's your situation, you may need only a minor software download, and your costs may be minimal. Other businesses may need new terminals, which could cost a few hundred dollars. If purchasing new terminals is too costly, you might consider leasing the equipment. Remember, it's not mandatory that you update your equipment, but after Oct. 1, 2015, Visa®, MasterCard®, American Express and Discover will no longer bear the liability for fraud unless the counterfeit transaction takes place with an EMV chip card at an EMV terminal.2 So if you don't update your equipment by then, the cost of fraudulent transactions may fall to you.
Improve cash flow.Cut expenses wherever you can: reduce inventory and discretionary spending on new office equipment or unnecessary items. You may even consider moving your office, store or warehouse to a less expensive location. Make sure you review the terms of your lease, however, so you know if relocating makes sense. Another alternative may be to sublease your space or a portion of your space to a complementary business. On the flip side, speed up collections from customers and stretch out payments to vendors. Read more cash flow tips here.
Review employee compensation.You may need to reduce workforce wages or hours temporarily. Your employees may be on board if they're kept in the loop and trust that—if and when things improve—they'll be rewarded. (They will also be more willing to sacrifice if you cut your own salary, as well) In the worst case, you may find it necessary to lay off some employees. You could also consider using contract, seasonal or temporary employees rather than hiring permanent full-time staff to save on the cost of benefits and reduce the emotional cost of layoffs.
Manage credit.Ideally, the time to set up a business line of credit, which can help you get through lean times, is before you need it. If you haven't already set up a line of credit, talk to your business banker about a short-term loan or find out if you can refinance an existing loan to obtain more affordable monthly payments to help you get through a rough patch.
Stay current on payroll taxes.Payroll taxes are withheld from your employees' paychecks and paid to the government on a monthly or semi-weekly schedule (talk to your tax advisor about what schedule you're required to use). It's your responsibility to make sure the money is reported and paid on time to the state and IRS. Failure to deposit payroll taxes in a timely manner can result in significant fines and penalties. In addition, you may be held personally liable for taxes that aren't reported or paid.
Review business insurance.Keep your business insurance current. If you have to go through a bankruptcy and you aren't currently insured, you may be unable to obtain a policy. But, if you have a current contract and continue paying premiums on time, it's unlikely your policy would be canceled in the event of a restructuring. It may also be wise to do a thorough inventory of your business assets and eliminate coverage for any assets that are obsolete or fully depreciated so you aren't paying more than you need to.
We Can Lend a Hand
Be sure to talk to a Navy Federal Business Development Officer at the first sign of trouble. He or she can help you work through your problem areas and find ways to help your business succeed.
1Source: National Federation of Independent Business Small Business Optimism Index, January 14, 2015, www.nfib.com.
2An exception is made for automated fuel dispensers (AFDs). The shift in liability for transactions at AFDs will occur Oct. 1, 2017.
This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.