Key Questions About Coronavirus Implications for Retail Businesses
March 15, 2020
As you have undoubtedly seen, the State of Ohio is continually announcing the shut-down of businesses operating in certain consumer-facing industries. Businesses directly and indirectly affected by this Order are asking themselves two very basic questions.
Question 1: What do I do for my workers?
Closing the operating locations for Ohio’s retail businesses is forcing the business owners to make difficult decisions regarding the short- and long-term status of their employees. There is a constant, evolving balance between supporting your workforce and financially securing the necessary cash position for the company and its investors. While the Ohio government has rolled out a number of benefits for employees without paid leave, businesses need to think critically about their human capital strategy in order to make the best of this situation for everyone involved.
- Discuss with your lawyers the myriad implications of staffing changes, including layoffs, extended leaves, furloughs, rotations and other potential options;
- Consider the effect staffing choices will have on your employee benefit obligations and discuss with your benefits broker the alternatives and related impact of these choices;
- Understand the role of FMLA and its application to your unique employment situation, as it may or may not be implicated based on your staffing choices;
- Understand the potential unemployment compensation changes and the related benefits now available to your eligible workforce;
- Thoughtfully consider your internal communication strategy to make sure you’re not over-committing to your staff regarding current and future employment status and related benefits, and ensure your employee handbook, especially with respect to PTO policies and payouts in the event of certain termination scenarios, sync up with your course of action to avoid unintended obligations.
Question 2: What should I do to preserve my cash flow?
Virtually every business leader is asking right now what relief may be available. The short answer is that while state or federal relief programs are anticipated, operationalizing those programs will likely take weeks (or months) before they can provide cash to operating businesses. Given that, businesses need to be laser-focused on cash flow planning and cash management, which requires careful consideration of operating and legal priorities.
- Create a creditor matrix (payroll, debt service, lease obligations, vendor and supplier obligations, etc.) with an understanding of operational priorities and legal priorities;
- Prepare a cash flow forecast by week using conservative assumptions to understand your cash runway;
- Weigh the economics of continued delivery/carryout operations with reduced staffing vs. temporary closure or other more serious measures;
- Consider drawing on available lines of credit in advance of need so that enough cash is on hand if closure extends eight weeks or more;
- Consider participating in any potential sell-backs of inventory, including the sell-back of recently purchased unopened liquor inventory (per the government’s order) to generate short-term cash.
We will send additional alerts as short- or longer-term relief programs come on line, which may be in the form of low-interest loans supported by the federal or state governments, withholding or payroll tax relief, etc.