Page 8 - NBIZ October 2020

for improved information technology due to the virus and recession. Also, Government Loan and Bailout
(IT) and equipping employees with other companies may be experiencing Programs
additional computers, other equip- increases in bad debt expense result- Since the COVID-19 crisis first hit,
ment and supplies to support remote ing from customer bankruptcies. Busi- many companies have taken advantage
work. Owners and their teams should ness owners and their management of various government loan and bail-
identify and track these expenses and teams should closely monitor A/R out programs, which are not normally
purchases to support remote work. aging and collections to stay in front utilized in the regular course of busi-
Also, they should track any positions of any potential issues with customer ness. The most widely-used program
likely to remain WFH going forward. payments. among small- to mid-market compa-
Careful consideration should be nies has been the Paycheck Protection
Reduced Employee Compensation given to modeling future customer Program or PPP. These programs
and/or Headcount revenue for specific lost customers invariably have stipulations such as
Many companies severely impacted and plans to recapture lost revenue by retaining certain employee levels and
by COVID-19 and the current reces- channel/geography. their compensation and other expense
sion have reduced employee compen- management requirements. Business
sation or reduced employee headcount Stretching Payments to Vendors owners and management teams must
through lay-offs or furloughs. Owners To conserve cash, many companies consider the impact of any loan or
and their teams should track employee are stretching payments to vendors, bailout programs on the company's
compensation and headcount pre- landlords, leaseholders, etc. This earnings and consider normalizing
COVID-19 and post-COVID-19. They practice leads to increases in aged that impact.
should also consider any costs asso- accounts payable (A/P) and higher The seven items listed above repre-
ciated with severance payments and A/P balances. In some situations, sent only some of the more common
other employee termination costs and stretching payments can result in issues that companies may be experi-
use this information to normalize the lost early-pay discounts if previously encing due to COVID-19, which alter
company’s EBITDA for the period. available and utilized. Owners and EBITDA. There are many additional
management teams should carefully issues to monitor and track, such as
Increased Bad Debt Expense monitor the business's payables and changes to the company's pricing
Many companies are experiencing consider normalizing higher than of its products and services, discre-
an increase in aged accounts receiv- usual A/P balances and significantly tionary expenses, cash management
able (A/R) as customers delay payment aged payables that impact EBITDA. practices, business development
operations and results, employee at-
tendance and absenteeism. Ultimately,
owners and management teams need
to study and accurately track their
EBITDA and other financial results
during these unusual times. Staying
on top of these issues is essential
not only for the company’s effective
leadership but also for correctly po-
sitioning the company for sale when
that day comes. N

Contact NAVIX to discuss your
specific EBITDA questions or your
overall exit plans. If you intend
to sell your company as your exit
Because buyers typically ask for five strategy, consider registering for our

years of historical financial reports, it is webinar, Eager to Sell Your Company
when the Market Returns? During
essential to track EBITDA now whether this webinar, we will discuss the steps
that business owners need to take
you aspire to sell your company quickly now to position the company for sale
and maximize value when market
or anytime within the next five or so years. conditions return to favorable. For
further information, contact Mr.
Ungashick via email at pungashick@
navixconsultants.com.

8 NBIZ ■ October 2020