As the number of COVID-19 cases continues to soar, manufacturers face the prospect of pandemic-related challenges in the coming winter months. You must actively plan to protect your employees and your business. Consider the following five steps as you continue to work toward recovery:
1. Don’t let down your guard.Environment, Health, and Safety (EH&S) managers might be thinking about machine guards, but these employees’ responsibilities will extend beyond what they were a year ago. Protecting the health and safety of employees includes providing proper personal protective equipment and encouraging social distancing. As you work to protect your employees’ and visitors’ health, don’t let down your guard. Follow the guidance of government agencies, including OSHA, CDC, and local and state health agencies. Monitor the behavior and actions of your employees to minimize or eliminate the risk they present to one another.
2. Plan carefully.
Typically, manufacturers use prior year results to build forecasts, budgets, and plans for the upcoming year. Calendar year-end companies preparing these tools should remember that 2020 was an unprecedented year, and not likely to be mimicked even if the pandemic continues well into 2021. Plans that rely on 2020 data, or any previous year’s data, are not likely to be relevant. Instead, work with your customers, vendors, and other strategic partners to plan for 2021. Remember that you face unprecedented times, which could result in changes in your business activities and revenue.
3. Revisit potential weaknesses in your supply chain.
As you develop your plans, ensure your current supply chain will be able to continue to deliver the support you need. Many manufacturers reviewed their supply chains after problems early in the pandemic. As we move forward, it is critical to ensure your supply chain can accommodate changes in your business, whether those changes are driven by different customer demands, ongoing challenges of the pandemic, or your suppliers’ capabilities.
4. Monitor your cash and working capital closely.
As most government relief programs have been exhausted, you will need to rely on your ability to generate cash and working capital through your operations. Do not plan around the possibility of additional relief, as government relief is neither promised nor guaranteed. Instead, work to build cash reserves. Tactics could include ensuring customers pay within their terms, extending payments to vendors, reducing inventory, selling unused assets, and tapping into lines of credit or other lending facilities designed to provide working capital.
5. If you have a PPP loan, think carefully about forgiveness.
While you might be eager to obtain PPP loan forgiveness, think carefully about how and when to apply. Many manufacturers use wage-based tax credits or deductions, such as the R&D tax credit, which includes wages associated with R&D activities. However, the IRS has declared that expenses paid with PPP loan funds that receive PPP loan forgiveness are not deductible for income tax purposes. As such, those non-deductible expenses likely cannot be used toward the R&D tax credit or other wage-based credits or deductions. Think carefully about whether to apply for forgiveness now or wait to see if Congress overturns the IRS’s position.
For help with these or other issues related to navigating the COVID-19 environment, call HBK Manufacturing Solutions at 330-758-8613 or email us at firstname.lastname@example.org.