7 Steps to Take Before Temporarily Closing Your Business

Some data shows that as much as 60% of U.S. businesses temporarily closed because of COVID-19. Thankfully, it appears that the worst of the pandemic is behind us. But you never know when something similar could happen in the future and impact your company.

That’s why it’s a good idea to familiarize yourself with the appropriate steps before temporarily closing your business. We’ve highlighted the seven most important steps below.

7 Steps to Take Before Temporarily Closing Your Business

Tell Your Staff

First, it’ll be essential to give your employees as much of a head’s up as you can. It takes time to look for new jobs and apply for unemployment benefits. The more notice you can provide, the easier it will be for your workers to manage the gap in their income.

Collect Outstanding Debts

The average small-to-medium-sized company takes 25 days to process an invoice. If you’re still waiting to be paid out for invoices that you’ve sent out, see if you can’t get your clients to speed up their payments some.

You definitely want to make sure that you don’t still have outstanding amounts owed to you after you’ve temporarily shut down. Especially because you may not yet have complete clarity over when you’ll be able to open up again.

Use Your Business Owner’s Insurance PolicyPlan

Did you know that business owner’sinsurance policyplans (BOPs) often provides coverage for unexpected interruptions in income? That means finding the right BOP could make it much easier for your company to survive a sudden temporary closure.

Suppose you’ve already got youra BOP, great! You can simply contact your insurance company and file a claim to start receiving benefits. However, if you don’t have one, then now could be the time to look through your options.

A bBusiness owner’sinsurance policyplans also provides coverage for property damage and sometimes theft. This type of insurance is great when your business is closed down, and you aren’t visiting it as often. It’ll give you peace of mind that if anything unexpected happens while you’re out, you at least won’t take a financial hit from it.

Sell Remaining Inventory (If Applicable)

If you’ve got a store that carries inventory, try to sell off as much of it as possible before your temporary shutdown. Doing so will give you some extra cash to keep yourself afloat during this period of uncertainty.

Some products, like electronics, can last on the shelf for years. But often, when you’re temporarily closing your business, you don’t know when you’re going to open it up again (or if you’re going to be able to at all).

It’ll be easier to do this if you host a sale and offer good product deals in the weeks leading up to your closure.

Inform Your Vendors or Suppliers

You’ll also need to let your vendors and suppliers know about any temporary closure for your company. If you have a contract with a company and you don’t give them notice, you may owe them money for any delivery they prepare for you that you’re not in your restaurant to receive.

Like your employees, you should also try giving vendors and suppliers as much notice as possible – especially if you plan on rehiring the service when you open your business back up.

Consult with Your Creditors

Many small and medium-sized businesses have recurring financial obligations with creditors. You may as well. But if you do, that doesn’t necessarily mean that you’re on the hook for those payments even while your business is closed.

There’s a strong chance that the bank you’re getting a line of credit from has some options for companies that encounter unexpected financial turbulence. At the very least, there’s no harm in asking.

Also, if your closure is related to an event like a pandemic that is impacting many businesses like yours, the government may offer financial assistance to companies experiencing hardship.

For example, the federal government offered COVID-19 relief loans to companies that were impacted by COVID-19. Depending on the situation, something similar may be available to your business.

Be Sure to Check and Comply with Applicable Laws

Finally, employers have many obligations to their employees under state and federal employment laws. 

For example, you have to provide information to your workers about unemployment benefits if you’re temporarily closing your doors. And your state may have more specific requirements for you to follow as well.

Additionally, you may have a legal obligation to continue filling out various types of forms even while your business is closed. This is a list that could include:

• Form W-2
• Form W-3
• Form 940
• Form 941
• Form 944
• Forms 1094-B and 1095-B

You may want to consult with a legal expert to ensure that you don’t miss anything and face fines as a consequence of doing so.