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Welcome to Farnham. For over 50 years, we've built our business the old-fashioned way – by taking the time to understand our clients’ goals and needs, then providing knowledgeable financial advice backed by thoughtful, personal service.

COVID – 19 and Entrepreneurial Business -Coping in Surreal Times


It has been less than a week since my last communication, but it seems like a lifetime already with the speed of COVID -19 related developments. Suffice it to say, things have not improved.

We have been fielding a lot of questions, and also giving thought to measures we can take to protect our own business and those of our clients and wanted to share this with you.


Are there any relief measures proposed for HST or payroll taxes?

To date the only relief is in connection with income taxes and not HST or payroll taxes. CRA correctly views HST and payroll taxes collected as a Trust arrangement  – you are collecting the tax on behalf of CRA, as distinct from income tax where you are sending a portion of your own funds to CRA to settle your tax obligations.

Am I able to lay off employees?

I cannot recommend strongly enough that you seek guidance from a qualified Labour and Employment lawyer before making changes to existing arrangements with employees. I have been advised that generally, as small business owners, we do not have the ability to unilaterally lay off employees. “Lay off” is a term commonly used in the media in connection with the airline or automobile manufacturing industries. In those instances, the ability to lay off employees is embedded in the contractual arrangements, often in a unionized environment. In the context of small business, the lay off of an employee without their agreement is generally constructive dismissal, with all of the associated notice and severance implications. In addition to the Employment Standards Act, there are also considerations associated with the Human Rights Act. In short, it’s a minefield.

How do I get the wage subsidy announced on March 18?

The wage subsidy is “received” in the form of a reduction in the regular remittance of tax withheld from employees. The ability to reduce your regular payroll remittance is in effect from March 18th to June 20th. It is equal to 10% of the remuneration you pay between those dates, up to $1,375 per employee to a maximum of $25,000. There is more detailed information on the CRA website at


Protecting our businesses

Our businesses are being subject to stresses unprecedented in any of our lives. It is going to get worse before it gets better, and it will be many months before we even begin to feel an economic recovery. The impact on our health system is only beginning, and it will not be until the health crisis is resolved that we start to see any signs of economic recovery.

That said, this will eventually end and a new day will dawn – we just have to ensure that our companies survive to see that. This may all sound very dramatic, but in my view it truly is that dire, and I am not one generally given to drama.

All businesses, in every sector, are being impacted by these events. At the front line are retail, hospitality and entertainment companies, which are virtually shut down. However, even businesses such as our own where there remains no shortage of work, will be impacted by severe cash flow challenges as receivables become stretched out for months.

For every business, the ability to weather this storm will depend on one thing only – cash. Cash flow management and cash preservation is the only priority. With that in mind, I have set out some strategies to consider during this crisis.


This is something many of us rarely do when times are good and cash flow is robust. However, it is now important, and in some circumstances will be critical, to understand your cash flow over the next 6 – 9 months. When, exactly would you run out of money if receivables dried up? If that was to occur in say three months, what actions could you take now to stretch to 6 or 9 months? Without some visibility on your cash burn you just cannot plan effectively.

Accounts Receivable

To a large extent this may move out of your control. You can improve your billing processes and accelerate invoicing, but you still may have little control over when you get paid. This will often depend on where you fit into your own customer’s and clients supply chains. Businesses are going to continue to pay for things that help them keep the lights on; everything else is going to the bottom on the payable pile. If you provide ongoing, regular critical services or essential inputs to your customers you will have at least some leverage over collections.

It still likely makes sense to get out invoices as quickly and as early as possible, however, another factor to consider is HST. The obligation to remit HST occurs in the period the invoice is rendered, not when the cash is received. Accordingly, rendering a large invoice now if you know you may not be paid for many months, may not be sensible if it is resulting in the obligation to make a significant HST remittance.


Many businesses rely on financing to bridge receivables and otherwise support working capital. By preparing a forecast you will know if your existing loan facilities will be sufficient to get through six to nine months of constrained cash flow. To the extent possible, protect your existing loan facilities by remaining onside with covenants and keeping your bank apprised of expected issues. Banks hate surprises and will be much more amenable to accommodations if you let them know you anticipate a cash flow issue in three months rather than tomorrow morning.

The government and the major banks have announced initiatives to provide short term liquidity to small businesses. In particular, the Business Development Bank of Canada is providing support through the new Business Credit Availability Program ( BACP ).

You are much likelier to be successful in applying for a loan under these initiatives if you have done your homework, can provide a cash flow and articulate when, why and for how long you require funding.

Review your Expenditures

Take the time to go through your regular expenses, in detail and with a critical eye.  There will be many expenses where you do not have the ability to reduce or defer the disbursement without jeopardizing the ability to continue operating in an uninterrupted fashion – think telecommunications, utilities, IT support. However, there will be some expenses, either of a discretionary nature, or that are simply not relevant in this environment that can be cut or deferred. Some discretion is required to ensure that cuts are not made in areas that will be damaging in the long term, but generally a relatively ruthless approach is in order.

The largest controllable expense in many, if not most organizations, is labour. That is also, by far, the most common subject of calls we are receiving from clients. While our employees are without a doubt our most valuable resource, how long can or should you continue to pay employees when there is no way for them to be productive?

As noted in the FAQ’s, good legal advice is essential when making any decision that will impact your existing arrangements with an employee. The spectrum of possibilities in terms of reducing labour costs include:

  • Termination – This may result in a significant cash outlay depending on the level of compensation and length of service. You also want to ensure that this is not a long term solution for a short term problem.
  • Temporary lay-off – Seek legal advice and generally not an option without the agreement of the employee.
  • Temporary pay cut – Seek legal advice, but generally it is possible to reduce compensation by +/-10% without it constituting constructive dismissal.
  • Work sharing – The Employment Standards Act contemplates work share arrangements. Seek legal advice.
  • Lay off with top up – It is possible to apply for the ability to top up an employee’s EI within certain limits without impacting their entitlement to EI. These plans need to be approved in advance. Seek legal advice. Information on the Supplemental Unemployment Benefit program can be found at

Stay Positive. Stay focused.

This is heavy. The news is depressing. We are forced to make difficult decisions affecting the lives of people we like and have worked with often for many years. We see the value we have created in our businesses and the savings diligently put away for years being devastated, but…

this will come to an end, and if we do a good job now our companies will survive and our employees will have a place to return to work. Self-care is important, as is the acknowledgement that this is affecting all of us mentally in ways likely not experienced before. That is normal, when many things are far from normal.

Eat well, exercise, focus on the things you can control. We are all being forced to slow down to some extent – take advantage of that to spend time with family and cherish the things that are truly important. There are many things that we have taken for granted for a long time and when this all ends we will experience a new gratitude for many of these things, some as simple as going out for dinner with friends.

We are also all in this together as entrepreneurs and we need to support each other so that we all come out on the other side. While cash flow is going to be the critical factor, do not treat cash like toilet paper, something to be hoarded, and when looking down your payables list be sensitive to the realities of those companies that provide support to your business and that you want to survive so that you can continue to do business together in sunnier times.

We are here to help in any way we can. We do not always have all of the answers, but we will try to find them. There is no playbook for what we are going through, we all just need to do the best we can.

Be safe,