by Pete McAllister | Accounting News, COVID-19, Industry - Professional Services, News, Professional Services
The pandemic lockdowns led to many professional service firms closing doors and, wherever possible, moving staff to home offices in anticipation of a temporary mode of operation. One year later, however, health safety concerns and economic uncertainty are still prevalent, prompting firms to think about a “new normal” post-COVID-19. This article covers some important points to consider as the economy begins to recover.
Cash Flow and Liquidity
If the past year has proven anything, it’s that fiscal resilience is imperative, and that likely isn’t changing anytime soon. Preserve cash, review capital investments, and cuts costs where possible.
Things to consider when thinking about cash flow:
- Assess works in progress and make any necessary changes or improvements in the areas of management and billing.
- Review and improve upon, if necessary, your accounts receivable system
- Analyze upcoming projects with a keen eye to scaling back on staffing, keeping in mind the risk of potentially losing key workers and talent.
- With social distancing guidelines in mind (and not knowing what the future looks like in regards to this), aim to reduce costs by reassessing real estate needs, existing office space, and places where you might be able to consolidate. This is especially important if some or all of your staff will be switching to permanent remote work model.
Things to consider when thinking about liquidity:
- Work out an agreement with leases. If your firm is in a financial position to remain in your current space, think about negotiating your lease renewal early and possibly extending it. Depending on circumstances and the current state of your space, you could approach discussions by offering free or reduced rent in exchange for tenant improvements.
- Review your lease for tenant improvements. If your lease provides an allowance for tenant improvements, it may be possible to negotiate the elimination of that allowance in exchange for the cash value or rent credit.
- Rent relief may be an option. Typically handled on a case-by-case basis, financial statements may be required to determine need.
New Opportunities and Growth
If your firm is in the position to be able to jump on new opportunities as they become available, don’t delay. Once your cash flow, liquidity, integrated technologies, and business processes are in good standing, develop a game plan for organic growth and expansion into new areas, including acquisition. Be mindful of how the increased demand that comes with growth can potentially burden each department, and have a plan in place to deal with the increased demand.
You’ve likely had to lay off or furlough valuable workers over the last year. If staffing shortage has prevented you from exploring new ideas and establishing new business practices, check the state of your cash flow and liquidity to see if now might be the time to expand your organization’s talent and expertise.
IT and Communication
With a year of pandemic life behind us, you probably have a good idea of how to move your firm forward in the future. If a remote working model has worked for all or part of your staff, you might decide to make it permanent. Be sure that your IT and cybersecurity infrastructure are up to date. Also evaluate methods of communication so that staff can easily and securely communicate with clients and each other.
Whether or not you foresee changes brought on by the pandemic as affecting lasting change to your business, one thing remains true: the key to success and growth is knowing the specifics and statistics of your organization in order to make wise decisions that will optimize business outcomes.
by Pete McAllister | Accounting News, CARES Act, COVID-19, News, Relief Bill, Stimulus, Stimulus Package, Tax
President Trump recently signed a second stimulus package—called the Consolidated Appropriations Act, 2021 (Act)—into law. The legislation includes over $300 billion in aid for small businesses. Below is a breakdown of some of the business tax changes and extenders in the new COVID-19 relief bill.
Payroll Tax Credit for Paid Sick and Family Leave
The refundable payroll tax credit for paid and sick family leave, established in the Families First Coronavirus Response Act, is extended until March 31, 2021. The tax credits are modified so that they now apply to practically any payments made to workers for these purposes.
Payroll Tax Repayment
The time frame for employees to repay deferred employment taxes under the President’s executive order, which was issued in August 2020, has been extended from April 2021 to December 31, 2021.
Employee Retention Credit
The Employee Retention Credit (ERC) under the CARES Act has extended to July 1, 2021. Further, the refundable tax credit has increased from 50% to 70%, the per-employee wages limitation has increased from $10,000 per year to $10,000 per quarter, and the determination of a large employer for purposes of the ERC has increased from 100 to 500 employees.
30-Year Depreciation of Certain Residential Rental Property
The new law determines that the recovery period relevant to residential rental property placed in service before Jan. 1, 2018, and held by an electing real property trade or business, is 30 years.
Business Meal Deduction
Rather than the current 50% business expense deduction for meals, the bill temporarily allows a 100% expense deduction for meals provided by restaurants in 2021 and 2022.
Deduction for Energy Efficient Commercial Buildings
The deduction for energy-efficient improvements to commercial buildings, such as lighting, heating, cooling, ventilation, and hot water systems was made permanent. The amount will be inflation-adjusted after 2020.
Changes to the Work Opportunity Tax Credit
If employers hire workers who are members of one of more of ten targeted groups under the Work Opportunity Tax Credit (WOTC) program, they are permitted to use an elective general business tax credit. Previously applicable to hires before 1/1/2021, the TCDTR extends the credit through 2025.
Employer Payments of Student Loans
Section 127, which permits employers to provide certain educational assistance to employees on a tax-free basis, was modified under the CARES Act to authorize the payment by an employer of principal or interest on specific employee qualified education loans through December 31, 2020. The Consolidated Appropriations Act expands this through December 30, 2025. As the pandemic subsides, employers may want to consider this valuable tax-free benefit.
Health and Dependent Care Flexible Spending Arrangements
The bill allows taxpayers to roll over unused funds in their health and dependent care flexible spending accounts from 2020 to 2021 and from 2021 to 2022. This arrangement also permits employers to grant employees a 2021 midyear prospective adjustment in contribution amounts.
by Jean Miller | COVID-19, Credit Card Debt, Debt, News
For the greater part of 2020, millions of Americans have faced furloughs and layoffs, subsequently relying on credit cards to keep their heads above water. Here’s how to get out from under those ballooning balances.
The Coronavirus Effect on Debt
When the stimulus checks were dispersed last spring, millions of citizens used those relief funds to pay down debt. However, a number of Americans who’ve been laid off or have had hours cut this year don’t have a financial safety net, so they’ve had to fall back on credit cards. Add to this the number of Americans who lost jobs with employer-sponsored health insurance and are now dealing with unpaid medical bills because of the pandemic, and it’s no wonder why so many Americans are struggling under the weight of debt now more than ever.
Strategies to Pay Down Credit Card Debt
If you’ve had to rely on credit cards this year, steps you can take to diminish your balance include:
Communicate with Creditors
At the start of the pandemic many credit card companies began advertising COVID-related assistance programs. Some of these have since expired, but it’s still worth looking into with each credit card company. You will most likely have to prove that you’re experiencing hardship, but most companies are willing to provide at least some short-term measures of relief, such as flexible payments or a lower interest rate.
Request a Lower Interest Rate
Credit card companies are unlikely to reduce APRs by a lot, but every little bit helps. And if you’ve improved your credit score, you have a greater chance of securing a lower rate.
Transfer Balances
By transferring the balance on a high-interest credit card to one with a low or 0% introductory interest rate, you can slash the overall interest you’ll pay on your debt. Just be sure to pay down the balance during the duration of the rate decrease, or you risk landing right where you started—a high balance coupled with a high interest rate.
Pay Off High Interest Credit Cards
If you need to pay off debt on more than one credit card, there are two conventional approaches to do it effectively.
The first is called the debt snowball, which involves paying off the card with the smallest balance first. Once that card is paid off, apply that monthly payment to the monthly payment of the card with the next highest balance. Each payoff builds momentum until you work your way to paying off the card with the largest balance.
The second strategy for paying off credit cards is called the avalanche method, which aims to tackle debts on the cards with the highest interest rates first. While the debt snowball can provide bite-sized mental victories, this method helps to better curtail interest payments over the life of your credit card debt.
by Stephen Reed | COVID-19, News, Relief Bill, Stimulus, Stimulus Package
A group of centrist lawmakers recently revealed an economic relief bill totaling approximately $908 billion. The plan has gained some traction among both congressional Democrats and Senate Republicans, getting talks moving again after Democrats and Republicans have been unable to reach a compromise on a second relief package for months. Here’s a summary of what’s included in the proposal.
Business Aid
The largest chunk of the $908 billion bipartisan bill—$288 billion—is reserved for U.S. businesses, with a focus on primarily assisting small firms, most likely as another round of funding for the Paycheck Protection Program (PPP). This would allow businesses that have since depleted their PPP funding to apply for another round of payments. This time, however, businesses will most likely be required to prove considerable downturns in revenue in order to qualify for assistance. Part of the $288 billion would also likely include another round of Economic Injury Disaster Loans (EIDL), which provide smaller loan amounts than PPP.
Unemployment Aid
The next largest chunk of funding consists of $180 billion, which is dedicated to unemployment benefits for jobless Americans. The bipartisan plan proposes $300 per week to each American on unemployment on top of existing state unemployment benefits at least through March. This is half of the $600 per week that Congress approved in March (that expired in July), but in line with the $300 per week unemployment bonus that was approved in August (most of the funds allocated for that bonus expired in October). One question that has not been addressed is whether the unemployment benefits will be made retroactive to compensate for prior months without jobless benefits.
State and Local Funding
The relief bill offers $160 billion to state and local governments to assist them through the next several months without additional cuts to personnel or services. This has been one of the biggest sticking points in getting an additional relief bill passed as Congressional Republicans contest that that such aid is wasteful “bailouts”. As a condition for their support of the broader package, some Republican lawmakers are considering a compromise by looking to establish new boundaries on state and local funds.
Temporary Protection from Liability Lawsuits
The other big sticking point comes from Democratic opposition for the “liability shield” sought by the GOP. Senate Republicans have tried for months to give business entities immunity from coronavirus-related lawsuits. This bipartisan plan offers a temporary moratorium on COVID liability lawsuits, which would allow time for individual states to draft their own laws.
What’s Not Included?
The bipartisan plan markedly excludes a second round of $1,200 stimulus checks, a measure that has long been supported by congressional Democrats and President Trump. Congressional Republicans have been forthcoming on their resistance to spending more than $1 trillion on another stimulus package, and once unemployment assistance, aid to state and local governments, and small business relief is added up, it’s unfeasible to both include direct checks and keep the overall price-tag below $1 trillion. (Republican Senator Josh Hawley and Sen. Bernie Sanders have since teamed up to propose an amendment to this plan that would include direct stimulus checks to Americans.)
The plan also leaves out Republican-backed tax cuts, including Trump’s call for a payroll tax cut for firms, and Democrats’ push for bonuses to essential workers and health-care professionals. Also missing from the plan is a renewal of the federal moratorium on evictions that is set to expire at the end of the year.
by Daniel Kittell | Accounting News, Business Consulting, COVID-19, Industry - Veterinary Medicine
Much like boredom breeds creativity, challenging times breed innovation. Though we will eventually return to normal, it will be a new normal—one where veterinarians have learned to adapt, survive, and even thrive during a global health crisis and economic downturn. Vet practices, which traditionally have been brick-and-mortar businesses, were forced almost overnight to implement online consultations, digital diagnoses, and curbside visits. These changes, it turns out, may be beneficial for business not just in the face of a pandemic, but permanently.
Telemedicine
A critical concern for businesses during the pandemic has been maintaining incoming cash flow, and though veterinary practices have had to adapt quickly, telemedicine—including remote consultations, diagnoses, and prescriptions—has provided an avenue for concerned pet owners to continue accessing affordable, professional vet care while helping to keep vet practices profitable. Along with aiding in restoring work/life balance among staff, offering telemedicine services, including curbside visits, is especially beneficial for immunocompromised and differently abled clients.
If vet practices were doing telemedicine prior to the pandemic, it’s likely that they weren’t charging for the service, but Covid-19 has given the green light to let clients know that payment for such time and expertise will be normal practice going forward. After all, services like curbside visits are so far proving to increase duration of appointments, as new intake processes need to be developed and back-and-forth communication with clients can take time.
Online Outreach
A strong line of communication with clients during and after the pandemic is imperative, and this is a time when veterinary practices can really boost and nurture existing client relationships as well as establish new ones. One can look to the company Chewy, which has experienced a momentum in revenue, due in large part to customer service and a new customer acquisition rate that is significantly higher than pre-pandemic. The company experienced an influx of active customers greater in the first half of 2020 than in all of 2019.
“We built Chewy by putting the customer at the center of everything that we do. In a world of uncertainty, qualities like trust, convenience, and customer service really matter, especially when it comes to caring for family or loved ones,” said Chewy CEO Sumit Singh.
Veterinary practices can use their websites and social media platforms to engage with clients and keep them informed, now and moving forward, by relaying valuable information such as:
- Alerting clients to hours of operation, policy changes, appointment availabilities, new procedures, and telemedicine capabilities
- Updating clients of the availability, including any sales and promotions, of pet supplies and food, either through the vet’s platform or a partner where the vet practice receives a percentage of the sales
Technology
Public health recommendations and state-mandated phases are still changing regularly, so keeping track of Covid-19 safety practices is still critical in keeping business running. Improve communication between staff by updating email listservs or using Google Docs and Sheets, which support immediate collaboration and multiple editors. Programs like Google Hangouts and Slack enable client service representatives to communicate efficiently with each other and with remote staff.
While you don’t want to inundate staff with an overload of Zoom meetings and new administrative and logistical strategies, managers should be regularly conversing on areas for growth and ways to improve patient care, client experiences, and team morale. Retaining valuable staff and keeping your team as connected as possible is a sure way to keep business steady, and even growing, well beyond the pandemic.
