Working to Make Small Businesses Whole

YOUNGSTOWN, Ohio — The top concern for nearly every business is to ensure it has a business to which it can return once the coronavirus outbreak is contained and people return to work.

“The buzzword is a business continuity plan,” says Tim Petrey, managing partner of HD Davis CPAs in Liberty Township. “We’re helping with cash flow models so they can see they have X dollars in the bank today and what happens if they go dark for a month when it comes to cash and available liquidity.”

In the week leading up to Gov. Mike DeWine’s stay-at-home order for all businesses deemed not essential, HD Davis was working with clients on trimming budgets and reviewing expenses. 

“It’s about getting skinny wherever possible. We’re trying to avoid reducing workforces because that’s the hardest thing to come back from,” he says. “We want to make policies to get ahead of this.”

Making that process more difficult is the fact that no one knows how long the COVID-19 outbreak will last. President Donald Trump has said he wants to have the country back at work by Easter, while Dr. Amy Acton, director of the Ohio Department of Health, has said she expects the number of cases in the state to peak in late April or early May. The epicenter of the coronavirus outbreak, the Chinese city of Wuhan, reported just one new case between March 18 and 25 – three months after the first group of diagnoses was made. 

“We have to remind clients to maintain and control cash flow,” says Tom O’Neil, managing principal of Schroedel, Scullin & Bestic in Canfield. “This could last two weeks. It could last six weeks. It could last three months. Cash flow is king.”

Businesses must be in constant communication with their banks and vendors, he continues, to stay on top of developments and business changes as they happen. 

“Secure relationships with banks. They’re more than willing. They’re looking at potentially extending lines of credit. They’re looking at potentially deferring some monthly payments,” O’Neil says. “That’s for both individuals and businesses.” 

Although federal and Ohio income tax deadlines have been pushed to July 15, Nicholas Moga, owner of Small Business Accounting,  Boardman, says he hasn’t seen businesses and individuals delaying their submissions.

“Most people want to get it filed so they can get some kind of refund, especially now with the loss of jobs and people having to stay home,” he says. “They’re more worried than ever about their incomes and paying bills. They want to get these returns filed.”

Also among the chief concerns for businesses are complying with state orders. DeWine’s order defining those deemed essential is broad, including sectors such as food and beverage production, laundry services and businesses that sell supplies people need to work from home.

The ambiguity in the order has left many wondering if they can remain open, say Elizabeth Farbman and Christine Papa, attorneys at Roth Blair Roberts Strasfeld & Lodge, Youngstown.

“Look at your business honestly. If you’re thinking, ‘I’m essential because of orders for a particular customer in agriculture,’ but you don’t have a pending order and the rest of your customers are nonessential, then look at it honestly,” Papa says. “Make the determination on what’s happening now, not what could be or what was.”

Part of the consideration should also include what one’s suppliers and customers are doing, Farbman says. Pennsylvania’s order to close all “non-life saving businesses” had narrower definitions than DeWine’s order.

“It’s locked down. To be blunt, you’re not making the decision. The conditions are driving the decision,” Farbman says. “If it’s a specialized part and your manufacturing process is tooled for that particular part, is it cheaper to make the run than sit on it? If you do make that run, is that company going to be able to accept it, to use it? If you’re not going to get paid and there’s no one there to unload it, you’ll be sitting on product.”

For businesses with outstanding contracts, Patrick Manning of Harrington Hoppe & Mitchell, Youngstown, advises rereading them with an attorney to determine what steps need to be taken.

“There are impossibility to perform and force majeure clauses. Is the person I contracted with still bound by the circumstances?” he says. “I can’t deliver goods because of this, so am I in trouble or off the hook because of this? That’s one of the things where it depends on the language of the contract. Talk to an attorney; but you or the person on the other side might be excused.” 

Farbman and Papa have also seen an uptick in questions about the unemployment system. It’s no surprise; the Ohio Department of Job and Family Services reported 187,780 claims for the week ending March 21. At the federal level, the coronavirus relief packages passed include a provision that a business’ unemployment tax rate won’t increase during the crisis. 

When it comes to making decisions about whether to lay workers off, Papa offers a quick list of things to consider about the state of one’s business.

“Is there work to be done? Are you shut down completely? Can you continue with a skeleton crew? What are your financials like?” she asks. “Does it make sense to lay people off now, keep your financials intact and hope there’s a business to bring employees back to rather than bring them in when there’s not much to do and not much income?”

Harrington Hoppe & Mitchell’s Manning also points Ohio businesses toward the state’s SharedWork program, which allows businesses to reduce hours equally across the board.

“Employees can get partial unemployment benefits. It might be a good idea for the short term if you don’t want to lay people off and try to rehire them later after they’ve gone other places,” he says.

The federal relief packages also include employer tax credits for paid sick leave. It’s broken into two parts: one for workers who have been diagnosed with or show symptoms of COVID-19, the disease spread by the coronavirus, and a second for workers who need to stay at home to care for family members affected by the coronavirus. Both apply, generally, only to businesses with 50 to 500 employees. It takes effect April 2.

For employees who take sick leave, the credit maxes out at $511 per day for up to 10 days – a maximum credit of $5,110 per employee – while the credit for workers who need to care for family is capped at $200 per day for up to 10 days. Employees who take sick leave for themselves will be paid their normal wage, while taking leave for a family member is compensated at two-thirds their usual wages.

There’s also an expansion to the Family and Medical Leave Act that includes time off for caring for children – whether because schools are closed, or they are suffering symptoms and/or are ill. Employers are still required to hold workers’ jobs for up to 12 weeks when they file for family leave; the first two weeks can be unpaid, followed by 10 weeks at two-thirds of their regular wages.

Time off from work should be used constructively, local advisers say. Many training programs are available online, says Julie Needs, executive director of the Sustainable Opportunity Development Center in Salem. 

“Finding the time to train those skills is hard. It’s hard to let them go to take classes or to have them take classes at night. There are a lot of online resources to get these certifications,” Needs says. “You’re giving your employees hope and they need that right now. You’re investing in them for when you’re back to work. It’s a great way to instill that in your employees. If there’s an advantage to this unfortunate circumstance, this is it.”

While it can be easy to get bogged down in the what-ifs and hypotheticals of the coronavirus crisis, she adds that now is the time to work on one’s business itself.

“Some places are getting maintenance done, retooling their stuff, getting more organized,” Petrey adds. “What are the things that you’ve been saying for years that you wish you had time to do? Now’s the time to do it.”

Time should also be spent keeping paperwork in order. Should businesses need assistance, such as an Economic Injury Disaster Loan from the Small Business Administration, the process will be eased by having the right information on hand. Businesses can also help keep track of losses for insurance claims down the road.

Agents have been handling calls from clients asking if business interruption coverage will apply to the coronavirus situation, says Jim Klingensmith, president of L. Calvin Jones in Canfield. The answer, as it stands now, is likely no. The policy traditionally covers interruptions caused by physical damage such as fire or wind. 

Because of the number of businesses that have closed, insurance companies may reach a deal with the government to honor policies in this case. If that does happen, L. Calvin Jones tells clients to submit notifications if they close, the same as they would with any other insurance claim.

“Because of the gray area, we don’t know what might happen,” he says. “There may be negotiations between the insurance industry and government officials where they try to come up with some money somewhere. If you don’t notify your carrier now, then you haven’t followed your contract and you’re too late.”

Lew Kachulis, president of Gilbert’s Risk Solutions in Sharon, Pa., says his firm has been advising clients to “create a line item on their expense sheet and start to accumulate all of the coronavirus expenses that they have and to tabulate what their lost revenues are. Whether or not it’s covered or the federal government has programs, at least they’re accumulating this information and will be better prepared,” he says.

In the coming weeks, the most important tool a business should use is communication, whether with accountants, bankers, lawyers, insurance agents or their employees.

“You have to ask if you have questions,” Roth Blair’s Farbman says. “The businesses that come out of this best are going to be the ones that know how to communicate.”