CPAs Tell How to Stay on Sound Financial Footing During Crisis

YOUNGSTOWN, Ohio – As the federal government takes steps to ease the impact of the COVID-19 pandemic on businesses through loans and tax credits, businesses can take their own steps to ensure they come out of the crisis in good financial health

The most visible relief comes from the Family First Coronavirus Relief Act, signed into law Thursday by President Donald Trump. It provides refundable payroll tax credits for sick and family leave up to 10 days. The quarterly sick leave credits are for wages up to $511 per day or $200 per day if the employee is caring for family members. Family leave credits are up to $200 per day, with a maximum of $10,000 per business.

It also covers 100% of qualified sick leave equivalent for self-employed workers for up to 10 days and 67% if they are taking care of family members.

Also aiding businesses is the postponement of the April 15 tax deadline, which has been moved to July 15. Individuals can defer up to $1 million and businesses up to $10 million with no penalties or interest. The full guidance from Treasury Secretary Steve Mnuchin is available here.

With the tax changes and coronavirus response moving quickly – Congress has already passed two relief bills and is at work on a third – HD Davis CPAs has moved three employees off their usual tax and accounting work and out them onto understanding the changes, what’s needed for Small Business Administration Loans and Ohio’s expedited unemployment process for those laid off due to the coronavirus.

“We’re just trying to collect information as fast as we can, process the information and ship it out to clients via emails and webinars, probably one a week for the foreseeable future,” says Tim Petrey, managing member of HD Davis, Liberty.

While tax credits will provide some relief, Petrey says his bigger concern is keeping businesses on sound financial footing for when the pandemic ends. Right now, that means keeping an eye on other countries’ responses and adapting businesses to their new cash flows.

“We can watch what other countries are doing for a timeline. China’s starting to come out of it, but it’s been three months of a complete shutdown. That involved forcibly keeping people in [their homes] and it lasted that long,” he says. “We’re trying to get clients to make their adaptations from a cash standpoint now. We’re reviewing their expenses and trying to modify their budgets. It’s about getting skinny wherever possible.”

Among the possibilities Petrey has discussed with clients is negotiated pay cuts. Laying off staff, he adds, is the last resort.

“That’s the hardest thing to come back from. We want to make policies to get ahead of this,” he says.

At Schroedel, Scullin & Bestic, Canfield, managing principal Tom O’Neil says businesses’ top concern should be its people.

“We’re going to make sure our team is safe and we’ll do everything we can to keep them healthy. We need them,” he said. “They’re the producers. They get the work done.”

Cash flow, however, is what will ultimately make or break a company’s survival through the COVID-19 pandemic.

“We have to remind clients to maintain and control cash flow. This could last two weeks. It could last six weeks. It could last three months,” he says. “It’s a vicious cycle, but it’s trying to control that cash inflow and outflow.”

Adds Petrey, “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.

“We can make adjustments or start reaching out to banks and SBA programs so they have the right information to get the money they need to survive,” he continues.

Beyond that, O’Neil and Tracie Stephens, principal, are encouraging clients to reach out to banks. While some, including Home Savings Bank, Huntington Bank, PNC and Chase, are temporarily closing branches to walk-in services, all have made commercial bankers available via phone and email.

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

What will make the coronavirus pandemic easier to navigate, Petrey adds, is that this is not yet a financial crisis. Banks are still operating and many have said they will provide assistance on a case-by-case basis.

“I feel better knowing we can tell our clients to talk to the banks to get what they need,” he says. “It’s not the days of 2008 when bankers rang you up and said, ‘We’re calling in on your note and that’s that.’ It’s still positive in the banking world.”

Also available are loans from the SBA’s Economic Injury Disaster Loan program, which were approved to be given in Ohio Thursday. The loans, up to $2 million, will be granted to businesses for working capital, such as payroll, accounts payable and fixed debts. To receive the loans, businesses must have credit available elsewhere.

“The first conversation people should be having is with their bank,” Petrey says. “Rather than wait for the SBA route, call your bank and deal with the people you normally deal with as a small-business owner.”

Among those people, adds SSB’s O’Neil, should be vendors and, if space is rented or leased, a landlord.

And as business slows, business leaders should use their time to work on their business, even if there’s nothing to be done inside. It’s important that time still be used productively.

“People, processes and products. Those are the three things to look at, in any business,” she says. “Are there ways to make things more efficient in their process? Is there a product or service that brings in more cash? Can they market better? Are they changes to the product line, service menu or business model? How do you stay in front of customers so that when things return to normal, you’re first in line for your customers?”

Copyright 2021 The Business Journal, Youngstown, Ohio.