Top 10 Benefits of Outsourced Accounting Services for Nonprofits

These days, accounting and finance professionals are in high demand, and that reality has made it increasingly difficult for nonprofit organizations to attract and retain qualified professionals. Whether you are just starting your organization, or it is well-established, the experience, insights and expertise of qualified accounting and finance professionals are essential. These professionals are vital to maintaining smooth operations, facilitating sustainability, enabling future growth, ensuring compliance with federal, state, and local tax and accounting requirements, and satisfying grant and funding reporting requirements.

More and more, nonprofit organizations are turning to outsourced accounting service providers to fill this need. The reasons are clear:

Outside expertise. Accounting professionals from established and respected providers offer a depth and breadth of expertise that, simply put, is a rare commodity. Established outsourced professionals often have worked for years – decades even – in a variety of business and operational settings. Their experience and knowledge can be enormously beneficial to organizations large and small.
Industry specialization. Outsourced accounting providers have experience and insights to meet all reporting requirements amidst a complex and evolving regulatory landscape. They are part of organizations that stay on top of the latest industry trends, shifts, and legislative actions. This can potentially enable the organization to anticipate changes before they happen, and plan accordingly.
Accountability. Accounting professionals from established and respected providers are accountable not only to the organization but to their employer as well. This double layer of accountability serves everyone well; to you, it provides peace of mind that the professional is meeting her/his obligations. To the outside provider organization, the professional’s solid job performance underscores the value of their services and strengthens their reputation in the marketplace.
Customized services. Outsourced accounting services are 100 percent customized to meet the specialized needs of every organization. Purchase and utilize only those services you need, for the specific time in which they are needed. No more, no less.
Cost savings on several levels. This includes human resources (e.g., salary and benefits, training, turnover), audit and tax time and the corresponding expense—provided you don’t need full-time staff. Many accounting and bookkeeping functions are time-consuming. By outsourcing these tasks to professionals, in-house staff can focus on delivering critical services and fulfilling your mission.
Technology. You’ll gain the benefit of an accounting professional who knows the way around accounting and finance systems. This means a much shorter learning curve for your organization —and more time devoted to performing essential duties. Many nonprofit organizations struggle to stay up to date with rapidly changing technology and can benefit from utilizing these resources through an outsourced accounting provider. This allows you to focus on interpreting data and making informed decisions.
Bench strength. If your in-house CFO, controller or bookkeeper is absent for any reason, the organization could face real problems. With outsourced support, the appropriate resources can fill in as needed.
Time savings. The hiring process is inherently time-consuming; retaining an outside provider of accounting services is a much more time-efficient task.
Sensitivity to different reporting requirements. Professionals from respected outsourced accounting services providers can bridge the gap between financial statement presentation, Form 990-series requirements, and grant and funding source reporting requirements, so that you consider all implications in running the organization—and don’t run it solely based on only one consideration.
Specializations to grow with the organization. When you outsource the financial requirements to a firm with broad specialties, that firm can grow with yours—through a greater depth of services to specialized knowledge and experience with complex tax and accounting matters.

Outsourced accounting services can help nonprofit organizations realize significant benefits from top to bottom. We hope you found this article useful as you think through the financial and operational challenges in your nonprofit organization and consider how outsourced accounting services can help address those challenges.

The team of outsourced accounting professionals at Yeo & Yeo is available to assist with any needs you may have related to outsourced accounting services implementation.

We know the nonprofit accounting landscape.
We understand the challenges nonprofit organizations face.
We develop and deploy customized programs for organizations like yours.
We are always available to answer questions, discuss issues or help you and your staff navigate complex financial and accounting challenges.
We strive to become an integral part of your team and become your trusted advisor.

To learn more about our outsourced accounting services and the approach we recommend for your nonprofit organization, please contact us for a free initial consultation.

Nonprofit organizations face the risk of error or fraud in the reporting of transactions, maybe even more so than for-profit businesses do. Therefore, internal controls are vital to an organization’s success. Let’s take a brief look at the two main types of internal controls: preventive and detective. These areas must be considered when assessing the overall effectiveness of your organization’s system of internal control.

Preventive internal controls are designed to stop, discourage, or make it more difficult for an organization’s employees to commit fraud. For example, it is important to have different employees in charge of each step in the receiving/recording process. This is known as segregation of duties. It is also essential to require specific signatures to approve spending, also known as authorization. However, to maximize the effectiveness of segregation of duties and appropriate authorizations, it is vital to keep accurate documentation. Maintaining accurate documentation will not only make it easier to track each dollar that is coming in and going out, but it will also make the annual external audit go a lot smoother as well!

Detective internal controls are designed to assist in identifying any possible errors or fraud that has occurred within an organization, which then makes for easier corrective actions. These controls also provide evidence for whether the current preventive controls are working effectively. An easy, yet effective, detective control is a bank reconciliation. Reconciliations should be done timely and monthly to ensure that all transactions are being appropriately accounted for. Other detective controls include employee reviews, internal audits, physical inventory count, and analyses of accounts. When detective internal controls identify an error, it’s necessary to take corrective action. Responsible personnel must investigate and act on matters that are identified. It is also necessary to periodically review control activities to determine their continued relevance.

Interested in learning how Yeo & Yeo can assist in executing an internal control assessment? Learn what the assessments are, what they involve, what they deliver, and how they can help your organization by reading our eBook: An Internal Controls Study – Your Key to Maximizing Efficiency and Safeguarding Against Fraud and Waste.

Many people are currently working from home to help prevent the spread of the novel coronavirus (COVID-19). Your external auditors are no exception. Fortunately, in recent years, most audit firms have been investing in technology and training to facilitate remote audit procedures and were already working in a paperless environment. These efforts have helped enhance flexibility and minimize disruptions to business operations. But auditors haven’t faced a situation where everything might have to be done remotely — until now.

Re-engineering the audit process
Traditionally, audit fieldwork has involved a team of auditors camping out for weeks (or even months) in a conference room at the organization being audited. Thanks to technological advances — including cloud storage, smart devices, teleconferencing, and secure data-sharing platforms — audit firms have been gradually expanding their use of remote audit procedures.

But remote auditing still isn’t ideal for everything. Auditing Standards must still be complied with before issuing the auditors’ report. The American Institute of Certified Public Accountants (AICPA) identified the following aspects of audit work that may present challenges when done remotely:

Internal controls testing. Auditing standards require auditors to gain an understanding of internal controls. This is an understanding of how employees process transactions, plus testing to determine whether controls are adequately designed and effective. If employees now work from home, your organization’s control environment and risks may have changed from prior periods.
Inventory observations. Auditors usually visit the actual facilities to observe physical inventory counting procedures and compare independent test counts to the organization’s accounting records. Stay-at-home policies during the pandemic (whether government-imposed or organization-imposed) may prevent both external auditors and personnel from conducting physical counts. A possible solution to this may be using a GoPro camera or warehouse security camera to focus in on a specific area or item.
Management inquiries. Auditors are trained to observe body language and judge the dynamics between coworkers as they interview personnel to assess fraud risks. When possible, it’s best to perform fraud discussions in person. We have found that making these inquiries through a virtual meeting platform has worked well, given the current situation.

Moving to a remote audit format requires flexibility, including a willingness to embrace the technology needed to exchange, review and analyze relevant documents. We have become pretty tech-savvy in using a variety of virtual meeting platforms during the last few months. You can facilitate this transition by:

Being responsive to electronic requests. Answer all remote requests from your auditors promptly. This will help the auditors move along in their process, almost as if they were right around the corner from you in a conference room. If a key employee will be out of the office for an extended period, give the audit team the contact information for the key person’s backup.

Privacy controls. With remote auditing, there will be a significant increase in the amount of information being transported back and forth. Auditors will need to work with their clients to verify they have a secure method to do this. With our secure portal, each organization can provide the appropriate employees with access and authorization to share audit-related data from your organization’s systems. Work with IT specialists to address any security concerns they may have about sharing data with the remote auditors. We have also found it helpful if our clients have a “view only” login that we can utilize to access their system. This decreases the number of requests for general ledger detail, supporting invoices, pay rates, etc.

Tracking audit progress. Ask the engagement partner to explain how the firm will track the performance of its remote auditors and communicate the team’s progress to in-house accounting personnel. We have found that having a pre-audit planning meeting that includes the audit engagement team and the key contacts at the organization has helped set expectations for this new process as well as ease some of the fears our clients may have. We have had success with doing this and have also scheduled quick, daily check-in calls with the in-charge auditor and key employees at the organization to discuss open items and follow-up questions.

Ready or not
Communication is key in this new remote auditing world we are facing. Contact us to discuss ways to manage remote auditing challenges and continue to report your company’s financial results in a timely, transparent manner.

Crisis brings out the best — and worst — in people. Some dishonest people have already turned the coronavirus (COVID-19) pandemic to their advantage by preying on unsuspecting victims and exploiting their fears.

“Criminals seize on every opportunity to exploit bad situations, and this pandemic is no exception,” IRS Commissioner Chuck Rettig said in a statement from the IRS Detroit Field Office. ”The IRS is fully focused on protecting Americans while delivering Economic Impact Payments in record time. The pursuit of those who participate in COVID-19-related scams, intentionally abusing the programs intended to help millions of Americans during these uncertain times, will long remain a significant priority of both the IRS and IRS-CI” (Criminal Investigation).

FTC Reports Rise in COVID-19 Scams

In the first quarter of 2020, the Federal Trade Commission (FTC) received more than 7,800 consumer complaints related to the coronavirus (COVID-19) crisis. That number is expected to surge, as the rate of complaints roughly doubled during the last week of March.

Top categories of COVID-19-related fraud complaints include:

Reports regarding cancellations and refunds for travel and vacation plans
Using coronavirus stimulus checks as cover for schemes to steal personal information and money
Selling fake at-home test kits, offers to sell fake cures, vaccines, pills and advice
Problems with online shopping
Mobile texting scams, and
Government and business imposter scams.

So far, the FTC reports that consumers have lost a total of $4.77 million from COVID-19-related frauds. The median loss is $598. Coronavirus-related scams can be reported to the National Center for Disaster Fraud Hotline at 1-866-720-5721 or submitted through the center’s Web Complaint Form.

Here’s an overview of six COVID-19-related scams and practical advice on how to avoid them.

1. Fake Charities

When a catastrophe like COVID-19 strikes, philanthropists flock to donate cash and other assets to help relieve the suffering. But, before donating, be aware that opportunistic scammers may set up fake charities to benefit from your generosity.

Fake charities often use names that are similar to legitimate charitable organizations. Scammers may be offering investments in fake companies working on a vaccine. So, be sure to do your homework before contributing. Donors aren’t the only victims to these scams — those in need also lose out.

2. Stolen CARES Act Payments

The new Coronavirus Aid, Relief, and Economic Security (CARES) Act provides one-time direct “economic impact” payments to individuals and families. If you’re eligible, these payments are up to $1,200 for single people and $2,400 for joint filers, plus $500 per qualifying child under 17. They’re considered advances for a new federal income tax credit that’s subject to phaseout thresholds based on adjusted gross income (AGI).

People who are strapped for cash may be impatient to receive the money — and cyber-crooks know it. Scammers may, for instance, call or email you, pretending to be from a government agency like the IRS. Then they’ll ask for your Social Security number (SSN) for you to receive your check. Or they’ll say you must make a payment to qualify for the check.

The IRS warns that scammers may:

Use the words “Stimulus Check” or “Stimulus Payment.” (The official IRS term is economic impact payment.)
Ask the taxpayer to sign over their payment check to them.
Ask by phone, email, text or social media for verification of personal and/or banking information saying that the information is needed to receive or speed up their payment.
Suggest that they can get a tax refund or payment faster by working on a taxpayer’s behalf. This scam could be conducted by social media or even in person.
Mail the taxpayer a bogus check, perhaps in an odd amount, then tell the taxpayer to call a number or verify information online to cash it.

Don’t fall for these ploys! If you previously signed up to have your federal income tax refunds deposited into a bank account, your advance credit payment will come to you that way. If not, you may be entitled to receive a paper check through the mail. Either way, the U.S. Treasury won’t contact you over the phone or email you with a request for payment or sensitive personal data (such as a bank account or SSN).

Taxpayers can also report fraud or theft of their stimulus checks to the Treasury Inspector General for Tax Administration. Reports can be made online at TIPS.TIGTA.GOV.

3. Public Health Phishing

In a “phishing” scheme, victims are enticed to respond to a false email or other online communication. In COVID-19-related phishing scams, the perpetrator may impersonate a representative from a health care agency, such as the World Health Organization (WHO) or the Centers for Disease Control and Prevention (CDC). They may ask for personal information, such as your SSN or bank account, or instruct you to click on a link to a survey or an email.

If you receive a suspicious email, don’t respond or click on any links. The scammer might use ill-gotten data to gain access to your financial accounts or open new accounts in your name. In some cases, clicking a link might download malware to your computer. For updates on the COVID-19 crisis, go directly to the official websites of the WHO or CDC.

The IRS reports that its Criminal Investigation Division has seen a wave of new and evolving phishing schemes against taxpayers, and among the targets are retirees. Phishing attempts that appear to be from the IRS or an organization linked to the IRS can be forwarded to phishing@irs.gov.

4. Retail Scams

In some parts of the United States, there’s little or no supply of certain consumable goods, such as toilet paper, hand sanitizer, antibacterial wipes, masks and paper goods. Scammers are exploiting these shortages by posing as retailers to obtain your personal information.

Con artists may, for example, claim to have the goods that you need and ask for your credit card number to complete a purchase transaction. Then they use the card number to run up charges while you never receive anything in return.

How can you avoid retail scams? Deal with suppliers only if you know they’re legitimate. If a supplier offers a deal out of the blue that seems to be too good to be true, it probably is.

In other cases, online sellers are price-gouging on limited items. If an item is selling online for many times more than the usual price, you probably want to avoid buying it.

5. Robo-Calls

Robo-calls may be increasing during the COVID-19 crisis. This scam has been tailored to fit the pandemic. For instance, callers may offer masks, testing kits and other COVID-19-related items at reduced rates. Then they’ll ask for your credit card number to “secure” your purchase.

A reputable company wouldn’t try to contact you this way. If you receive an unsolicited call from a phone number that’s blocked or that you don’t recognize, hang up or ignore it.

Also, don’t buy into special offers for such items as COVID-19 treatments, vaccinations or home test kits. You’ll likely end up paying for something that doesn’t exist. There currently is no vaccine for COVID-19.

6. Bogus Business Emails

Businesses aren’t immune to COVID-19 frauds. Frequently, scams originate from emails instructing employees to remit goods, authorize transactions or provide proprietary data.

For example, an employee might receive an email that appears to be from the company’s president that directs the employee to transfer funds, wire money or take some other financial action. But the email is actually from a fraudster, hoping to steal money or gain access to the company’s computer system.

Under normal conditions, this type of phishing email might have raised some eyebrows. But COVID-19 has disrupted normal business operations and caused businesses to take extreme measures to protect assets and preserve cash flow. Companies may be especially vulnerable to these scams while employees work from home and don’t have the same access to management as they do during normal conditions.

Another type of phony business email appears to come from the company’s IT department. These messages might ask the recipient to provide his or her password — or to download software that turns out to be malware that infects the entire system. Employees who are stressed, overworked or sleep-deprived due to COVID-19 are easy targets for this scam — especially if an employee’s wireless home network is less secure than the company’s in-office network.

Education is the key to avoiding COVID-19-related frauds in the workplace. Remind employees about network security protocols and phishing scams during the pandemic. And provide tools that allow them to verify any communications that seem out of the ordinary and to report hoaxes as soon as possible.

Team Effort

You’re not in this alone. The Federal Trade Commission (FTC) has ramped up efforts to protect consumers on matters relating to COVID-19. Visit the FTC’s website for more information about these types of scams and how to avoid them — or contact your financial advisors for additional guidance.

View all Yeo & Yeo’s COVID-19 Resources.

As you may recall, the Small Business Administration (SBA) launched the Paycheck Protection Program (PPP) back in April to help companies reeling from the economic impact of the COVID-19 pandemic. Created under a provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act, the PPP is available to U.S. businesses with fewer than 500 employees.

In its initial incarnation, the PPP offered eligible participants loans determined by eight weeks of previously established average payroll. If the recipient maintained its workforce, up to 100% of the loan was forgivable if the loan proceeds were used to cover payroll expenses, certain employee health care benefits, mortgage interest, rent, utilities and interest on any other existing debt during the “covered period” — that is, for eight weeks after loan origination.

On June 5, the president signed into law the PPP Flexibility Act. The new law makes a variety of important adjustments that ease the rules for borrowers. Highlights include:

Extension of covered period. As mentioned, under the CARES Act and subsequent guidance, the covered period originally ran for eight weeks after loan origination. The PPP Flexibility Act extends this period to the earlier of 24 weeks after the origination date or December 31, 2020.

Adjustment of nonpayroll cost threshold. Previous regulations issued by the U.S. Treasury Department indicated that eligible nonpayroll costs couldn’t exceed 25% of the total forgiveness amount for a borrower to qualify for 100% forgiveness. The PPP Flexibility Act raises this threshold to 40%. (At least 60% of the loan must still be spent on payroll costs.)

Lengthening of period to reestablish workforce. Under the original PPP, borrowers faced a June 30, 2020 deadline to restore full-time employment and salary levels from reductions made between February 15, 2020, and April 26, 2020. Failure to do so would mean a reduction in the forgivable amount. The PPP Flexibility Act extends this deadline to December 31, 2020.

Reassurance of access to payroll tax deferment. The new law reassures borrowers that delayed payment of employer payroll taxes, which is offered under a provision of the CARES Act, is still available to businesses that receive PPP loans. It won’t be considered impermissible double dipping.

Important note: The SBA has announced that, to ensure PPP loans are issued only to eligible borrowers, all loans exceeding $2 million will be subject to an audit. The government may still audit smaller PPP loans, if there is suspicion that funds were misused.

This is just a “quick look” at some of the important aspects of the PPP Flexibility Act. There are many other details involved that could affect your company’s ability to qualify for a PPP loan or to achieve 100% forgiveness. Also, new guidance is being issued regularly and further legislation is possible. We can help you assess your eligibility and navigate the loan application and forgiveness processes.

The recently released 2020 Association of Certified Fraud Examiner’s (ACFE’s) occupational fraud study, Report to the Nations, reveals that the most common behavioral red flag exhibited by fraud perpetrators is living beyond their means. Also high on the list are financial difficulties and unusually close relationships with vendors and customers.

Some of these signs may be tough to spot if you don’t work closely with an occupational thief. That’s why the ACFE report also looks at correlations between fraud and non-fraud offenses and human resources issues. When these issues are present, supervisors and HR managers may need to increase their scrutiny of an employee.

Recognize red flags

The vast majority (96%) of occupational fraud perpetrators have no previous criminal record and 86% have never been punished or fired by their employers for fraud. This may make identifying the thieves in your midst difficult, but not impossible. The ACFE has found that approximately 85% of perpetrators exhibit at least one behavioral red flag before they’re discovered.

Although a perpetrator may be the friendliest and most cooperative person in the office, many thieves come into conflict with colleagues or fail to follow rules. The survey participants (more than 2,500 defrauded organizations) were asked whether the perpetrator in their cases engaged in any non-fraud-related misconduct before or during the fraud incident. Close to half (45%) responded “yes.” Some of the most common offenses were:

Bullying or intimidation of others,
Excessive absenteeism, and
Excessive tardiness.

A small number also was investigated for sexual harassment and inappropriate Internet use.

In addition to misconduct, some fraud perpetrators exhibited work performance problems. Thirteen percent received poor performance evaluations, 12% feared the loss of their job and 10% were denied a raise or promotion.

Get involved

When misconduct or poor performance leads to disciplinary action, supervisors and HR managers have a golden opportunity to potentially stop fraud in progress. After all, the longer a scheme goes undetected, the more costly it is for the organization. Fraud schemes with a duration of less than six months have a median loss of $50,000, but those with a median duration of 14 months (the typical scheme in the ACFE report) experience losses of around $135,000.

So if you detect smoke, look for fire. Of course, most underperforming employees aren’t thieves. But it probably pays to observe any worker who routinely flaunts the rules, antagonizes coworkers or lets job responsibilities slip. You may discover other red flags, such as family problems, addiction issues or a lifestyle that isn’t supported by the employee’s salary.

Limit opportunities

Knowing your employees is only part of the solution. You also need comprehensive internal controls to limit opportunities to commit fraud. Contact us for help.

Business owners around the country have reported damage to storefronts, office and business properties due to recent events. This damage was especially devastating because businesses were reopening after the COVID-19 pandemic eased.

A commercial insurance property policy should generally cover some, or all, of the losses. (You may also have a business interruption policy that covers losses for the time you need to close or limit hours due to rioting and vandalism.) But a business may also be able to claim casualty property loss or theft deductions on its tax return. Here’s how a loss is figured for tax purposes:

Your adjusted basis in the property
MINUS
Any salvage value
MINUS
Any insurance or other reimbursement you receive (or expect to receive).

Losses that qualify

A casualty is the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual. It includes natural disasters, such as hurricanes and earthquakes, and man-made events, such as vandalism and terrorist attacks. It does not include events that are gradual or progressive, such as a drought.

For insurance and tax purposes, it’s important to have proof of losses. You’ll need to provide information including a description, the cost or adjusted basis as well as the fair market value before and after the casualty. It’s a good time to gather documentation of any losses including receipts, photos, videos, sales records and police reports.

Finally, be aware that the tax code imposes limits on casualty loss deductions for personal property that are not imposed on business property. Contact us for more information about your situation.

The IRS recently released the 2021 inflation-adjusted amounts for Health Savings Accounts (HSAs).

HSA basics

An HSA is a trust created or organized exclusively for the purpose of paying the “qualified medical expenses” of an “account beneficiary.” An HSA can only be established for the benefit of an “eligible individual” who is covered under a “high deductible health plan.” In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).

In general, a high deductible health plan (HDHP) is a plan that has an annual deductible that isn’t less than $1,000 for self-only coverage and $2,000 for family coverage. In addition, the sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan for covered benefits (but not for premiums) cannot exceed $5,000 for self-only coverage, and $10,000 for family coverage.

Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contribution to an HSA. This annual contribution limitation and the annual deductible and out-of-pocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for 2021 contributions

In Revenue Procedure 2020-32, the IRS released the 2021 inflation-adjusted figures for contributions to HSAs, which are as follows:

Annual contribution limitation. For calendar year 2021, the annual contribution limitation for an individual with self-only coverage under a HDHP is $3,600. For an individual with family coverage, the amount is $7,200. This is up from $3,550 and $7,100, respectively, for 2020.

High deductible health plan defined. For calendar year 2021, an HDHP is a health plan with an annual deductible that isn’t less than $1,400 for self-only coverage or $2,800 for family coverage (these amounts are unchanged from 2020). In addition, annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) can’t exceed $7,000 for self-only coverage or $14,000 for family coverage (up from $6,900 and $13,800, respectively, for 2020).

A variety of benefits

There are many advantages to HSAs. Contributions to the accounts are made on a pre-tax basis. The money can accumulate year after year tax free and be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term-care insurance. In addition, an HSA is “portable.” It stays with an account holder if he or she changes employers or leaves the work force. For more information about HSAs, contact your employee benefits and tax advisor.

Nearly everyone has heard about the Economic Impact Payments (EIPs) that the federal government is sending to help mitigate the effects of the coronavirus (COVID-19) pandemic. The IRS reports that in the first four weeks of the program, 130 million individuals received payments worth more than $200 billion.

However, some people are still waiting for a payment. And others received an EIP but it was less than what they were expecting. Here are some answers why this might have happened.

Basic amounts

If you’re under a certain adjusted gross income (AGI) threshold, you’re generally eligible for the full $1,200 ($2,400 for married couples filing jointly). In addition, if you have a “qualifying child,” you’re eligible for an additional $500.

Here are some of the reasons why you may receive less:

Your child isn’t eligible. Only children eligible for the Child Tax Credit qualify for the additional $500 per child. That means you must generally be related to the child, live with them more than half the year and provide at least half of their support. A qualifying child must be a U.S. citizen, permanent resident or other qualifying resident alien; be under the age of 17 at the end of the year for the tax return on which the IRS bases the payment; and have a Social Security number or Adoption Taxpayer Identification Number.

Note: A dependent college student doesn’t qualify for an EIP, and even if their parents may claim him or her as a dependent, the student normally won’t qualify for the additional $500.

You make too much money. You’re eligible for a full EIP if your AGI is up to: $75,000 for individuals, $112,500 for head of household filers and $150,000 for married couples filing jointly. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$112,500/$150,000 thresholds.

You’re eligible for a reduced payment if your AGI is between: $75,000 and $99,000 for an individual; $112,500 and $136,500 for a head of household; and $150,000 and $198,000 for married couples filing jointly. Filers with income exceeding those amounts with no children aren’t eligible and won’t receive payments.

You have some debts. The EIP is offset by past-due child support. And it may be reduced by garnishments from creditors. Federal tax refunds, including EIPs, aren’t protected from garnishment by creditors under federal law once the proceeds are deposited into a bank account.

If you receive an incorrect amount

These are only a few of the reasons why an EIP might be less than you expected. If you receive an incorrect amount and you meet the criteria to receive more, you may qualify to receive an additional amount early next year when you file your 2020 federal tax return. We can evaluate your situation when we prepare your return. And if you’re still waiting for a payment, be aware that the IRS is still mailing out paper EIPs and announced that they’ll continue to go out over the next few months.

Do you want to save more for retirement on a tax-favored basis? If so, and if you qualify, you can make a deductible traditional IRA contribution for the 2019 tax year between now and the extended tax filing deadline and claim the write-off on your 2019 return. Or you can contribute to a Roth IRA and avoid paying taxes on future withdrawals.

You can potentially make a contribution of up to $6,000 (or $7,000 if you were age 50 or older as of December 31, 2019). If you’re married, your spouse can potentially do the same, thereby doubling your tax benefits.

The deadline for 2019 traditional and Roth contributions for most taxpayers would have been April 15, 2020. However, because of the novel coronavirus (COVID-19) pandemic, the IRS extended the deadline to file 2019 tax returns and make 2019 IRA contributions until July 15, 2020.

Of course, there are some ground rules. You must have enough 2019 earned income (from jobs, self-employment, etc.) to equal or exceed your IRA contributions for the tax year. If you’re married, either spouse can provide the necessary earned income.

Also, deductible IRA contributions are reduced or eliminated if last year’s modified adjusted gross income (MAGI) is too high.

Two contribution types

If you haven’t already maxed out your 2019 IRA contribution limit, consider making one of these three types of contributions by the deadline:

1. Deductible traditional. With traditional IRAs, account growth is tax-deferred and distributions are subject to income tax. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k), the contribution is fully deductible on your 2019 tax return. If you or your spouse do participate in an employer-sponsored plan, your deduction is subject to the following MAGI phaseout:

For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:
- For a spouse who participated in 2019: $103,000–$123,000.
- For a spouse who didn’t participate in 2019: $193,000-$203,000.
For single and head-of-household taxpayers participating in an employer-sponsored plan: $64,000–$74,000.

Taxpayers with MAGIs within the applicable range can deduct a partial contribution. But those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

2. Roth. Roth IRA contributions aren’t deductible, but qualified distributions — including growth — are tax-free, if you satisfy certain requirements.

Your ability to contribute, however, is subject to a MAGI-based phaseout:

For married taxpayers filing jointly: $193,000–$203,000.
For single and head-of-household taxpayers: $122,000–$137,000.

You can make a partial contribution if your 2019 MAGI is within the applicable range, but no contribution if it exceeds the top of the range.

3. Nondeductible traditional. If your income is too high for you to fully benefit from a deductible traditional or a Roth contribution, you may benefit from a nondeductible contribution to a traditional IRA. The account can still grow tax-deferred, and when you take qualified distributions, you’ll only be taxed on the growth.

Act soon

Because of the extended deadline, you still have time to make traditional and Roth IRA contributions for 2019 (and you can also contribute for 2020). This is a powerful way to save for retirement on a tax-advantaged basis. Contact us to learn more.

Many companies struggle to close the books at the end of the month. The month-end close requires accounting personnel to round up data from across the organization. Under normal conditions, this process can strain internal resources.

However, in recent years the accounting and tax rules have undergone major changes — many of which your personnel and software may not be ready to handle. This state of flux may be pushing your accounting department to its breaking point. Fortunately, there are five simple ways to make your monthly closing process more efficient.

1. Create a standardized, repeatable process. Gathering accounting data involves many moving parts throughout the organization. To minimize the stress, aim for a consistent approach that applies standard operating procedures and robust checklists. This minimizes the use of ad-hoc processes and helps ensure consistency when reporting financial data month after month.

2. Allow time for data analysis. Too often, the accounting department dedicates most of the time allocated to closing the books to the mechanics of the process. But spending some time analyzing the data for integrity and accuracy is critical. Examples of review procedures include:

Reconciling amounts in a ledger to source documents (such as invoices, contracts or bank records),
Testing a random sample of transactions for accuracy,
Benchmarking monthly results against historical performance or industry standards, and
Assigning multiple workers to perform the same tasks simultaneously.

Without adequate due diligence, the probability of errors (or fraud) in the financial statements increases. Failure to evaluate the data can result in more time being spent correcting errors that could have been caught with a simple review, before they’re memorialized in your financial records.

3. Adopt a continuous improvement mindset. Workers who are actively involved in closing out the books often may be best equipped to recognize trouble spots and bottlenecks. Brainstorm as a team, then assign responsibility for adopting changes to an employee with the follow-through and authority to drive change in your organization.

4. Build flexibility into your staffing model. Often accounting departments require certain specialized staff to be present during the month-end close. If an employee is unavailable, the department may be shorthanded and unable to complete critical tasks. Implementing a cross-training program for key steps can help minimize frustration and delays. It may also help identify inefficiencies in the financial reporting process.

5. Minimize manual processes. Your accounting department may rely on manual processes to extract, manipulate and report data. Manual processes create opportunities for errors and omissions in the financial records. Fortunately, modern accounting software can automate certain routine, repeatable tasks, such as invoicing, accounts payable management and payroll administration. In some cases, you’ll need to upgrade your current accounting package to take full advantage of the power of automation.

Keep it simple

Closing the books doesn’t have to be a stressful, labor-intensive chore. We can help you simplify the process and give your accounting staff more time to focus on value-added tasks that take your company’s financial reporting to the next level.

The IRS has issued guidance clarifying that certain deductions aren’t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn’t deductible if both:

The payment of the expense results in forgiveness of a loan made under the PPP, and
The income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

PPP basics

The CARES Act allows a recipient of a PPP loan to use the proceeds to pay payroll costs, certain employee healthcare benefits, mortgage interest, rent, utilities and interest on other existing debt obligations.

A recipient of a covered loan can receive forgiveness of the loan in an amount equal to the sum of payments made for the following expenses during the 8-week “covered period” beginning on the loan’s origination date: 1) payroll costs, 2) interest on any covered mortgage obligation, 3) payment on any covered rent, and 4) covered utility payments.

The law provides that any forgiven loan amount “shall be excluded from gross income.”

Deductible expenses

So the question arises: If you pay for the above expenses with PPP funds, can you then deduct the expenses on your tax return?

The tax code generally provides for a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Covered rent obligations, covered utility payments, and payroll costs consisting of wages and benefits paid to employees comprise typical trade or business expenses for which a deduction generally is appropriate. The tax code also provides a deduction for certain interest paid or accrued during the taxable year on indebtedness, including interest paid or incurred on a mortgage obligation of a trade or business.

No double tax benefit

In IRS Notice 2020-32, the IRS clarifies that no deduction is allowed for an expense that is otherwise deductible if payment of the expense results in forgiveness of a covered loan pursuant to the CARES Act and the income associated with the forgiveness is excluded from gross income under the law. The Notice states that “this treatment prevents a double tax benefit.”

More possibly to come

Two members of Congress say they’re opposed to the IRS stand on this issue. Senate Finance Committee Chair Chuck Grassley (R-IA) and his counterpart in the House, Ways and Means Committee Chair Richard E. Neal (D-MA), oppose the tax treatment. Neal said it doesn’t follow congressional intent and that he’ll seek legislation to make certain expenses deductible. Stay tuned.

Not all companies follow U.S. generally accepted accounting principles (GAAP). Many smaller businesses, for example, have adopted the AICPA’s Financial Reporting Framework for Small and Medium-Sized Entities because it’s easier to follow. Other businesses may use non-GAAP measures because they don’t believe GAAP provides readers of financial reports with enough information to make informed decisions.

Non-GAAP accounting is, in a nutshell, any measure a company uses that relies on a methodology not included in GAAP. But not all measures are necessarily created equal. Some non-GAAP principles have the potential to mislead investors, lenders and the public.

History lesson

Historically, U.S. companies have used non-GAAP measures sparingly. Yet according to financial data provider Audit Analytics, in 2017, 97% of financial statements produced by S&P 500 companies used at least one non-GAAP measure. While GAAP-related measures are audited by qualified accounting firms, non-GAAP measures undergo no such scrutiny.

So although non-GAAP measures may help enlighten stakeholders regarding a company’s activities, they also have the potential to mislead or even provide false information. Another potential issue: Due to methodological differences between GAAP and non-GAAP principles, comparing data between companies that use different measures can be difficult.

SEC rules

Arguably, companies using non-GAAP principles add a degree of variability and subjectivity to financial filings and disclosures. To avoid accusations that uncertainties, errors or inconsistencies contained in your company’s releases are intentional, develop appropriate procedures.

The Securities and Exchange Commission (SEC) has established three rules for the use of non-GAAP measures:

Regulation S-K, Item 10(e) covering SEC filings,
Regulation G, which provides instructions for earnings releases, and
Item 2.02 of Form 8-K about making public disclosures of any type.

These rules are intended to help companies using non-GAAP measures to put numbers in context. You should, for example, reconcile non-GAAP measures to comparable GAAP measures and explain why someone might find the non-GAAP measures insightful. To help stakeholders analyze financial results over time, also be sure to present non-GAAP measures consistently.

You can minimize the potential for errors or omissions by verifying the accuracy and integrity of the data you rely on. And have your executive team regularly review your non-GAAP measures to ensure they continue to be appropriate.

Current incentives

In the current economically depressed environment, some companies using non-GAAP measures may have even greater incentive to present their performance in the best possible light. If you use non-GAAP measures, make sure you’ve chosen them well and that they accurately portray your company’s position. The last thing you need right now is to be accused of trying to deceive or mislead stakeholders. Contact us for help.

Several major companies have already filed for bankruptcy during the novel coronavirus (COVID-19) crisis and many more large and small businesses are expected to follow suit. If you’re a creditor of a company that’s liquidating, it may be challenging to get back what you’re owed. That’s where a solvency opinion can help. An expert determines whether the company could meet its long-term interest and repayment obligations when it made — or didn’t make — payments to creditors.

Examining the subject

Solvency professionals consider many issues when examining a business. But ultimately, the outcome of three tests enable an expert to determine solvency:

Balance sheet. At the time of the transaction at issue, did the subject’s asset value exceed its liability value? Assets are generally valued at fair market value, rather than at book value. The latter is typically based on historic cost, and fixed assets (such as vehicles and equipment) may be reduced by annual depreciation expense. But the balance sheet is just a starting point. Adjustments may be needed to balance sheet items so that they more accurately reflect the fair market value of assets.
Cash flow. This test examines whether the subject incurred debts that were beyond its ability to pay as they matured. It involves analysis of a series of projections of future financial performance. Professionals consider a range of scenarios. These include management’s growth expectations, lower-than-expected growth, and no growth — as well as past performance, current economic conditions and future prospects.
Adequate capital. The final test determines whether a company has adequate capital and is likely to survive in the normal course of business, bearing in mind reasonable fluctuations in the future. In addition to looking at the value of net equity and cash flow, professionals consider factors such as asset volatility, debt repayment schedules and available credit.

Companies generally are considered solvent by solvency professionals if they pass all three of these tests.

Presumed insolvent

Courts typically presume that a company is insolvent unless a party to litigation proves otherwise. You can bolster your position with a comprehensive solvency analysis performed by a qualified expert. Contact us for more information about obtaining one.

The novel coronavirus (COVID-19) pandemic has opened the floodgates to scam artists attempting to profit from sick, anxious and financially vulnerable Americans. On the frontlines fighting fraud are the Federal Trade Commission (FTC), U.S. Justice Department (DOJ) and other government agencies. Here are some of the fraud schemes they’re actively investigating — and the perpetrators they’ve rounded up.

Peddling false hope

The FTC has sent warning letters to almost 100 businesses for making scientifically unsubstantiated claims about their products. Companies from California to Virginia, Indiana to Florida have touted (mostly online or by phone) “treatments” for COVID-19, even though the federal government hasn’t approved any vaccines or cures for the disease.

Letter recipients must stop making deceptive claims immediately and notify the FTC within 48 hours about the actions they’ve taken. Noncompliance can result in a federal court injunction and an order to refund deceived customers. Just last week, the FTC took the seller of a “wellness booster” to court. Originally, the product — capsules containing Vitamin C and herbal extracts — had been marketed as a cancer cure. But the enterprising fraudster pivoted in March 2020 to exploit COVID-19 fears.

Technological accomplices

Producers and marketers of fake cures aren’t the only companies under scrutiny. The FTC, in joint letters with the Federal Communications Commission, has warned several Voice over Internet Protocol (VoIP) service providers for “assisting and facilitating” illegal telemarketing and robocalls related to COVID-19. This is a violation of the FTC’s Telemarketing Sales Rule.

The DOJ has also come down on several VoIP providers for knowingly transmitting robocalls from “government officials.” Although there’s uncertainty about whether VoIP and similar services can be considered liable for the actions of their users, law enforcement officials are clearly serious about taking down those who would exploit the pandemic for personal gain.

Opportunity knocks

Government agencies also have their sights on smaller, opportunistic scams. Recently, the FTC warned consumers to beware of fake COVID-19 testing sites set up in parking lots with realistic looking signs, tents and workers. Not only have these criminals obtained Social Security and credit card numbers from test-seekers, but they may have helped spread contagion through unsanitary contact with them.

And the DOJ is raising the alarm about the role cryptocurrency is playing in many COVID-19 schemes. Everyone from snake-oil sellers to bad-investment promoters are asking their victims to pay with cryptocurrency. Therefore, it should be recognized as a red flag.

How to stay safe

Many fraud schemes present since the start of the COVID-19 crisis in the United States — small business loan scams, charity fraud and attempts to steal stimulus payment checks — also continue apace. Your best defense, as always, is to hang up on suspicious calls, delete fake-looking emails and be wary of any claims that sound too good to be true. If you encounter fraud, report it to ftc.gov.

On June 3, the Senate passed the House version of the Paycheck Protection Flexibility Act, which will:

Give businesses 24 weeks to spend their PPP loan proceeds instead of 8 weeks.
Require that only 60% of proceeds be spent on payroll expenses, versus the previous 75% constraint.
Extend the deadline that businesses must rehire workers, from June 30 to December 31.
Provide a loan repayment term of five years instead of two years for any loan dollars not forgiven.
Allow borrowers to defer the employer share of Social Security taxes (6.2%), regardless of whether the borrower receives forgiveness or not. 50% of deferred Social Security tax would be due in 2021, with the other 50% due in 2022.

These provisions will allow many small businesses to stretch their dollars even further, and not necessitate the issuance of large bonuses or hazard pay to use up the funds.

Note one significant change: The original PPP rules allowed partial loan forgiveness if a company used less than 75% of the loan for payroll, but the new House and Senate bill states that none of the loan will be forgiven if the new 60% threshold is not met. The entire loan will need to be repaid if payroll expenses are less than 60%.

The President is expected to sign the legislation soon.

We are awaiting further guidance on many additional questions that this legislation raises. We will provide additional information as we continue to learn more.

The information contained in this post may not reflect the most current developments, as the subject matter is extremely fluid and constantly changing. Please continue to monitor Yeo & Yeo’s COVID-19 Resource Center for ongoing developments. Readers are also cautioned against taking any action based on information contained herein without first seeking professional advice.

The coronavirus (COVID-19) pandemic may pose a double whammy for seniors. The elderly are considered the most vulnerable population for medical complications associated with the virus. They’re also prime targets for COVID-19 scams. If you’re a senior — or have elderly relatives and friends — read and share the following information.

Everyone a potential victim

There’s nothing new about fraud perpetrators attacking seniors, who may be less savvy about phishing emails and online scams and more trusting of strangers. As a study conducted by the FINRA Investor Education Foundation and several other groups found, a major risk factor for losing money to scams is social or physical isolation, which is more common among the elderly.

Of course, during the current crisis, everyone’s a potential fraud victim. As with all consumers, seniors should watch out for:

Emails promoting vaccines and cures that contain malware-laced attachments,
Fake charities soliciting donations,
Scams that promise high returns for investing in COVID-19-related stocks, and
Requests for personal information or a fee to receive an economic impact payment from the federal government.

Senior benefit scams

Some scams are tailor-made for older Americans. For example, the nonprofit Senior Medicare Patrol warns that perpetrators are contacting Medicare recipients and offered sham COVID-19 tests and treatments in exchange for Medicare numbers or money. It’s important to remember that actual government agencies will never call and ask for personal or payment information. As Medicare.gov instructs, “if someone calls asking for your Medicare Number, hang up!”

With local Social Security Administration (SSA) offices temporarily closed, scammers are also trying their luck with benefit payment recipients. The SSA states emphatically that, “any communication that says SSA will suspend or decrease your benefits due to COVID-19 is a scam, whether you receive it by letter, text, email, or phone call.” You can report suspicious contacts at oig.ssa.gov.

Other threats

Fraud perpetrators have also updated several old frauds for the COVID-19 age — including the classic “grandchild” scam. You could receive a phone call claiming that a grandchild is sick or in trouble and needs your help. Fraudsters usually ask for payment via a gift card and instruct you to act fast. Gather facts from the caller, then hang up and verify the information with other relatives. Chances are, your grandchild is just fine.

Also be wary of anyone using the virus to pitch home services. If someone offers to clean and sanitize your home, check the business’s reputation online or with the Better Business Bureau and make sure you don’t pay the service provider until the job is complete. As an extra precaution, you might invite a friend or relative to be with you when cleaners are in your home.

Reporting crime

This is an anxious time for everyone, but elderly Americans need to be on guard even more than other segments of the population right now. If someone attempts to scam you or a family member, contact law enforcement and, if applicable, the proper government agency. Reporting these crimes is essential to stemming senior-targeted fraud.

Like the coronavirus (COVID-19) pathogen itself, incidents of COVID-19 fraud are surging and financial losses are piling up. The Federal Trade Commission (FTC) reports that the number of 2020 COVID-19-related complaints doubled in just one recent week. As of March 31, losses attributed to the outbreak stood at $5.9 million. Here are some of the scams criminals are perpetrating.

Bad medicine

Although travel and vacation company disputes top the FTC’s most recent list of COVID-19 complaints, most of these relate to cancellations and refunds, not fraud. Much more worrying for American consumers are the many online vendors hawking suspect treatments and tests. On March 9, the FTC sent warning letters to seven companies advertising everything from virus-fighting tea to essential oils. The Commission has informed companies that don’t immediately cease making such false claims that they face legal action.

For the record, the Food and Drug Administration hasn’t approved any vaccines, drugs or at-home tests as effective in the fight against the virus. Fortunately, it’s relatively easy to protect yourself from ineffective and potentially dangerous products. Simply ignore pitches that sound too good to be true.

If you want to get tested for COVID-19, visit the Centers for Disease Control and Prevention’s (CDC’s) website at cdc.gov for information. Contact your healthcare provider directly if you’re experiencing symptoms of the disease.

Law enforcement on the case

The FBI and U.S. Attorney’s office are also closely tracking COVID-19 fraud. A recently assembled task force warns consumers and businesses about several novel scams, including:

App malware. Fraudsters are creating new — and hacking existing — mobile apps that supposedly provide COVID-19 data. In fact, the apps are infected with malware that gathers financial and personal information.

Healthcare provider scams. Some people have received calls from a “doctor” or “hospital” that claims it treated a family member and demands payment. Know that recent federal legislation makes most COVID-19 testing and treatment free.

Hot stocks. There’s nothing new about investment scams, but con artists are using the pandemic to promote dubious stocks. You might hear, for example, that a pharmaceutical company’s stock will soon go through the roof because it has a miracle drug in the pipeline. Bottom line: Check with a trusted advisor before investing your money.

Exercise skepticism

As always, exercise caution when answering the phone, opening email and reading texts. These days, scammers may claim to represent the CDC or another government agency to try to con you out of money or personal information. When in doubt, be skeptical. And if you believe you’ve fallen for a scam or are worried about protecting your assets or your business from fraud, contact us.

The IRS recently issued frequently asked questions (FAQs) regarding retirement plan distribution and loan relief under the Coronavirus Aid, Relief and Economic Security (CARES) Act. This relief applies to qualified individuals affected by the novel coronavirus (COVID-19) pandemic. It expanded distribution options and favorable tax treatment, increased plan loan limits and delayed repayment of outstanding plan loans.

The FAQs explain that the IRS plans to release further guidance under Internal Revenue Code Section 2202 “in the near future.” It will apply principles originally articulated in Notice 2005-92, which interpreted distribution and loan relief enacted in response to Hurricane Katrina. Meanwhile, here are some highlights of the CARES Act FAQs:

Optional relief. Employers may choose whether to amend their plans to provide the Sec. 2202 distribution and loan relief, which includes allowing qualified individuals to delay repayment of outstanding plan loans for up to one year. They may also adopt some portions of the relief but not others — for example, the distribution relief but not the plan loan rules or loan repayment schedules.

Waived distribution restrictions. COVID-19-related distributions are treated as meeting certain restrictions ordinarily applicable to 401(k) plans and certain other plans — for example, the requirement that 401(k) plans prohibit the distribution of elective deferrals before specified events. But other distribution limits (for instance, the spousal consent rules) aren’t waived simply because the distribution, if made, could qualify as a COVID-19-related distribution.

Tax treatment of distributions. COVID-19-related distributions are generally taxable, though not subject to the 10% tax on early distributions. They’re reported as income ratably over a three-year period, unless the individual reports the full amount as income for 2020. Qualified individuals who receive a distribution that meets the requirement for a qualified distribution may treat the distribution as such on their federal income tax returns, regardless of how an employer or plan reports or characterizes the distribution.

Reporting of distributions. Plans must report COVID-19-related distributions on Form 1099-R, even if the individual repays the distribution in the same year. More information about reporting such distributions will be provided “later this year,” according to the IRS.

No obligation to accept repayments. The FAQs affirm that plans generally aren’t required to accept rollovers of COVID-19-related distributions.

Tax treatment of repayments. Distributions repaid to an eligible retirement plan within three years are treated as rollovers (and, thus, not taxable). An example in the FAQs shows how to handle repayment of a COVID-19-related distribution in 2022 (after one-third of the distribution has been reported as income in each of the two preceding years) for federal income tax purposes. The Katrina notice provides additional examples. Qualified individuals must report repayments on Form 8915-E, which will be issued later this year.

Plan loans. If loan repayments are suspended, payments after the delay must be adjusted to reflect the delay and any interest accrued during the delay.

It’s important for employers to understand how the CARES Act relief and these FAQs affect plan administration and what plan amendments may be required. Please contact us for assistance.

Economists will look back on 2020 as a year with a distinct before and after. In early March, most companies’ sales projections looked a certain way. Just a few weeks later, those projections had changed significantly — and not for the better.

Because of the novel coronavirus (COVID-19) pandemic, businesses across a variety of industries are revising their sales compensation models. Nonprofit workforce researchers WorldatWork released a report in late April indicating that 36% of organizations had begun addressing sales compensation in light of the crisis, and another 49% were developing plans to do so.

If your company is considering changes to how it compensates sales staff in a drastically changed economy, here are three of the most common actions being implemented according to the survey:

1. Adjusting sales quotas. Of the organizations surveyed, 46% were adjusting their quotas to account for the pandemic’s impact. For many businesses, this means providing “quota relief” to salespeople who find themselves in a reluctant buying environment. Of course, any adjustment should be based on a realistic and detailed forecast of what your sales will likely look like for the current period and upcoming ones.

2. Modifying performance measures. The report indicates that 44% of organizations will modify how they measure the performance of their sales staffs. Whereas a sales quota is a time-bound target assigned to an individual, performance measures encompass much wider metrics.

For example, you might want to amend your average deal size to account for more conservative buying during the pandemic. This metric is typically calculated by dividing your total number of deals by the total dollar amount of those deals. Also look at conversion rate (or win rate), which measures what percentage of leads ultimately become customers. Scarcer leads will likely lead to a lower rate.

3. Lowering plan thresholds. Survey results showed 36% of organizations intend to lower the plan thresholds for their sales teams. From a compensation plan perspective, a threshold describes what performance level qualifies the employee for a specified payout. This includes a max threshold to identify outstanding sales performances during a given period.

The pandemic-triggered economic downturn serves as a prime, even extreme, example of the kinds of external, macroeconomic factors that can alter the effectiveness of a plan threshold. When looking into corrective action, it’s critical to go beyond the usual adjustments and conduct analyses specific to your company’s size, market and industry outlook.

Setting sales compensation has never been a particularly straightforward endeavor. Businesses often tweak their approaches over time or even implement completely new ways when competitively necessary — and this is during normal times. Our firm can help you assess your sales figures since the pandemic hit, forecast upcoming ones and design a compensation model that’s right for you.