PPP Flexibility Act Eases Rules for Borrowers Coping with COVID-19

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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:

1. Regulation S-K, Item 10(e) covering SEC filings,
2. Regulation G, which provides instructions for earnings releases, and
3. 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.

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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:

1. 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.
2. 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.
3. 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.

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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.

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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.

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.

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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.

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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.

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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.

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Sustainability reports explain the impact of an organization’s activities on the economy, environment and society. During the novel coronavirus (COVID-19) pandemic, stakeholders continue to expect robust, transparent sustainability reports, with a stronger emphasis on the social and economic impacts of the company’s current operations than on environmental matters.

Investors, lenders and even the public at large may pressure companies to issue these supplemental reports. But the information they provide isn’t based on U.S. Generally Accepted Accounting Principles (GAAP). So, is it worth the time and effort? One way to make your company’s report more meaningful and reliable is to obtain an external audit of it.

What is a sustainability report?

In general, a sustainability report focuses on a company’s values and commitment to operating in a sustainable way. It provides a mechanism for communicating sustainability goals and how the company plans to meet them. The report also guides management when evaluating corporate actions and their impact on the economy, environment and society.

During the COVID-19 crisis, stakeholders want to know how your company is handling such issues as public health and safety, supply chain disruptions, strategic resilience and human resources. For example:

• How is the company treating employees during the crisis?
• Are workers being laid off or furloughed — or is management implementing executive pay cuts to retain its workforce?
• What is the company doing to ensure its facilities are safe for workers and customers?
• Is the company donating to charities and encouraging employees to participate in philanthropic activities during the crisis, such as volunteering at food pantries and donating blood?

Stakeholders want assurance that companies are engaged in responsible corporate governance in their COVID-19 responses. Sustainability reports can showcase good corporate citizenship during these challenging times.

Why do you need an external audit?

There aren’t currently any mandatory attestation requirements for sustainability reporting. That means companies can produce reports without engaging an external auditor to review the document for its accuracy and integrity. However, without independent, external oversight, stakeholders may view sustainability reports with a significant degree of skepticism. That’s where audits come into play.

Many organizations have developed standardized sustainability frameworks, including the:

• Carbon Disclosure Project (CDP),
• Dow Jones Sustainability Index (DJSI),
• Global Initiative for Sustainability Ratings (GISR),
• Global Reporting Initiative (GRI),
• International Integrated Reporting Council (IIRC),
• Sustainability Accounting Standards Board (SASB), and
• United Nations’ Sustainable Development Goals (SDG).

External auditors can verify whether sustainability reports meet the appropriate standards, and, if not, adjust them accordingly. In addition, numerous attestation standards govern the audit of a sustainability report, including those from the American Institute of Certified Public Accountants, the International Standard on Assurance Engagements and the International Organization for Standardization.

Need help?

Many companies agree that a sustainability report is an important part of their communications with stakeholders. But there’s little consensus on the approach, topics or non-GAAP metrics that should appear in sustainability reports. We understand the standards that apply to these supplemental reports and can help you report sustainability matters in a reliable, transparent manner.

© 2020

Until recently, the number one concern for many employers was finding and retaining top talent. Today, to fight the novel coronavirus (COVID-19), many of those same companies are being forced to shed workers en masse. If you haven’t yet pared down your workforce or need to do some more trimming, what are your options? How you carry out a workforce reduction — and how you maintain contact after the cutbacks — can either engender loyalty and keep employees wanting to come back, or it can send them away feeling disgruntled.  

As employers trim their employee rosters, they have several options, including:  

• Reduce employee benefits — for example, 401(k) matching contributions,
• Furlough workers,
• Lay off some or all of staff, or
• Cut nonexempt employees’ hours.

(Note: Reducing the hours of salaried exempt employees doesn’t allow you to cut their pay proportionately under the Fair Labor Standards Act.)

The less drastic the measures, the easier it will be to keep valued workers available to rejoin the company when you need them. In part, it depends on how much time has elapsed since they were let go. Don’t underestimate the importance of the way you say goodbye. It will have an impact not only on your ability to bring those employees back on board, but could affect your “brand” as an employer. Former employees who feel mistreated are only too happy to write about it on social media.

Cutting Hours

Cutting nonexempt workers’ hours lets you hang on to more employees, of course. While nobody wants to see their hours cut, they dislike being laid off even more, especially when unemployment rates are spiking. Not only do they retain some income, but they’re less likely to feel singled out for punishment, since more of their coworkers are in the same boat.

Note: Federal assistance (under the CARES Act) to employees harmed economically by the COVID-19 outbreak isn’t limited to employees who lost their jobs entirely. The law’s “Pandemic Unemployment Assistance” program can provide funds to workers who aren’t eligible for regular unemployment compensation because they still have some employment income.

A special provision of the CARES Act focuses on supporting employees whose hours were reduced in a work-sharing arrangement. The benefits vary according to whether states — which administer unemployment programs — already provide some support for employees forced to take reduced hours. Twenty-seven states have such programs.

Employees permitted to work with reduced hours are generally able to hang on to some of their employee benefits, which often represent a significant part of their total compensation. The picture gets more complicated, however, when employees are furloughed.

Employee Benefit Implications

With a furlough arrangement, the employee’s job is essentially put on hold. But in some respects, the employee is still under your economic umbrella. Plus, there’s an expectation that he or she will eventually return to full-time employment.

The legal impact of a furlough, as it pertains to employee benefits, can vary according to its duration. For example, a health insurance company might not agree to maintain coverage for furloughed employees just because you continue to pay your customary share of the cost of their health benefits.

Your contract with your carrier might become void if you’re covering people who aren’t working for you now and might not be employed by you in the foreseeable future. It’s critical to read the fine print on insurance contracts before making any promises to furloughed employees.

There’s generally more leniency with 401(k) plans. While you can’t deduct any payroll-based employee payments to a 401(k) plan if an employee isn’t receiving a paycheck, employees can deal directly with the 401(k) provider for some transactions. For example, if the furloughed employees want to take advantage of the CARES Act’s liberalization of plan loan rules, they can do so but need to make payments on a loan by means other than payroll deductions.

When Termination Is Your Only Option

Using a furlough strategy can improve your chances of keeping valuable employees available to return to full-time status when you’re able to reopen your doors. But sometimes, a simpler straight layoff (which is similar to a termination) is your only option, depending on your industry and the economy. Even then, you can still do your best to avoid losing those valued employees forever.

One key to maximizing the chances of being able to rehire laid off employees later is to be as generous and sensitive as you can when you pull the trigger. That can include helping terminated employees, either directly or through an outplacement service, to take advantage of available state and federal unemployment benefits.

If you can afford to pay a severance benefit, that can instill loyalty as well. However, be aware that such a policy needs to be administered consistently. Also, if you structure a severance payment plan as a series of periodic payments instead of as a lump sum, that could delay a laid-off employee’s eligibility for unemployment benefits. Why? Your state might treat it as the equivalent of ongoing employment income.

Keep Talking

If you want to hold onto your workforce, don’t neglect contacting your staff in general, especially those you’re most interested in hiring back when the time comes. It’s best to avoid making an actual commitment to rehire them, but you can still keep communication friendly. The longer workers go without hearing news directly from you, the more likely they are to assume the worst and start looking elsewhere.

Communication doesn’t have to be formal, but it should be regular. If there’s news you can share, your laid-off workers are probably eager to hear it. Whatever you do — group emails, texts, letters, Facebook posting on your company’s page or occasional phone calls to your most valued workers — don’t neglect staying in touch so that, when times get better and you prepare to turn the “closed” sign to “open” your loyal staff is right there beside you.

Chances are, employers don’t need the force of law to make them care about the health of their employees, especially during the novel coronavirus (COVID-19) pandemic. But it’s still important to know what the federal workplace safety agency — the Occupational Safety and Health Administration (OSHA) — has to say about employees returning to their jobs with a measure of confidence in their own safety.

OSHA’s recent “Guidance on Preparing Workplaces for COVID-19” report offers a helpful blueprint. However, the agency stresses it’s “only advisory in nature” and doesn’t set any new standards. Also, it falls under the underlying law’s overall requirement that employers “provide their employees with a workplace free from recognized hazards likely to cause death or serious physical harm.”

Below are some points from the OSHA blueprint to help you consider workplace safety through a new lens.

Assess Your Risk Profile

Step one in working toward a hazard-free workplace is to make an “infectious disease preparedness and response plan,” OSHA states. (You might need to recycle your plan at some future time when another aggressive virus makes the rounds.)

Consider the sources of COVID-19 that workers might be exposed to. Those include both sources at work — namely coworkers and other people who regularly come to your workplace — and workers’ potential exposure outside work.

For example, employees who commute to work via public transportation might face a higher risk of being exposed than those who drive their own cars. Similarly, employees with spouses or family members who work on the front lines, such as in a hospital clinical setting, could pose a greater risk than others.

While you can’t discriminate against employees who might be at greater risk than others, having a complete risk exposure picture can guide your overall preparedness strategy. You might have considered that the chances of a viral outbreak at your workplace were minimal before thinking about potential indirect sources of exposure, and thus decide to take greater precautions than you otherwise would. 

Workplace Control Categories

“Workplace controls” for infection prevention, as OSHA calls them, fall into four buckets:

• Engineering controls.Physical measures include using high-efficiency filters, increasing ventilation, and installing physical barriers such as clear plastic sneeze guards.
• Administrative controls.This involves HR policies, safety equipment and procedure training.
• Safe work practices.Examples include “no-touch” trash cans, alcohol-based hand rubs and required handwashing.
• Personal protective equipment (PPE).This includes gloves, goggles, face shields, etc. Note: While there’s no COVID-19-specific OSHA PPE standard, some regulations may apply here. One is general industry PPE standards laid out in 29 CFR 1910 subpart I, governing when the use of gloves, eye, face and respiratory protection is required.

As the above categories indicate, infection prevention measures highlighted by OSHA aren’t limited to frequent handwashing and disinfecting of workplaces. They cover work policies you might not already have in place, for example, when employees should work from home or call in sick.

And while this isn’t suggested by OSHA, you might review your paid sick leave policy to ensure that it doesn’t discourage sick employees (potentially with COVID-19) to report for duty to avoid forfeiting pay.

Other possible policy responses to consider include staggered work shifts to lower the density of employees at work at any given time, and other ways to allow workers to spread out more (“social distance”).

Employees’ Obligations

Employees should be informed of the right person or department to contact if any symptoms consistent with COVID-19 arise, and what will happen next. Ideally, you’ll have multiple options ranging from sending the employee home immediately to moving the employee’s workstation to a more remote site. “Although most worksites do not have specific isolation rooms, designated areas with doors may serve as isolation rooms until potentially sick people can be removed from the worksite,” OSHA suggests.

Not every respiratory infection is COVID-19 related, of course. But OSHA discourages employers from requiring every sick employee to obtain documentation from a healthcare professional before deciding how to handle the situation. Erring on the side of caution is the practical solution because swamped medical offices might not be able to generate such documentation.

“Risk Pyramid”

OSHA’s guidance also features a “risk pyramid” that classifies hazard levels for different kinds of jobs and workplaces. It’s encouraging to note that OSHA believes most workers “will likely fall into the lower or medium exposure risk levels.”

Jobs with “medium” exposure risk include those “that require frequent and/or close contact with people who may be infected but are not known or suspected” to be infected. The least risky (“lower exposure risk”) jobs “are those that do not require contact with people known to be, or suspected of being” infected, nor frequent contact with the general public.”

In contrast, jobs with “very high” exposure risk include healthcare workers and those who perform autopsies working with known or suspected COVID-19 patients. The next level down in the risk spectrum are jobs with just “high” exposure risk. This includes healthcare delivery personnel (for example, ambulance drivers) and medical support staff working around known or suspected COVID-19 patients.

Your infection minimization strategy and policies can be suited to the risk classification of the jobs your employees have. For example, for jobs in the “lower exposure risk” class, special engineering controls are “not recommended,” beyond any that may already be in place for risks not specifically associated with COVID-19. In contrast, some engineering controls are recommended for medium exposure risk jobs. Those include “physical barriers, such as clear plastic sneeze guards, where feasible.”

Final Thoughts

As noted, OSHA’s suggestions are merely that — suggestions and not strict requirements. It’s helpful to read the OSHA guidance to ensure you’re aware of how contagions spread. But for your company, you and your trusted managers and advisors are in the best position to evaluate the risks that exist in your workplace, and how to minimize them.

The novel coronavirus (COVID-19) pandemic has caused difficulties for millions of businesses — from family-owned restaurants and niche manufacturers to multinational airlines and oil companies. As the economy slowly reopens across the country, old ways of doing things clearly won’t work for most business operations.

But there’s a potential upside: Major economic disruptions may provide opportunities for managers and owners who can reject the status quo and “think outside the box.” Over the short run, businesses that “pivot” in a timely manner may be able to stay afloat until things decisively turn around for the better. There also may be long-term opportunities to add value and update your existing business model.

Old Concept, New Twist

Pivoting isn’t a new concept. Some of the most profitable and recognizable businesses in the country changed paths midstream before they truly became successful. 

A classic example is Starbucks. The company didn’t start out as a franchiser of coffee shops. Initially, it sold coffee makers, bulk coffee beans and other items before shifting to its current model of coffee houses with a sense of community, like those in Italy and other European countries. Now it seems as if Starbucks has a coffee shop at every busy intersection in the country — and a loyal following of coffee aficionados.

What makes the current situation different is the sense of urgency and uncertainty. With some states in various phases of slowly reopening, local businesses may have to modify their operations and adapt to the “new normal.” What’s more, astute business people are seizing on pandemic-inspired opportunities for creating goodwill. (See “Successful COVID-19 Pivots,” at right.)

8 Tips to a Successful Pivot Strategy

Pivoting requires a transition period, especially if you’re shifting to a new product line or paradigm. It’s not as easy as snapping your fingers and announcing a change of plans. Here are eight practical suggestions to smooth out the rough edges.

1. Communicate. Let your customers know that you’re still there to serve them and that safety is your main concern. Explain the extra precautions you’re taking — including use of employee face masks, contactless payment methods, and cleaning procedures — to ensure that doing business is a safe experience.

Also, tout new products and services — such as free delivery or curbside pickup — on your website. If customers don’t know what you’re selling, they won’t be buying. Expand the reach of your social media accounts.

2. Modify your business hours. Whether you’re an essential business that’s been open throughout the lockdown or you plan to reopen soon, shorter business hours may be necessary. You’ll need more time for cleaning, and you might need to scale back nonpeak business operations to control labor costs. Many businesses are also carving out special senior-only shopping times, say, between 8 a.m. and 10 a.m. Post changes in your business hours at the physical location, as well as on your website and social media.

3. Adapt to meet new demands and needs.Be creative about serving customers who are staying at home. Can you offer pick-up and/or delivery services? If a car dealership can drive a new vehicle to a buyer’s residence, can you do the same for your products? Or can you use teleconferencing to walk a client through the steps of a purchase?

4. Think ahead.If people can’t buy your services or goods right now, you may be able to encourage them to purchase later. For example, if you own a retail outlet that’s had to close its doors, you might offer gift cards for future purchases at discounted rates. When restrictions in your area have been lifted, customers can cash in. In the meantime, you’ve boosted current cash flow.

5. Update your website.Now may be a good time for a complete overhaul of your website. Test your online order system from the perspective of a customer and consider ways it can be updated to facilitate customer orders.

At the very least, freshen up your site and make it more visually appealing. Include all the latest information, ditch outdated or inaccurate information and fix any broken links. When it makes sense, hire a professional to handle the changes. In addition, if you don’t already have an app, now might be a good time to create one to allow customers to order from your business using their smartphones.

6. Learn a new skill.Faced with necessity, managers and owners may delve into areas they previously hadn’t touched. For instance, if you aren’t proficient in social media, navigate new platforms. Or you could become adept at scheduling pick-ups through software. Or maybe you can do some administrative work that had previously been delegated to others.

7. Protect your employees.Remember that safety concerns should extend to both customersand employees. Let your staff know about the measures you’re taking to keep them clean and safe in the workplace. In times of crisis, owners and managers should practice what they preach, because employees look to leaders to set the example.

Workers also appreciate honesty. So, inform them as soon as possible if layoffs are coming, benefits are being scaled back or bonuses won’t be paid this year. When the economy starts turning around, companies will likely continue to face the long-term talent shortages they’ve experienced in recent years. These challenging times present an opportunity to build long-term loyalty among your workers.  

8. Monitor your pivot strategy regularly.Don’t rely on gut instinct or quarterly financial statements to monitor your company’s performance. Timely, accurate financial reporting is key during volatile market conditions. Consider producing daily or weekly “flash” reports that highlight what’s working and what’s not — and then take corrective measures. For example, you might need to adjust your pricing, staffing or hours of operation to improve profitability.

Which metrics should be included in your company’s flash report? Keep a close watch on revenue, payroll costs, and sources (and uses) of cash. Your CPA can help determine what other metrics would be most beneficial in your situation.

For example, a restaurant’s flash report might break down revenue by day of the week and compare those numbers to the previous week, the same week in the previous year and the budget. Other important metrics for a restaurant might include average order size, food costs, gross margin and spoilage.

A Brave New World

During the COVID-19 crisis, there’s no universal pivot strategy that will work for every business. Contact your financial, tax and HR advisors to help identify, monitor and seize potential opportunities in your industry.