This article was originally published on March 25th and is being updated as new information becomes available.
We created this Q&A as a general, high-level guide for our clients on common business items relating to the COVID-19 pandemic. We will be continually updating when new information becomes available.
What general advice are you giving to clients?
There’s nothing technical, fancy or elaborate about the basic advice we are sharing with clients. For most clients, small and large, the following principles are applicable:
- Conserve cash. Preserving cash is of utmost importance to weather this storm.
- Develop a 30-60-90 day plan of operations. No one knows exactly how long this crisis will last or how quickly the economy will rebound. Update the documents over time as appropriate. Your plans will change with new events and circumstances.
- Communicate with the bank early and often. Request increased borrowing capacity on the line of credit. Establish a line of credit if one is not in place. Request advance waiver of restrictive loan covenants. Banks have been instructed to be lenient with customers in this crisis. Talk to your banks in advance about deferring loan payments for a short period of time.
What are some specific ways to conserve cash?
- Make quick decisions regarding operating expenses. Quickly identify which expenses are critical, which expenses can be deferred, and which expenses can be eliminated.
- Make quick decisions regarding staff. No one wants to lay off staff, even if just for a few weeks. Doing so may be exactly what is necessary to ensure that all employees have a job to come back to when this crisis passes. This is a business decision, not a personal decision.
- Suspend owner paychecks and draws until cash flow is back to normal. If it is not possible to suspend entirely, reduce as much as possible.
- Keep customer invoicing current and stay on top of collections. It’s a challenge to be calling on customers knowing they might be in a tough spot. Consider payment terms for customers with past due balances or customers struggling to pay current invoices. Partial payment is better than no payment.
- Ask landlord for temporary deferral on rent payments.
- Communicate with vendors and request extended payment terms. Be honest about the ability to pay.
- Communicate with equipment leasing companies and request deferral of payments.
- Eliminate all travel. With most states issuing shelter in place or stay at home orders, this becomes a lot easier to enforce and should be the expectation for the foreseeable future.
Are there any payments that should NOT be deferred or paid?
Yes! Regardless of the cash flow crunch, the following payments carry penalties and/or detrimental consequences for being late and should be paid on time:
- Employees’ payroll for all hours worked.
- All federal state and local payroll tax deposits.
- Remittance of employee deferrals and employer match into the company’s retirement plan.
- Employee health insurance policy premiums. Most companies are billed monthly for the company’s health insurance plan. Paying late could result in termination of coverage.
- Reach out to their insurance carriers to see what payments are due now. If policies are paid up, or if there are grace periods, make sure it is understood when payments need to be made to avoid termination or lapses in coverage.
- Life insurance premiums. Same as the comment above, be sure it is understood when payments need to be made to prevent lapses in or termination of coverage.
Speaking of payroll, any additional advice to give?
Most importantly, make sure employees are paid timely and receive checks in a timely manner. Many employees depend on their checks on the scheduled pay dates. Other useful tips include:
- Requesting employees who are paid by check switch to direct deposit.
- Alternatively, utilize pay cards instead of checks for employees not on direct deposit. Most third-party payroll processors offer pay cards as an option.
- If employees have mobile access to checks, make sure they have information on how to access pay stub info so that they do not have to come to the office to retrieve deposit advices or wait for the mail.
What other considerations regarding employees should I be aware of?
Many of our clients offer retirement plans for their employees (401k, 403b, SIMPLE IRAs, etc.). Depending on the plan design, there might be an opportunity for the following:
- Temporary suspension of employee deferrals
- Hardship loans for employees
It may be tempting to terminate a retirement plan immediately, but we strongly caution against making quick decisions regarding retirement plans.
A comprehensive guide to retirement plan considerations can be found here.
What do I need to consider if I have to move my accounting function to work remotely?
- Make sure cash receipts process is uninterrupted.
- Someone is available to get mail and deposit checks at the bank.
- Continue to work Accounts Receivable (AR) collections.
- Accounts Payable.
- Ensure someone available to print checks to keep vendors paid.
- Maintain effective internal controls and stay diligent. Times of uncertainty and panic can lead normally trustworthy employees to poor decisions. Maintain proper levels of oversight, even if you have to do remotely.
- Consider use of ACH and/or bill pay through bank.
- Consider the use of third-party bill paying applications (Bill.com is a favorite of ours – as a bonus, it integrates with QuickBooks).
- Instruct employees to verbally confirm any instructions received from their mangers by email or text for wiring or sending ACH payments as this crisis is prime opportunity for scammers to profit.
- Move to the Cloud.
- If you are using QuickBooks Desktop and the file is stored on your local server, consider moving to a hosted environment. We recommend Right Networks for QuickBooks hosting.
- Check to see if any other applications running on local servers can be moved to the cloud
- Cross-train employees in case a team member becomes ill and is unable to work.
- Make sure all essential functions have at least two people trained (Cash receipts, accounts payable and payroll)
- Communication is key.
- Delegate leadership of teams to capable managers so you can focus on keeping the business alive. Task team leaders with regular team check-in meetings/calls to ensure continued productivity.
- Be clear with staff working remotely regarding expectations. This isn’t a vacation – duties, responsibilities, deadlines all exist the same as they did when you came to the office to work. Ask employees to lean in and give a little extra to help weather the storm.
Can Blue & Co. help if I am struggling to keep accounting functions afloat while working remotely?
Yes! We have staff that are available to help. Please contact your Blue & Co. advisor or fill out our contact form to connect with someone who can help. Our team can help with everything from IT Security issues, moving to the cloud, to maintaining basic internal controls while working remotely.
What do I need to know about the Families First Coronavirus Response Act (FFCRA)?
The provisions of the Emergency FMLA are different than regular FMLA and will affect the majority of our clients. These provisions are set to be effective April 1 and are not retroactive. We will be sharing some updates on this topic soon.
The U.S. Department of Labor issued a Q&A on the FFCRA that answers many questions. This document is updated frequently. The Q&A can be accessed here.
I may need to lay off employees. What do I need to know?
If you have specific questions about how to lay off employees, we suggest you contact your attorney.
Generally speaking, laid-off employees will be eligible for unemployment. Each states’ unemployment laws are slightly different regarding eligibility, when benefits begin, and what unemployed workers must do to continue to receive benefits. Links with information relevant to our states’ unemployment laws are below:
- Indiana Department of Workforce Development
- Ohio Office of Workforce Development
- Kentucky Education and Workforce Development Cabinet
Important Note: if you employ more than 100 full-time workers and plan to lay off at least 50 workers, the WARN Act requirements of the Department of Labor (DOL) may apply, unless the DOL waives these requirements. See the DOL website for more.
What about the SBA Loans available?
SBA loans will be a viable option for many clients. Please see here for information from the SBA regarding the loans and the application process. Our suggestion is to apply for these loans quickly. We are available to assist you with these applications.
What else should I consider?
We recommend you reach out to your insurance brokers regarding specific coverages. It is unlikely, but this event may qualify as business interruption. It is also important to understand your Workers Compensation coverage and what is covered should a claim arise from an employee who is exposed to and contracts COVID-19 on the job.
We also recommend keeping an eye out for scams during this time of disruption. We will be releasing more guidance soon about cyber security and avoiding threats/scams during this time. In the meantime, if you have questions about how to protect your organization, please contact your Blue & Co. advisor or reach out to us on our contact form.
What else is coming from the government in terms of relief?
Our website has several summaries of legislation contained in the CARES Act, signed into law on March 27, 2020. In addition to articles on the website, we are offering free webinars to cover various topics in the CARES Act. Links below:
- The Coronavirus Aid, Relief and Economic Security (CARES) Act
- The CARES Act: Economic Injury Disaster Loan (EIDL) Program vs. Paycheck Protection Program (P3)
- Webinar: An Overview of the CARES Act
- Employee Retention Credit Overview & Update
- Updates on the Paycheck Protection Program (PPP or P3)
- PPP Loan Forgiveness Application
- PPP Loan Forgiveness Considerations for Not-For-Profits
Where else can I look for help?
In addition to your team at Blue & Co., the following reputable resources are available:
- U.S. Department of Labor
- U.S. Department of Labor: Families First Coronavirus Response Act: Questions and Answers
- U.S. Department of Labor WARN Act
- Centers for Disease Control and Prevention (CDC)
- Indiana Department of Workforce Development
- Ohio Office of Workforce Development
- Kentucky Education and Workforce Development Cabinet
- Small Business Administration Loan Programs
- U.S. Chamber of Commerce
Please continue to monitor our Coronavirus Resources and Information Page for updates.
