As the Covid-19 Pandemic continues to hit the U.S. economy, businesses are struggling to maintain afloat. As a result, consumers, who are now either unemployed or dealing with cuts in pay are having to reprioritize what goods and services to consume. This has led to a surprise growth in some business sectors, while others continue to deal with dropping demand.
The new challenges posed by the Covid-19 Pandemic are being overcome through the implementation of ingenuity: creating new business strategies. Businesses that are implementing new business models are expected to see increased sales, despite restrictions local authorities have enacted to reduce the spread of the Coronavirus.
There are already several business sectors that are implementing new strategies, including:
- Restaurants :
– If consumers cannot dine at the facility, restaurants are now offering online ordering and delivery service.
– Groceries and paper goods can now be purchased at many restaurants.
- Businesses with more than 50 employees (including large, multinational corporations) are enabling their employees to work from home by setting up home offices.
- Furniture stores, seeing an increase in the need for office furniture as more workers are working from home, have increased inventory and are providing quick delivery of office equipment to employees homes.
- Grocery stores have begun offering both curb side pickup and same day delivery of grocery items .
- Telehealth – With the use of a wide variety of modern technology and services, healthcare professionals can now impart non-clinical services, such as provider training, administrative meetings, and continuing medical education, in addition to clinical services, to organizations worldwide.
- Telemedicine –Health care professionals are now utilizing telecommunications (computer or mobile phone) to evaluate, diagnose and treat patients remotely. This trend is quickly becoming part of the new norm in medical care.
Lastly, small businesses should remember to continue implementing that magic ingredient that keeps clients coming back: Good customer service and personal interaction ! Always remember these four steps:
- Put yourself in the place of the consumer: be ready to provide not only great service, but respect any precautions that the client may follow at home.
- Be honest with consumers: Offer solutions to what they truly need.
- Go the extra mile. Understand that we are all in the same boat, trying to get past this pandemic. Clients are feeling what you feel. And,
- Keep in contact with clients (email, social media). Let them know you are there if they need you.
In the wake of these unprecedented times, the world economy is changing the landscape of how we conduct business, and in retrospect, is expected to last beyond the Covid-19 pandemic. Particularly as businesses begin to save on office rental costs, consumers save time by having groceries ready for curb-side pickup, and even virtual doctor visits becoming more common, the full potential offered by digital communication in the form of e-commerce will finally reveal itself.
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Small business owners were given an extra reason to celebrate July 4th, as President Trump signed into law an extension of the SBA’s Payment Protection Program into law. Small business owners now have until August 8th to apply for a small business loan to meet employee payroll, rent, utilities, and other expenses. The original deadline to apply for the PPP loan assistance was this past Tuesday, June 30th.
With over $130 Billion left in funds from the approximate $660 Billion approved for small businesses, Congress would have had to reallocate the funds elsewhere had the original application deadline not been extended. Provided small business utilize 60% of the funds to cover employee’s payroll, the loans can be forgiven, essentially becoming a grant.
When Congress reconvenes on July 20th following a two week recess, it must then decide how to allocate the remaining budget before the new filing extension ends on August 8th. The new PPP deadline extension also grants Congress time to draft another, more refined economic relief package aimed at assisting businesses impacted the hardest by the economic crisis as a result of the Coronavirus Pandemic .
- Sara Hansen, Forbes Magazine : https://www.forbes.com/sites/sarahhansen/2020/07/04/trump-signs-ppp-extension-bill-giving-small-businesses-another-5-weeks/#14e5239e59bf
- Matthew Schwartz, NPR: https://www.npr.org/2020/07/04/887322386/trump-signs-small-business-loan-program-extension
- See above.
- Sarah Westwood and Phil Mattingly, CNN Politics: https://www.cnn.com/2020/07/04/politics/trump-ppp-extension/index.html
DRDA’s President, Mr. Douglas A. Dickey, CPA, CEPA, was spotlighted this week in Houston’s news publication “Houston Business Journal.” Mr. Dickey covered the current economic crisis that most small businesses in the U.S. have experienced due to the Covid-19 Pandemic and how the Small Business Administration’s Paycheck Protection Program has currently aided more than 4 million small businesses from closing their doors.
The SBA’s PPP program originally set out for small businesses to utilize loans within an eight week span, the timeframe that the U.S. government officials expected the pandemic t last. However, the pandemic has extended further than anticipated. “This PPP was designed to survive for a 90-day period of time — 60 days of stay-at home, 30 days to ramp back up,” Mr. Dickey said. “That doesn’t seem to be happening, so now what do we do?”
In order to extend economic relief to small business, Congress passed the Paycheck Protection Program Flexibility Act in June. Businesses are now permitted to extend the use of the funds received from extended from eight to 24 weeks, and utilize 40% of the loan to cover non-payroll expenses. This is particularly helpful for business that remain closed. “If your business is completely shut down and you’re not making any money, you’re going to have some rent costs, you’re going to continue to have note payments,” explained Mr. Dickey. “You’ve got ongoing costs, but you’ve got no income coming in.”
Set to expire at midnight on Tuesday, June 30th, the U.S. Senate decided to extend the Small Business Administration’s Paycheck Protection Program for small businesses until August 8th. The program was set to close down Tuesday night with $130 billion in funding left over. The bill has passed the House & Senate, and is awaiting the President’s signature. Small business owners have until August 8th to apply for the program.
The Small Business Administration (SBA), which runs the program with the Treasury Department, was set to stop accepting new applications on Tuesday, June 30th, at 11:59 p.m., Eastern Time. With over $130 Billion left in funds as of Saturday, June 28, the unused portion was set to return to the U.S. Treasury Department, unless Congress allocated the funds elsewhere. Of the $650 billion allocated to help small businesses, just over $520 Billion in loans were approved and issued to nearly 4.9 million small business by Tuesday night, the SBA said.
Sen. Ben Cardin, D-Md., who presented the bill extending the filing deadline, stated “We thought by the end of June that our economy would be on track and we would not need to have additional applications after that date.” The Paycheck Protection Program, referred to as PPP, is designed to offer loans to small businesses to cover expenses, including employee salary during the economic crisis caused by the Covid-19 Pandemic. As Sen. Chris Coons (D-Del.) points out: “There are millions of small business that are barely open now. With the likelihood of either renewed closures or much slower reopening, we have literally millions of small business nationwide at risk.” With the Covid-19 crisis still looming over most of the country, and with fall and winter around the corner (not to mention a heavily active hurricane season forecast), signs of financial stability rebounding to pre-Coronavirus levels by the end of the year remain bleak.
One of the great benefits of the SBA’s Paycheck Protection Program is that the loan amount granted to small business owners to keep their business open and employees from losing their jobs, if utilized according to SBA Guidelines, do not have to be repaid. Hence, the loan converts into a grant. This eases pressure on small business as they struggle to generate revenue to keep afloat. With many small companies struggling to keep open, the government assistance offered via the SBA is a welcomed relief.
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DRDA’s own Jennifer Lopez, Human Resources and Learning Development Coordinator was spotlighted this week in the University of Houston – Clear Lake news publication “The Signal.”
The article covers her educational path as a student and parent, and now with a full-time career. “I think the most important thing I learned,” said Jennifer, “is how to take a curriculum outside of my classroom and into a board room or training room. Just because its education doesn’t mean it has to be in a K-12 classroom. It can be corporate or anywhere.” She continues to add, “What I learned in my undergraduate classes at UHCL is to be a better instructor across the board, whether it’s a child or an accountant.”
“Her skill sets were amazing,” said Dr. Jana Willis, Professor of Instructional Design and Technology, “she had worked very hard to get to where she was in her educational journey. Her journey took her from NASA aerospace scholar, to computer engineering, to mathematics major, to a master’s degree in instructional technology, and now to a doctorate in curriculum and instruction. It’s all adding to the brilliance I saw in that undergraduate classroom. Jennifer is a role model for all UHCL students.”
Jennifer will be Graduating this May, receiving her Master’s degree in Instructional Technology and Design with a specialization in Human Resources.
Treasury, IRS and Labor announce plan to implement Coronavirus-related paid leave for workers and tax credits for small and midsize businesses.
The IRS has announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits provided by the Families First Coronavirus Response Act (the Act). The credits are designed to give businesses with fewer than 500 employees funds to provide coronavirus-related paid leave, either for an employee’s own health needs, or to care for family members. Under the Act, employees receive up to 80 hours of paid sick leave for coronavirus-related reasons and expanded paid child care leave when schools are closed or child care providers are unavailable. To take immediate advantage of the paid leave credits, employers can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released in the near future. News Release IR 2020-57.
Corona-virus related reasons is a very broad category and does not require the employee to technically be sick. A shelter in place restriction issued by a government entity qualifies.
COVID-19 CLIENT MEMO FOR FINANCIAL REPORTING CONSIDERATIONS
You have asked us for assistance in identifying financial reporting considerations related to the risks and uncertainties associated with the Coronavirus (COVID-19) epidemic. COVID-19 has begun to cause significant disruption in the global economy. The ripple effect is far-reaching across multiple industries, including travel and hotel companies, airline companies, manufacturers, and companies in the supply chain. Companies have begun issuing warnings that revenues may be adversely affected by the virus, and early warnings are important to investors; however, the challenges posed by this virus are unprecedented, and the scope and downstream effects are still unknown. Given the uncertainty of the current environment, reporting entities must balance the accuracy of the information available against the need to provide appropriate, adequate disclosure for investors.
Here are some considerations to keep top of mind while preparing financial statements:
Geographic concentration of business operations. An entity will need to evaluate the extent to which it relies on operations in countries outside the US, especially China, South Korea, Italy, or other areas of the world with confirmed spread of COVID-19. An entity that has business operations in these countries will need to evaluate the risk of a material disruption, which may have to be reported in the 10-K under Item 1A. Risk Factors. These effects may also lead an entity to restructure its operations, which could lead to changes in its business segments under Topic 280, Segment Reporting.
Subsequent events. COVID-19 was first identified in December 2019, so the entity will have to determine what disclosures are required under Topic 855, Subsequent Events, based on the entity’s individual facts and circumstances. It may be necessary to provide additional disclosures or even adjusted financial statements.
Volatility. Asset valuations may be adversely impacted by the uncertainty in the financial markets. This could result in unanticipated losses, which may or may not be unrealized. The entity will have to ensure valuations are correct as of the reporting date, which can be challenging in a highly volatile market.
Credit risk. Entities will have to monitor changes in their customers’ credit risk and decide if credit impairments or loan write-offs are necessary.
Liquidity risk. Entities will have assessed their ability to meet short-term obligations. Expanded liquidity disclosures may be necessary.
Pension and other postretirement plans. Entities will have to monitor pensions and other postretirement plans for potential changes to the funded status.
Hedging. The entity may need to reevaluate its hedging strategies and examine its hedges to determine the extent of hedge ineffectiveness, which must be recorded in earnings. If a hedge is no longer highly effective, then hedge accounting under Topic 815, Derivatives and Hedging, can no longer be applied.
SEC guidance and expectations. In a public statement issued January 30, 2020, Chairman of the SEC Jay Clayton said that the SEC will be monitoring disclosures related to COVID-19. Acknowledging that the effects of COVID-19 are beyond the control of issuers, Mr. Clayton said that issuers can still disclose how they are planning for uncertainty and how they will respond to the unfolding epidemic, which could be material to investors.
Entities have already begun to include information related to the Coronavirus in their 10-K filings:
Norwegian Cruise Line Holdings disclosed the following in Item 1A – Risk Factors of its 10-K for the period ended December 31, 2019:
Public perception about the safety of travel and adverse publicity related to passenger or crew illness, such as incidents of viral illnesses, stomach flu or other contagious diseases may impact demand for cruises and result in cruise cancellations and employee absenteeism. For example, the recent outbreak of the COVID-19 coronavirus has resulted in costs and lost revenue related to customer compensation, itinerary modifications, travel restrictions and advisories, the unavailability of ports and/or destinations, cancellations and redeployments and has impacted consumer sentiment regarding cruise travel. The spread of the COVID-19 coronavirus, particularly in North America, could exacerbate its effect on us. Any future wide-ranging health scares would also likely adversely affect our business, financial condition and results of operations.
United Airlines, Inc. disclosed the following regarding the risks from the Coronavirus in item 1A – Risk Factors and in Note 16 – Subsequent Events of its 10-K for the period ending December 31, 2019:
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The World Health Organization has declared COVID-19 to constitute a “Public Health Emergency of International Concern.” On January 30, 2020, the U.S. Department of State issued a Level 4 “do not travel” advisory for China. The U.S. government has also implemented enhanced screenings, quarantine requirements and travel restrictions in connection with the COVID-19 outbreak. The Company has suspended its flights between the United States and each of Beijing, Chengdu, Shanghai and Hong Kong through April 24, 2020. These routes represented approximately 5% of the Company’s 2020 planned capacity and the Company’s other trans-Pacific routes represented an additional 10% of the Company’s 2020 planned capacity. As of the date of this report, the Company is experiencing an approximately 100% decline in near-term demand to China and an approximately 75% decline in near-term demand on the rest of the Company’s trans-Pacific routes. The extent of the impact of the COVID-19 on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak and related travel advisories and restrictions and the impact of the COVID-19 on overall demand for air travel, all of which are highly uncertain and cannot be predicted. If traffic on the Company’s trans-Pacific routes were to remain at these levels for an extended period, and/or routes in other parts of the Company’s network begin to see significant declines in demand, our results of operations for full year 2020 may be materially adversely affected.
Of course, you must evaluate the effects of the Coronavirus on your own business based on your unique facts and circumstances and tailor your disclosures accordingly. If you have any questions or concerns – Please email us direct at firstname.lastname@example.org or email@example.com
Beneath the headlines of an outbreak, fatalities in the thousands and infecting tens of thousands worldwide sits other news: panic buying at grocery stores, whipsawing on Wall Street, and the specter of unprecedented disruption to everyday lives and business — all with less than five weeks to go before Tax Day.
So, how is DRDA planning on dealing with coronavirus just as the season heats up?
“We are taking a proactive approach to dealing with this issue,” said Doug Dickey, CPA, CEPA, Principle Partner of DRDA. “Like any other Hazard Preparedness or Disaster and Emergency Planning, we are committed to having a system in place to ensure the safety and security of our staff and clients with minimal disruption to our services.”
Being prepared to prevent, respond to, and recover rapidly from public health threats can save lives and protect the health and safety of the public. Though some people feel it is impossible to be prepared for unexpected events, the truth is that taking preparedness actions helps anyone deal with hazards of all types more effectively when they do occur.
The IRS is taking a wait-and-see approach: “Our internal working group will continue to closely watch this and promptly respond to any emerging situations to protect our employees and taxpayers interacting with the agency,” the agency said in a statement. “Normal IRS operations are continuing, and we are seeing a strong, smooth filing season for the nation.”
More than likely the IRS is developing contingency plans, as they did with the government shutdown. Historically they have developed a hierarchy of essential and non-essential services. Our belief is that return filing and the collection of tax due will be at the top of their essential service list.
Taking it seriously
“DRDA has had remote employees and work from home employees for years. We are ensuring that everyone on our Team is set to work from home if needed,” said Doug Dickey, CPA, CEPA. “
“Different” might be one word to describe the potential disruption. Living on the Texas Gulf Coast we think ahead in detail for weather or power outages. A new and largely unknown virus is a new and different disruption. Since there is very little known of COVID-19, it is being treated as a disaster or an event that would require a business to invoke their Emergency Plan. It is imperative to be prepared with a contingency plan for any natural or systemic challenge.
In the event of a citywide mandate for public safety which would require the staff to stay home; we will continue to serve you by enabling our staff with home workstations, along with constant communication with the entire firm and our clients. Our computer and phone systems have been in the cloud and VOIP for years. There is no difference in access from home or office.
Tax prep also often depends on face-to-face conferences with clients with little more than the width of a desk between us.
Most preparers complete hundreds of individual returns per year and have face-to-face meetings with about ten percent of the clients. The trend in our industry for the more substantial firms has been leading to digital productivity and remote access. As stated previously DRDA has been digitally in the cloud for years so the impact to our business will be minimal. Almost everything we do can be conducted remotely via phone, video conferencing, email, fax, secure portals and remote electronic signatures.
We encourage our clients who normally come in for an interview or drop off, pick up or mail their documents to upload their information through the secure client portal if you can. With less interviews, and traditional mailing routes, there would be less contact and increased safety for all. We are all human and human safety and well-being is always our first concern.
Technology will help
We have encouraged clients to use the portal and upload their documents since the beginning of Tax Season (click here to access our secure portal). We believe in these times, if more clients utilize this approach, it will foster a safer and better document delivery and acknowledgment process for everyone. We are currently enhancing our website with even more detailed information about how to use the portal if you choose this option (click here for help with our secure portal).
To make certain we can continue to serve you, DRDA has incorporated applications from the cloud, with two-factor authentication. In the event of a virus emergency, the firm’s e-workflow would involve alerts to clients in case of quarantine; instructions to use the firm’s encrypted portal; staff scheduling and payroll; monitoring of each stage of work; shipment to the client for e-signature and electronic payment; and e-filing.
Rest assured we are working diligently to ensure a seamless transition in the event of an emergency happening. Our primary endeavor is the safety and security of our staff, clients and community while serving you.
If you have any questions or concerns, please do not hesitate to contact us directly.