On Friday afternoon, July 17, Secretary of the Treasury Mnuchin announced that he would consider recommending to both the IRS and SBA that all PPP loans below a certain amount be automatically forgiven. The PPP loan cap mentioned in the discussion was for all loans under $150,000 (though various lobbying groups have floated other amounts). Loans at this level and below account for 86% of all PPP loans — but only 26% of the funds.
This would allow banks and the SBA to concentrate their reviews on the loans above $150,000 — only 14% of the loans — which make up a whopping 74% of the funds. (Among these large borrowers are the many chains, billionaires, and public companies that arguably were not the “small businesses” the fund was meant to help.)
If this recommendation is made, and if accepted, presumably that would mean that Forms 3508-EZ or 3508 would not have to be filed by the borrower with the PPP lender. Mnuchin did mention that some fraud precaution would need to be involved. We’ll have to wait to learn more.
I’ve been put off by how many of my colleagues have been mining these applications for additional fees (and bragging about it), especially when their small-business clients desperately need all the funds they can get to keep their businesses running. So not only would this move by Treasury aid small business owners, who are already overwhelmed with keeping afloat during a pandemic; as well as lenders, who would be able to spend resources more effectively in examining large loans; but it also would put the brakes on the predatory behaviors of “trusted advisors”.
In light of this exciting new development/ possibility, and the fact that we are still waiting for an SBA/Treasury FAQ — which has been promised for weeks on-end at this point — I have decided to postpone all client meetings and webinars on the topic, to allow for the respective government agencies to provide additional information.
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UPDATE 7/1: It has passed the House as well and is expected to be signed by the President today.
Total shock and surprise… out of nowhere, the Senate unanimously passed a five-week extension to the Paycheck Protection Program application deadline, just a few hours before it was set to expire.
Sen. Ben Cardin, D-Md., the top Democrat on the Small Business Committee, said on the floor that senators picked August 8th because that’s the end of the Senate’s next work period and lawmakers are hoping to pass the next relief package by then.
Additionally, Sen. Susan Collins, R-Maine, who helped negotiate the initial small business portions of the March coronavirus relief legislation, said that the extension would make certain we “don’t see an interruption in this program” while a fifth relief bill is being negotiated in Congress.
The unanimous agreement Tuesday night was unexpected, as lawmakers have clashed over issues regarding the program, including legislation regarding how to possibly redirect the unused $130 billion.
The deadline had recently been extended for a few specific borrowers who challenged some of the requirements in court and won — but this ruling only applied to those specific instances. However, their challenge pointed out some unfair restrictions in the PPP application requirements regarding criminal records that have since been remedied (though none of the online applications I have seen have incorporated the new rules yet). Given the timing of the recent guidance, there were certainly many would-be applicants that would not have been able to apply, and hopefully this extension will help.
There also is simply a huge amount of money left — $130 billion. There was so much confusion and fear about applying and getting loan forgiveness that the funds didn’t make it to many of the intended recipients; many never even applied. For example, I helped three folks this week who thought the program “didn’t apply to them”. Now that the rules are easier to follow, make more sense, require less work, and are clearer, hopefully small business owners will come out of the woodwork and get some much-needed assistance.
The House is expected to pass the measure and the President is expected to sign it. The bill passed in the Senate by unanimous consent.
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So much has happened since my last PPP posts, just a week-and-a-half ago, I hardly know where to begin.
Let’s start with the good news: all of it is good news!
As you may recall, Congress passed the June 5th PPP Flexibility Act, and SBA & Treasury came out with new guidance on June 11th, which I covered extensively. They followed up by reducing the non-financial felony threshold a couple days later. Then the new forgiveness application and EZ-version (thank goodness) were released shortly afterward, on June 17th. However, I held off publishing blog posts or holding webinars on the new applications, since they were released without guidance — and like many of us, waited for the answers to our many outstanding questions.
Well, in the past week that guidance continued to trickle in, culminating in some key answers from the June 22nd Interim Final Rule (IFR) that — believe it or not, after almost three months — actually leave us with most of our concerns answered, and a clear path forward for most small business borrowers.
<This is the part where your blog writer takes her hard-earned glass of wine and raises it in a gesture of cheers.>
The confidence in the piecemeal guidance released since June 5th was evident this morning, when the AICPA decided to re-release their most excellent PPP Forgiveness Calculator Spreadsheet. Mind you, it’s in draft form, and I did find a couple mistakes when I took it on a test-run tonight — but they are quick to incorporate correction requests, and more importantly, this indicates to me that the folks there feel that we’ve gotten most of what we can expect to get from SBA/Treasury on the topic, and we can get back to work on forecasting. (Oh yeah — and tax preparation, as my clients and staff are reminding me.)
Another small win is that the SBA finally agreed to release names of recipients of PPP loans larger than $150,000. SBA loan recipients have always been a matter of public record, so I admit that I was confused by the political angle on this — but in the end, I think the compromise struck is one that will allow single-owner and other closely-held small companies the privacy they need for payroll purposes, while balancing the demands of the public to know where their taxpayer dollars are going. Reportedly, this will account for nearly 75% of the loan dollars approved.
So — what’s new?
These game-changers: – Non-owner employee compensation can be forgiven based on their full 24-weeks of pay — up to a $46,154 (24/52 x $100,000) cap — if the 24-week period is elected; – Owner compensation limits increase to 2.5 months of 2019 income capped at $100k (20.833%) if the 24-week period is elected (compared to 15.385% of 2019 if the 8-week period is used); – Borrowers may submit application early — as soon as requirements are met (including FTE calculations, meaning that even if a borrower does not meet either of the FTE Safe Harbors, they can determine the period for which FTEs must be maintained, between 8 and 24 weeks); – FTE Safe Harbor #1 (business activity limited by government mandate) will apply to the vast majority of borrowers, and frees them from performing the hellish FTE calculations; – FTE Safe Harbor #2 (the original Safe Harbor) allows choice of December 31st or the date of forgiveness application.
What does this mean?
First-off: any business owner(s) with no employees should elect the 24-week forgiveness period. Instead of the 8/52-week limit x 2019 compensation available for those who stick with the original 8-week period, those who elect the 24-week period will have 2.5 months x 2019 compensation forgiven instead. That’s an increase from 15.384% to 20.833%. And since most of these small business owners received their loan based on 2.5 times their 2019 monthly average, this will clearly earn them full forgiveness. (Furthermore, it eliminates the challenging situation whereby the loan amount was determined in months and the compensation limit was determined in weeks, putting most Schedule C and partnership filers in a position where full forgiveness was impossible.)
Secondly: once you have spent the money consistent with the rules, go ahead and submit your forgiveness application early, regardless of whether you have employees or not. You can elect the 24-week period, allowing for more generous caps, but then end the period early. There are many advantages to this approach: – having a shorter period over which to meet the FTE test, or an earlier date to qualify for the FTE Safe Harbor #2 (the original FTE safe harbor) – getting the loan off the Balance Sheet and freeing up any leverage you might need to be able to borrow from other lenders – avoiding the possibility of straddling a tax year with potentially non-deductible expenses to address – peace of mind
What don’t we know yet?
One unanswered question is whether or not the owner-compensation limitation applies to spouses or other relatives. So far there are no attribution rules, so presumably they fall under the (more generous) calculations for regular (non-owner) employees (assuming the wages are legitimate compensation for services rendered to the company).
What happens if the FTEs cannot be maintained due to a limitation on business activity that was not caused by government agency mandate? I am thinking of some professional services, for example, dog-walking, where technically the company was allowed to continue activities at full capacity, but the drop-off in business was precipitous. In this case the FTE rule will not be met, nor Safe Harbor #1 (government mandate). They could aim for the December 31 Safe Harbor #2 (the original safe harbor test), but that would be a gamble, and would presumably delay forgiveness by many months. This is not a large group of borrowers, but the consequences faced by them are certainly inequitable.
Are retirement contributions on behalf of owners allowable? Capped? The guidance makes it clear that these costs are not allowable for Schedule C filers or partners, as any funds earmarked for retirement are already counted in net income before being contributed. For owner-employees, there’s language in the EZ application — but not the main application — that makes it sound like retirement contributions are only allowed to the extent they are included in income, and are capped at 2.5 months x the 2019 amount. Why the discrepancy is unknown. This article discusses that topic in more detail.
There was concern about the announcement that S-Corp owners were suddenly not able to include health insurance in the payroll total — but it turns out that’s because by law those costs are already considered part of the Box 1 W-2 wages. It just means you can’t double-count them. (Schedule C filers and partners were already disallowed health insurance costs for forgiveness, as similarly, they are paid out of net income, which has already been counted for forgiveness purposes.) This article discusses that topic in more detail.
And for a step-by-step explanation of how to calculate forgiveness, I’ll also point you to the AICPA (no, I do not receive any remuneration from them — I’m just impressed by their resources). This step-by-step guide is quite helpful, and also points you to their greatest contribution to the PPP forgiveness thus far — the AICPA PPP Forgiveness Calculator Spreadsheet. Don’t fill out your forgiveness application or plan accordingly without it!
If you haven’t applied yet, please do. There are only a few days left in which to do so, and $130 Billion still available. The SBA has recently relaunched its Lender Match site, which connects small businesses with SBA-approved PPP lenders to get their loans approved before the June 30th deadline. I’ve had excellent luck with Cross River Bank, which has provided approximately 70% of my clients’ PPP loans, either directly or through various FinTech companies — and there was a great article in the New York Times about them recently. (Nope, those links aren’t monetized and I receive nothing from them. Just hoping to help out some small businesses.)
After a few more webinars on the topic — see the most recent one here — I plan to take a break from PPP planning for a short while and focus on tax preparation. I can’t begin to express my relief that we finally have a comprehensive PPP rule book that takes the real world into account.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
As a reminder — EIDL is considered a “working capital” loan, which means it’s meant to be used to make payments that would have been required to sustain operations if the disaster hadn’t occurred in the first place. The only items that EIDL can’t be used on are a) expansion costs (which includes new assets only if they are part of the expansion; therefore regular replacement or investment in equipment for increased efficiency is allowable), b) consolidating long-term debt (so regular LOC and debt service payments are fine, but not anything that essentially refinances existing long-term debt), and c) shareholder payroll or distributions that are not in the usual course of business (in other words, you can’t use the EIDL to essentially give yourself a bonus).
From their press release today, June 15: “The SBA is strongly committed to working around the clock, providing dedicated emergency assistance to the small businesses and non-profits that are facing economic disruption due to the COVID-19 impact. With the reopening of the EIDL assistance and EIDL Advance application portal to all new applicants, additional small businesses and non-profits will be able to receive these long-term, low interest loans and emergency grants – reducing the economic impacts for their businesses, employees and communities they support,” said SBA Administrator Jovita Carranza.
EIDL assistance can be used to cover payroll and inventory, pay debt or fund other expenses. Additionally, the EIDL Advance will provide up to $10,000 ($1,000 per employee) of emergency economic relief to businesses that are currently experiencing temporary difficulties, and these emergency grants do not have to be repaid.
The SBA is offering low interest federal disaster loans for working capital to small businesses and non-profit organizations that are suffering substantial economic injury as a result of COVID-19 in all U.S. states, Washington D.C., and territories.
These loans may be used to pay debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact, and that are not already covered by a Paycheck Protection Program loan. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
To keep payments affordable for small businesses, SBA offers loans with long repayment terms, up to a maximum of 30 years. Plus, the first payment is deferred for one year.
In addition, small businesses and non-profits may request, as part of their loan application, an EIDL Advance of up to $10,000. The EIDL Advance is designed to provide emergency economic relief to businesses that are currently experiencing a temporary loss of revenue. This advance will not have to be repaid, and small businesses may receive an advance even if they are not approved for a loan.
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I’ve been doing regular 40-minute free zoom sessions for my clients for a couple months now, mostly centering on questions concerning PPP & EIDL applications and forgiveness.
1) I have taken six webinars on the new PPP forgiveness rules in the past week — and gotten six different interpretations. They vary widely, on topics such as the EIDL advance subtraction, incurred and-vs-or paid, what an acceptable utility is… as well as some flat-out mistakes (such as including owner compensation in FTE/wage reduction calculations — this is simply not okay). There was even one where the person doing the presenting and the person answering questions in chat were conflicting with each other. So keep in mind that just because someone (including me) sounds confident — this does not mean they are right. They’re just AN expert… there is currently no such thing as THE expert. Just do your best with the information you have — the smartest approach to take is to do whatever you can to make it easy for your banker to just glance at your substantiation and decide it’s sufficient to support your calculations, whatever interpretation you choose.
2) This tool is a DRAFT. For one, there are some small errors in it that I’ve reported to the AICPA; but more importantly — we know this guidance is going to change. In fact, there is pending relief legislation in Congress (to extend the forgiveness period or remove the 75% rule) that may render most of what we’re doing now useless (including the fact that we don’t yet know when we’ll be submitting anything for forgiveness).
However: some folks are more than half-way through their forgiveness period and we have to plan based on the law as it stands now… and hitting the FTE reduction, salary/wage reduction, and 75% of payroll tests is hard. So as a tool for forecasting, as well as establishing your goals and gauging your progress, I encourage you to fill this spreadsheet out to the best of your ability, so you aren’t surprised by a large loan balance at the end of this.
3) Remember, you will only fill out the sections on the application that are highlighted in BLUE. The spreadsheet bases all calculations on that data. Grey fields are calculated, and green are ones that pull from data you entered elsewhere. The instructions aren’t entirely complete, and there are a couple small errors, but it’s still the best tool I’ve found out there (including my own). The spreadsheet formula cells are locked, but you can resize any areas you need to in order to view the full content. Lastly, it seems maybe folks with Macs or using cloud spreadsheet software may have challenges getting their systems to recognize it’s not read-only.
Best of luck, and I’ll try to post other examples for other entity types as time allows.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE: AICPA has partnered with a Fintech lender to create an online version of their forgiveness tool — www.PPPForgivenessTool.com — available free of charge. More on the project here. The spreadsheet below still works, and I personally prefer it, but the online tool is easier to use if you don’t already have background into how the PPP rules work.
My husband and I have collectively spent nearly 18 hours preparing, updating, editing and testing our PPP Forgiveness spreadsheet, as well as comparing it with colleagues’ versions… only to be stymied at every last moment — each time we were ready to “go live” with it, some new guidance, analysis or interpretation was released that had us going back to the drawing board. At this point I’m joking with my clients that it’s a mythical creation.
And it might have to stay that way — the AICPA has done such an incredible job with their version that I’m not sure we can do any better.
It’s not pretty, and it’s a bit clunky, and there’s no budget tool or FTE calculator included — but the logic is sound and it does a lot of the calculations for you. And they’ve made it public! Just scroll down to where it says “PPP loan forgiveness calculator“.
CPA Practice Advisor notes, “As the AICPA has emphasized throughout this process, questions surrounding guidance make critical decisions unnecessarily challenging and complex for PPP loan recipients and those who are considering applying for the program.” They created a loan forgiveness calculator last week that reflected both the latest SBA guidance and additional AICPA recommendations, and presented it to Treasury. Unfortunately that was not the version that became the final application (released this past Friday night).
“The AICPA loan forgiveness calculator provided more support and details than the SBA loan forgiveness application, and we will continue to encourage Treasury and SBA to leverage our recommendations,” said their VP of Firm Services.
So they reconciled their previous version with the forgiveness application, released it to the public — and you should use it.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Because some politicians involved with the drafting of the forgiveness rules had been saying on twitter that a longer time-frame and more flexibility on how the funds can be spent were key to making the PPP more effective, we had been hoping for an application reflecting these characteristics — but it did not turn out that way. The entire thing at this point feels like “too little, too late”.
What Were Hoping For But Did Not Get (The Bad News)
An extension to the 56-day (8-week) forgiveness period (at least for restaurants, bars, cafes and other fully- or partially-closed businesses)
Simplified rules for FTE and salary/wage reduction calculations
EIDL advance funds used for non-PPP purposes exempt from forgiveness subtraction (per analysis by many colleagues, this is still the case; but on the application it is not apparent, and many banks will not understand the subtle distinctions)
What We Did Get (The Good News)
Unpaid rent and utilities from a period prior to forgiveness can be paid during the forgiveness period
Rent and utility payments made shortly after the forgiveness period can also be included, if for services during the 8-week timeframe
Forgiveness period — as it relates to payroll costs (including employer portion of health insurance and retirement) — can be delayed to coincide with the first pay period after disbursement
If an employee was fired, quit, or voluntarily had their hours reduced due to non-pandemic reasons, their FTE and salary/wages will not count against the employer
Safe harbor for salary/wage reduction (however, additional complicated calculations are required)
Safe harbor for FTE reduction (however, additional complicated calculations are required)
Clarification on various calculations (e.g., FTEs, forgiveness phase-out, and forgiveness reductions)
There is a lot more to unpack, of course, but those are some highlights. I recommend the following excellent articles for step-by-step explanations and analysis (no, I do not have any affiliation with Forbes — I just think they are writing some of the best material on the topic these days). Also, many thanks to colleague Andrea Carr CPA for preparing a Fillable Version of the SBA PDF Forgiveness Application.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
No, I have not analyzed it yet, and my birthday is this weekend, so please understand that I may not have feedback on it until Monday. (Unless it keeps me up all night obsessing over it.) Thanks for your patience!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
One of my favorite aspects of the work I do is engaging with people and sharing knowledge. With so much confusion in the current climate, especially surrounding small business survival, I’ve been pleased to have opportunities to dispel some of the misinformation out there and bring clarity to extremely challenging topics.
Among the most recent appearances were ABC 7 Chicago, WRLR Radio, and Q&A sessions with State Representative Will Guzzardi — at his most recent Town Hall — as well as professional organizations Bookkeeping Buds and the Logan Square Chamber of Commerce. (See the Speaking Engagements section of my Services page for links to all the above and more.) My interview with Block Club Chicago went on to inspire a favorite recent blog post.
And at times I’ve even been so lucky as to share the stage with clients, most recently Chris Busse of Penguin Foot Pottery and Dinah Grossman of Spinning J Cafe & Bakery. These folks inspire me daily and are one of the reasons I do what I do (well, two of the reasons). Their companies have focused on taking care of employees above all else — not only their safety, but also their financial well-being and health benefits. And they have harnessed their own creativity, resiliency, and flexibility as true entrepreneurs to carve out a new space for their offerings in a vastly different world, redefining themselves in the process.
Spinning J is offering homemade comfort food and groceries — full dinners available for pick-up or delivery, along with take-and-bake rolls and their famous pies. The decision to stretch their prep time so that staff work 24-hours-a-day in shifts, and to have their own employees run deliveries, allows them to maintain social distancing while keeping the paychecks coming. And by offering grocery staples, they are helping their vendors and maintaining supply chains as well.
If you are a small business owner looking for ways to pivot your business and re-imagine yourself, see my recent blog post on Small Business Advice. If you run a professional or public organization and are looking for an impassioned speaker full of knowledge on small business relief options, reach out to me to see if we’re a good fit. And if you want to learn pottery or eat comfort food from the safety of your home — or any number of other amazing offerings — check out my awesome clients.
Things are scary right now — we’re seeing how size and capital are rewarded in tough times, not just good ones. We’re recognizing that operating on cash flow and not having savings is risky. And we’re keenly aware of how our employees depend on their jobs for their health insurance.
But it’s not all grim… we’re not entirely powerless. There are loads of resources out there, and if we went into entrepreneurship in the first place, chances are we have some of our own: Creativity, Resilience, and Flexibility: – Creativity? Brainstorm. Imagine a new world, not a return to the old one. – Resiliency? You’ve likely overcome struggles before, or know other business owners who have. Tap into this. – Flexibility? Take off the blinders and open up your view to all the possibilities out there.
With that in mind, here are ten valuable pieces of advice for what to do next.
1) If you still have staff you’re paying, I recommend taking advantage of the Employee Retention Tax Credit that you get by reducing your required regular payroll deposits, and applying for the balance on Form 7200. I know that Gusto (my favorite payroll company) is helping many of its clients through this process, which provides immediate cash in the form of certain payroll tax payments that don’t have to be made (in essence an advance on the credit). Treasury has indicated that you cannot take ERTC and PPP at the same time (though it sounds like they are working on a way for folks to take advantage of ERTC and simply have it deducted from the PPP forgiveness should the business end up with PPP funding).
2) Payroll Tax Deferral – similar to the above, in the sense that you only benefit from this if you have staff still on payroll (or yourself if you are a shareholder-employee), but this one is just a delayed payment of the employer portion of Social Security taxes. Again, I know Gusto is doing this for their clients on request. And again, guidance initially indicated that you couldn’t do payroll deferrals and PPP, but has since indicated that you can defer these payroll taxes until the end of the PPP forgiveness period, and the original due dates for the deferment will stick. More info here.
3) EIDL – the Economic Injury Disaster Loans are still an option for farmers only. Only the advance is forgiven, and there’s no way to know how much of an advance you’ll get (though in general it seems to line up with $1K per employee), but if you need cash, you should apply. If you request $25K or less, there’s no personal guarantee or collateral required.
4) Regarding the Paycheck Protection Program: – Get your PPP application in order if you have not applied already. I’ve got a whole list of lenders accepting applications in this blog post. – Similarly, work with your accountant to establish a plan for tracking the loan for forgiveness, so you have everything set up properly from the moment the funds are received. There’s a lot we don’t know about the forgiveness calculations from SBA. Make a plan to structure your forgiveness-period payroll to ensure the maximum amount of the loan will be forgiven. – And make sure you have a business checking account! Some folks are using personal checking accounts for their business – these rules about this changed four years ago, but some were apparently grandfathered in, and these small business owners are finding that the banks will not even consider their applications as a result – even though they’ve been banking there for ages. The banks are prohibited from depositing PPP funds into a personal account.
5) Pivot Your Business: If you haven’t already, start redefining your business model now. Even once the stay-at-home order is lifted, it might be quite some time before people are comfortable shopping or dining or drinking out. Research alternative models; ask around as to what other businesses are doing; investigate new revenue streams; communicate with your employees.
Some examples: – switching to online sales and other new/expanded sales channels (even for service-based businesses like entertainment, makeup/hair lessons, art/hobby and cooking classes); – offering virtual shopping and curbside pickup; – pairing with other businesses to deliver/ship care-packages; – going to a 100% take-out model with a contactless pick-up window; – having staff take care of customer ordering and deliveries instead of GrubHub or Caviar, or switch to a co-op bike delivery service; – provide services for free and ask for tips, donations, or pay-as-you-can; – increasing your marketing and social media presence, improving your website; – offering in-demand products along with your usual offerings, such as groceries or alcohol; – teaming up with your local Chamber of Commerce to establish a virtual neighborhood store, and more.
This is likely the #1 most important thing you can do to come out on the other side once this is behind us. And don’t just take my word for it. Lots of resources are out there to help you reinvent yourself. Among them: five things to recognize now: you’re not alone; what you do now will determine your future success; recognize that the future has already changed; we can never over-prepare… and this too shall pass.
6) Go on unemployment. If you’re no longer able to pay yourself, or you’re paying yourself a substantially reduced salary, you may be eligible. Shareholder-employees have been eligible since Day One for the full amount (they receive W-2s from their own companies and have been paying into the system all along), and as of yesterday, self-employed folks such as sole proprietors and partners in partnerships are able to apply. Even if you received PPP funds, you can claim backpay for the period of time between when you stopped being able to pay yourself and when the PPP funds arrived.
7) Remember that there is currently no 10% penalty for withdrawing retirement funds – if you feel confident that you can survive this period but need cash now to do it, consider accessing those accounts now.
8) Cash flow forecasting is something I wish all small businesses did, but they don’t. Consider working with your accountant to build a cash-flow projection system to figure out how to get through this. CashFlowTool.com is a great resource, and they offer free webinars on how to forecast, if you don’t have a professional you can go to (or even if you do).
Once you’ve gone through the effort, you can then see: – Are there any weeks where it looks like there will be a cash shortfall? – If so, what is the plan to address that? – Can we adjust in- and outflows to attain a better cash position by:
Reducing days sales in accounts receivable
Extending repayment days in accounts payable
Negotiating better terms with suppliers on purchases
Reducing operating expenses
Delaying capital purchases
Sell equipment that is no longer needed
Run specials on any slow-moving inventory to convert it to cash
Have owners contribute additional equity or loans to the company
9) Apply for small business grants — the focus has been on PPP, EIDL, ERTC and other federal relief efforts, but remember that there are public and private resources available at the state, county and city levels as well. You can just google “COVID relief” and the name of your industry and see the various options.
10) And I know this sounds insane… but try to take moments, tiny little vacations, away from your anxiety. I have to tell myself this every day. There is so much that is out of our hands; we have to work on the things over which we have control, and try to let go of what we don’t. The world isn’t working the way we want it to, or maybe even thought it did. For a lot of us, that’s a shock, and the emotional weight of that can pull us down. To survive this, we’ll need to shake off the anxiety and plan for a brighter future.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
