Find an Accountant
BizBoost News Volume 10, Issue 3 For distribution 7/27/20; publication 7/30/20
Five Expenses to Cut During Tough Times
If revenue hasn’t come back as fast as you expected it to, it may be time to review your budget and determine if some planned expenses can be cut. Here are five places to look to do just that.
1- Travel
Since most events have been moved online or cancelled altogether, you can likely redirect any money you’ve budgeted for travel this year to other more urgent expenses. And if you have prepaid these items, you may be able to get a refund. Hotels have flexible refunds up to the date of the stay unless you took a prepaid deal. And airlines have begrudgingly provided refunds, although in some cases, it did take time to get them.
Now that so many employees are familiar with Zoom and other videoconferencing tools, you may want to rethink any future travel requirements that could easily be accomplished virtually with a much lower budget.
2- Training
While it’s never a good idea to cut training, there may be ways to deliver it more affordably. You may be able to purchase subscriptions to online courses that include an “all-you-can-eat” component to them. A good example is Lynda.com, now owned by LinkedIn.
Any unnecessary training that can be delayed is another way to free up funds.
3- Dues and Subscriptions
If money is tight, evaluating your memberships is one area where you may be able to free up money. Especially since many in-person events have been cancelled, this might be a good time cancel any renewals you are not able to fully utilize.
Subscriptions are also something you can review. Can any of these be cancelled to free up cash? You can always re-subscribe when things get better.
4- Employee Perks
If you provide your employees with benefits and times are extremely lean, cutting them is an option to keep from laying off workers. Some of the options might be:
All of these are steps you can take to avoid having to reduce your workforce.
5- Layoffs
One painful place to look for more cash is your workforce. If work has slowed due to demand, you can raise cash by furloughing or laying off workers. Unfortunately, many businesses have already had to do this.
By looking deeply at all of your business expenses, you can find places to cut spending so that you will be in a better position for the future.
***
Tweets
Insert a link to your newsletter, web site or blog before you post these:
Our latest blog: Five Expenses to Cut During Tough Times. Subscribe here: [link]
Are you looking for places where you can cut spending and expenses during these uncertain times? Check out our latest blog post for some ideas: [link]
Business Tip: It’s usually not a good idea to cut training, but any unnecessary training that can be delayed is another way to free up funds if needed. [link]
It’s likely that your travel plans and any events you were planning to attend this year have been cancelled. It may be a good idea to redirect any money you’ve budgeted for travel this year to other more urgent expenses. [link]
If you provide your employees with benefits and times are extremely lean, cutting them is an option to keep from laying off workers. [link]
If your revenue isn’t looking as great as you expected during these tough times, it may be time to look into your budget and find areas where you can cut expenses. Here are a couple of expenses to consider cutting: [link]
Is money tight? Here are a few places where you can reduce expenses during these tough times: [link]
Five Expenses to Cut During Tough Times.Sign up for our newsletter: [link]
BizBoost News Volume 10, Issue 2 For distribution 7/13/20; publication 7/16/20
How to Reduce Stress Around Money
Many families and small business owners have seen decreases in income over the last several months. Money struggles can cause us to experience stress and worry, and none of us need that right now. Instead we need to boost our immune systems and decrease stress.
Here are some tips on how we can take back control of our finances and reduce our stress around money.
1- Assess your situation.
Take an inventory of your bank accounts, credit cards, and other financial accounts. This helps you to see the entire picture. You can be financially healthy in different ways. For example, you might be low on income coming in but if you have healthy savings or plenty of assets, you might be just fine.
2- Track your spending.
When you can see where the money is going, you can make good decisions about what changes you need to make. Use tracking software like Quicken®or simply a spreadsheet so you can see how much you really need for things like the rent or mortgage, food, utilities, and other necessities.
3- Make any changes that you need to.
If you have more expenses than income, here are several ways to get back in balance:
4- Build a budget and stick with it.
Making a plan helps some people reduce their stress a great deal. They feel good that they now have goals and can develop new habits that will work for their lifestyle.
In your software or spreadsheet, commit to monthly spending limits for each major category: housing and utilities, food, transportation, clothing, entertainment, savings, paying off debt, and other.
Each month, track how you did by comparing your actual spending with your planned spending. Give yourself a grade on how you did, and either reward yourself or make the changes you need to.
5- Pay off debt.
If you have debt, make a plan to pay it off systematically. Here are some ways you can speed that up:
6- Build a cushion for the future.
If your spending and income is balanced, but you don’t have a savings cushion, that can also be stressful. You need a safety net to fall back on for times just like these.
Decide on an amount that you can put away for a “rainy day” fund, and stick to it. It’s also never too early to start saving for your retirement years. The younger you start, the more your money will grow into a significant nest egg, providing comfort and flexibility in your final years.
7- Identify any other stressors related to money.
Perhaps a relative constantly asks you for money, and this causes you stress. In this case, you may have to make a “tough love” decision to reduce your stress while maintaining family relationships. These are very personal, individual decisions that include factors far beyond finance. But if they are causing stress, some kind of action should be taken.
8- Make your accounts work for you.
If possible, select credit cards that give cash back, miles, or other perks. Keep you bank balance high enough so that you don’t get charged a monthly fee, and try to get an account that pays interest. You won’t get rich from these things, but they are fun perks that help you save.
9- Invest wisely so you can sleep at night no matter what happens.
Understand your risk tolerance level when it comes to investments, and avoid investments that are too risky. You’ll sleep better at night knowing your money is safe.
Hopefully, these tips will help you decrease your money stress and improve your control over your finances.
Our latest blog: How to Reduce Stress Around Money. Subscribe here: [link]
Are your finances stressing you out more than usual? Check out these tips on reducing stress around money: [link]
Business Tip: If you have debt, make a plan to pay it off systematically. [link]
Stressed about money? It’s a good idea to take a step back and assess your situation so that you can see the big picture. Just because one bank account is low doesn’t mean you’re ready to declare bankruptcy. [link]
Making a plan can help some people reduce their stress a great deal. They feel good that they now have goals and can develop new habits that will work for their lifestyle. [link]
If you’re stressed about money, here are some tips on how you can regain control and reduce stress over your finances: [link]
Are your finances spiraling out of control—and not in a good way? If you’re stressing out about money, check out our latest blog post on how to reduce stress around money! Check it out here: [link]
How to Reduce Stress Around Money. Sign up for our newsletter: [link]
BizBoost News Volume 10, Issue 1 For distribution 6/29/20; publication 7/2/20
3 Essential Metrics for a Smarter Marketing Spend
The only way to get smarter about how to invest your marketing dollars is to document and measure what’s happening now in your business. What you’ve measured, you can then improve.
Marketing Spend
The first step to measuring what you spend on marketing is to aggregate all of the costs. They may be in one account or several. Some of the places to look for marketing expenses include:
Once you have aggregated all of these costs, you’ll have a good idea of what you’re spending on marketing and you can calculate the first metric, marketing spend. The formula is
Total marketing costs / total gross revenue = Marketing spend
This gives you a percentage.
Most companies spend five to ten percent on marketing. Higher growth companies will spend close to ten percent, and stable growth or slow growth companies will spend close to five percent. Large companies will spend more, from nine to 12 percent of gross revenues, than small companies.
CAC – Cost to Acquire Customer
Probably the most important metric for marketing is how much it costs on average to acquire one customer. To compute this, count the number of new customers for any period of time, and use this number in the following formula:
Total marketing costs / number of new customers = CAC
A more granular version of CAC is CPA, cost per acquisition. Unlike CAC, CPA is measured by campaign or marketing channel, or the source of how the customer was acquired. Example marketing channels include email marketing, social media, and paid ads, to name a few.
Revenue per Customer
Revenue per customer is a good measure in many companies. It can tell you how much, on average, a customer will spend at your company over a period of time, adding up all of the orders, projects, visits, or engagements for that customer. The formula is simple:
Total revenue for a period / total number of customers for the same period = Revenue per customer
A similar metric that’s valuable is how much a customer will spend at your company in their lifetime. That’s called CLV or customer lifetime value. Use the same formula above but compute it based on the longest period of time you have records for.
When you can compare revenue per customer or CLV with CAC, you can determine how much you can afford to spend to acquire new clients.
Let us know if we can help you calculate these metrics so you can become wiser about how to invest your marketing dollars.
Our latest blog: 3 Essential Metrics for a Smarter Marketing Spend. Subscribe here: [link]
Do you know the three metrics required to smarten your marketing spend? Find out here: [link]
Business Tip: The most important metric for marketing is how much it costs on average to acquire one customer. [link]
Find out what you’re spending on marketing by dividing total marketing costs over the total gross revenue. [link]
Get smarter about your marketing spend by documenting and measuring what’s happening now in your business. [link]
Customer acquisition cost, revenue per customer, and customer lifetime value are all important metrics when it comes to improving your marketing spend. Find out more here: [link]
Most companies spend five to ten percent on marketing. How much do you spend? Find out how you can calculate your marketing spend here: [link]
3 Essential Metrics for a Smarter Marketing Spend.Sign up for our newsletter: [link]
BizBoost NewsVolume 9, Issue 26For distribution 6/15/20; publication 6/18/20
How Liquid Is Your Business?
Liquidity in business has nothing to do with water, milk, or juice! It describes how quickly you can sell an asset and convert it into cash. Cash is the most liquid asset of all. Real estate, in contrast, is not quite as liquid because it could take months to sell it to a new owner.
Liquidity is important to all businesses. It affects your credit score and how much you can borrow. It’s a measure of whether you can pay your bills on time. It’s also one of many measures of the overall financial health of your business.
If your business sells items that take a long time to produce, liquidity can be extremely challenging and should be carefully managed. Examples include farms, wineries, breweries, automobile manufacturers, and biotech researchers.
Liquidity Ratios
A couple of financial metrics can quantify your business’s liquidity. The current ratio is computed as follows:
Current Ratio = Current Assets / Current Liabilities
The largest components of current assets include cash, cash equivalents, accounts receivable, and any other asset that is expected to be converted to cash within one year. The largest components of current liabilities include credit card balances, accounts payable, bills due, interest payable, and the amount of any loan due within one year. You can find both current assets and current liabilities on your balance sheet.
Companies with a current ratio of less than 2:1 are considered less liquid, while companies with a current ratio of more than 2:1 are more liquid. However, current ratio values and whether they are “good” or “bad” vary by industry, so before you panic, check out your industry benchmarks.
Another measure of liquidity is the quick ratio. It measures how equipped a business is to meet its short-term obligations by taking its most liquid assets, cash equivalents, and using them to pay down current debt. Its formula is:
Quick Ratio = (Cash + Cash Equivalents + A/R) / Current Liabilities
This ratio’s value should typically be 1:1.
Emergency Fund
A good common-sense measure you can use to stay on top of your business’s liquidity is to build a healthy emergency fund. To calculate how much you need, determine how much you typically spend each month. You can get that number by reviewing a bank statement and summing all of the withdrawals including checks paid and online withdrawals. Do this for each bank account you have and include other accounts such as PayPal if you use them for disbursements.
This should give you your total spend per month. Go back a few months to calculate an average spend per month. The farther you go back, the more accurate your average will be, especially if you have a lot of large annual payments throughout the year.
Now that you have your average spend per month, your emergency fund should be a multiple of that spend. Three months’ worth should be the minimum amount in your emergency fund. If you spend $50,000 per month on average, your emergency fund should be $150,000 at a minimum.
An emergency fund will not only make your business more liquid; it will protect you if disaster strikes. According to FEMA, 90 percent of small businesses that experience a disaster will fail within a year unless they can resume operations within five days. Having an emergency fund will increase the odds of your business continuing in spite of any hardship that may occur.
If you have questions for us about your business’s liquidity or starting an emergency fund, please feel free to reach out any time.
Our latest blog: How Liquid Is Your Business? Subscribe here: [link]
Do you know how quickly you can sell your business and convert it into cash? Find out why liquidity is important for your business: [link]
Business Tip: A good common-sense measure you can use to stay on top of your business’s liquidity is to build a healthy emergency fund. [link]
Companies with a current ratio of less than 2:1 are considered less liquid, while companies with a current ratio of more than 2:1 are more liquid. However, “good” and “bad” current ratios will vary among different industries. [link]
The quick ratio measures how equipped a business is to meet its short-term obligations by taking its most liquid assets, cash equivalents and using them to pay down current debt. [link]
Three months’ worth of your monthly average spend should be the minimum amount in your emergency fund. Find out more here: [link]
Did you know that 90 percent of small businesses that experience a disaster will fail within a year unless they can resume operations within five days? (Source: FEMA) That’s why it’s important to have an emergency fund! Find out more: [link]
How Liquid Is Your Business? Sign up for our newsletter: [link]
BizBoost NewsVolume 9, Issue 25For distribution 6/1/20; publication 6/4/20
18 Small Business Opportunities in 2020
Deciding on the kind of business you want to start is a very big decision. Some require specialized skills that either the owner or employees will need. Others require a substantial initial capital outlay. In any case, it’s always a good idea to consider the health of the industry you’ll be entering in.
While we are not giving any kind of investment advice in this article, we thought it’d be fun to list the business ideas that will be recession-proof in 2020, many of which were also fast-growing in 2019. They are not in any particular order.
1. Bicycle shops
Demand for bikes ramped up this year when people started staying at home due to shelter-in-place orders. They saw the need to exercise close to home, and a bike is the perfect accessory to get people out of the house safely.
2. Building services
This group includes businesses that provide services like office and home cleaning, landscaping, and pest control. New demands in cleaning will continue for some time.
3. Software development
Businesses with skilled developers are in demand as other businesses look to automate more and more of their processes. Workers with skills in artificial intelligence and virtual reality are in very high demand. In 2020, we added a huge demand for video conferencing tools, and other tech tools we need to work from home.
4. Online publishers
While the traditional print media such as book publishers and newspapers are declining in growth, online publishers are thriving. This category includes bloggers as well as the internet stars on YouTube that are making great money through online ads and product endorsements. The fast pace of the news in 2020 has simply accelerated this trend.
5. Building finishers
This category includes construction companies that provide drywall, painting, and flooring to finish out a building or house. Th need will continue in 2020 as offices, shops, and other businesses remodel to meet social distancing and other safety rules.
6. Outpatient care
An alternative to going to the hospital emergency room, these care facilities are growing fast. For patients, they are less hassle than making an appointment with a doctor and far less expensive than ER bills. Once tests and treatments for COVID-19 become universal, these places will become good alternative for people with mild symptoms.
7. Administrative services
There’s a growing need for businesses that need additional administrative support beyond what employees can provide. Virtual assistants are included in this category as well as staffing companies that provide temporary clerical workers onsite.
8. Physicians
If you’ve ever been in a doctor’s office waiting room full of people, you know that this area is in demand. This include offices of physicians of all specialties.
9. Professional drivers
Professional drivers fall into two categories: truck drivers and delivery/taxi services. The demand for truck drivers is always increasing as online orders and ecommerce steadily grows. Many of these drivers are independent and own their own rigs as well as their own businesses.
Uber, Lyft, GrubHub, and DoorDash, to name a few, have increased the demand for professional drivers who can deliver food, medicine, or people to where they need to go.
10. Data processing
The demand for data hosting, server farms, and data processing continues to grow as our appetite for technology increases.
11. Warehousing and storage
Places like self-storage facilities will be in demand for a couple of reasons. Families have more stuff than they have room for. And as families continue to be mobile, they will need temporary storage space. All you have to do is look on your street at all the cars that don’t fit in their garages to see the demand in this type of business.
On the commercial side, increased ecommerce demand and the need for pickup and delivery services has increased the need for warehouses for businesses in the distribution space.
12. Construction
In most places, construction is booming, so there is a demand for general contractors, subcontractors, architects, engineers, and businesses that support construction.
Architects should be busy re-designing spaces, such as offices, restaurants, nursing homes, day care centers, and jails, to name a few, to keep people safer.
13. Medical and diagnostic laboratories
Even before COVID-19 came on the scene, this type of business was growing fast for several reasons beyond standard medical test ordered by doctors. People are getting DNA tests on their own, and nutritionists are doing more testing as people realize diet is a huge factor in health and personal energy.
Now that COVID-19 diagnosis and treatment require a variety of tests, these labs will be busy for a long time in the future.
14. Ecommerce wholesalers
There is a growing number of people who sell items on ecommerce platforms such as eBay and Amazon. While a few source these items through agreements with manufacturers, many visit flea markets, donation centers, and resell shops to make their purchases and repurpose the items.
Smart wholesalers that have their systems set up can help brick-and-mortar shops without an ecommerce presence sell their items while they are shuttered.
15. Professional services
Fields that are fastest-growing include technology and marketing consultants. An interesting new type of security consultant is one that trains groups on how to deal with violence in the workplace and schools.
Attorneys are busy helping individuals update their estate plans and will likely be busy with divorce filings after COVID-19 has let up some. Accountants have new laws to communicate to their clients, and many small businesses want their books caught up now.
16. Educational services
This broad group include elementary and secondary schools and junior colleges. It also includes adult career education, including businesses that teach trades skills, computer skills, and business skills.
Companies that provide an online component to learning will be in demand for quite a while.
17. Real estate agents
Competitive, yes. But the average home sells twice as fast as it did eight years ago, so the number of transactions have doubled, increasing demand.
18. Personal services
While a broad category, the areas seeing growth include personal trainers, personal nutritionists, and wedding planners, to name a few.
If your business falls into one of these categories, congratulations. If you’re considering starting a business and you have the skills needed to start one of the businesses above, what are you waiting for?
Our latest blog: 18 Small Business Opportunities in 2020. Subscribe here: [link]
Curious about what some of the fastest-growing businesses in 2019 were? Find out here: [link]
Business Tip: If you’re thinking about starting your own business, it’s always a good idea to consider the health of the industry you’ll be entering in. [link]
Pet care, ecommerce, and software development were just a few of the fast-growing business ideas in 2019. [link]
Thinking about building a business from the ground up? Starting a business is a huge decision. Have you done your research? [link]
Real estate, construction, physicians, and warehouses—these are just some of the fastest-growing businesses from 2019! Do you have the skills needed to start one of the businesses listed in our latest blog post? [link]
Considering starting a business? Check out some of the fastest-growing business ideas from last year: [link]
18 Small Business Opportunities in 2020. Sign up for our newsletter: [link]
BizBoost NewsVolume 9, Issue 24For distribution 5/18/20; publication 5/21/20
Cool Tech Tools: Apps that Get You Places
If you’re unlucky enough to have a car without GPS navigation maps, the next best thing to use is your smartphone. This article will take a look at apps that help to get you from point A to point B.
Google Maps
Google Maps is the all-around favorite, whether you own an iPhone or an Android. The default navigation system on the iPhone is Apple Maps, so you will need to download Google Maps to get it.
The database is robust, mostly up-to-date, and shows not only places but also traffic congestion.
Waze
Waze is a crowd-sourced app that is good for current traffic conditions. It has some fun features, such as the speed limit of the road you’re on. You can even set it to warn you when you’re speeding. Waze users let others know where local police are checking for speeders, although this is a bit of a controversial use of the software. Other user reports include the locations of construction, road hazards, gas stations, and toll roads. A carpooling feature is also available.
At this writing, Google Maps and Waze, both owned by Google, are the only apps available for Auto navigation on the Android.
Komoot
Do you prefer to cycle or hike? If so, Komoot’s AllTrails app maps all of the hiking and cycling trails around your town. It lets you know the distance, elevation, and suggested fitness level of each trail so you can plan accordingly. You can set routes and save them as well as favorite your local trails.
There’s no fee to use the above apps. The following apps require a fee to use.
Bird and Lime
Don’t have your own ride? You may have seen people riding on motorized scooters or simply seen scooters parked on sidewalks scattered here and there. Welcome to the new field of micromobility. If you need to get somewhere that’s too short a distance for a car but too long to walk, you can unlock one of these rides with an app and hop on. A couple of companies in this space include Bird Rides Inc. (bird.co) and Lime (li.me), and Lyft.
Uber and Lyft
Of course, if you want a car, you can get a quick ride via Uber or Lyft as well as rent a car at all the traditional places.
Try out these apps so you can get where you want to go.
Our latest blog: Cool Tech Tools - Apps that Get You Places. Subscribe here: [link]
Do you use a GPS app on your smartphone to get you from point A to point B? Whether you do or don’t, check out these cool apps that will get you where you need: [link]
Business Tip: Stuck in traffic? Save yourself some time by using a GPS app that gives you real-time information about traffic, accidents, construction, and alternate routes. Find out more here: [link]
Are you someone who loves hiking or bicycling? You may have heard of GPS apps like Google Maps and Waze for navigation, but have you heard of Komoot? Komoot maps all of the hiking and cycling trails around your town. [link]
Not a fan of the current GPS app or system you’re using? Check out these alternatives: [link]
If you need to get somewhere that’s too close to drive and too far to walk, you might benefit from unlocking a ride on a motorized scooter, like the ones available from Lime, Lyft, or Bird. Find out more here: [link]
Don’t have a built in GPS for your car? There are plenty of apps that will help you get where you need to be. Find out more here: [link]
Cool Tech Tools: Apps that Get You Places. Sign up for our newsletter: [link]
BizBoost NewsVolume 9, Issue 23For distribution 5/4/20; publication 5/7/20
5 Signs You Need to Upgrade Your Accounting System
To maximize profits in your business, all of your business functions need to run smoothly, including your accounting department. Your accounting system is at the core of your accounting function. If it is old or lacks the features you need, your business may suffer. Here are five warning signs you can look for to determine if it’s time to upgrade or replace your current accounting system with something more cost-effective.
1. Not enough users
If your current system limits the number of users you can have in the system at any one time, this could be a major enough reason in itself to switch to a larger option. Luckily, most accounting software companies include an accountant user for free, so at least this type of user doesn’t have to count toward your total requirements.
If you’re not sure how many users you currently have a license for, we can help you check on that. It might be as easy as buying more licenses if you’re not at the maximum capacity. But if you are at maximum, it may be time to look for a better accounting system with room for you and your business to grow.
2. Outdated
If your accounting system runs on desktop-based software that’s upgraded every year and you have not paid for or installed the upgrades, then your system is outdated. If it’s been sunsetted, that means the software vendor no longer supports the software. You are at major risk for the software crashing, getting buggy, getting hacked, or worse, permanently breaking.
The cost of getting the system current may be better spent looking for a new alternative, or moving to a cloud-based system where updates occur automatically.
3. Lack of functionality or scale
It is commonly the case that your business has grown so much that it’s outgrown your original accounting solution. That’s good news! It’s time to find a solution that will scale better for your business.
You might be missing important features that are costing you more time and money than if you were on a system that offered those features. Common time-wasting activities in accounting include too much time spent on data entry and/or Excel spreadsheets to make up for what the accounting system can’t do.
4. Lack of reporting and analytics
If you’re unable to receive the reports and analytics you want to run your business better from your current accounting system, it may be time to switch. With better data comes better decision-making and if lack of data is costing you money, then it’s time to find a more robust system.
5. Lack of integrations
Thousands of apps exist to expand accounting systems’ core functionality. If your current accounting system lacks integration capabilities or does not have apps that are built to integrate with it, you may be missing out on additional functionality. This include mobile apps; it’s quite common now to do much of your accounting work from your mobile phone.
Does your current accounting system have any of these red flags? If so, please reach out. We can help you find a best fit for your accounting needs.
Our latest blog: 5 Signs You Need to Upgrade Your Accounting System. Subscribe here: [link]
Is it time for you to upgrade your accounting system? Find out here: [link]
Business Tip: If your accounting system is old or lacks the features you need, it’s time for an upgrade. [link]
Have an outdated system that requires you to update manually every so often? Consider switching to a cloud accounting system so that your system gets updated automatically. [link]
It’s incredibly common to do a lot of your accounting work from your mobile phone. Does your current accounting system include integrations for all the apps and features you need for your business, including mobile apps? [link]
Don’t have enough users in your current accounting system? It’s time for an upgrade. Find out more here: [link]
How do you know if your business needs an accounting system upgrade? Here are 5 warning signs that signal it’s time to switch it up: [link]
5 Signs You Need to Upgrade Your Accounting System.Sign up for our newsletter: [link]
Changes Affecting Small Business Employers
Disclaimer: This article will provide a broad overview of this act. Be sure to consult with legal experts to fully understand how this legislation affects your business.
The Families First Coronavirus Response Act was passed on March 18, 2020 and contains several provisions that affect private businesses with fewer than 500 employees and all public employers. It goes into effect April 2, 2020.
The major sections affecting employers include:
1. Emergency paid sick time leave 2. Tax credits 3. Expansion of the FMLA
Other important topics for employers right now includes the OSHA requirement to maintain a safe workplace and information regarding layoffs and furloughed employees.
Emergency paid sick time leave
If an employee cannot work or telework because of the following reasons, they are eligible for emergency paid sick leave in the amount of their regular pay, up to $511 per day and $5,110 for the benefit period.
If an employee is unable to work or telework due to a need for leave because the employee is doing the following, they are eligible for two-thirds of their regular pay, up to $200 per day and $2,000 during the benefit period.
The amount of sick time granted is the number of hours the employee normally works in a 2-week period, up to 80 hours.
Exemptions: The Secretary of Labor can exempt small businesses with fewer than 50 employees if compliance jeopardizes going concern. They can also exclude certain health care providers or emergency responders.
This section is effective No later than April 2, 2020 and expires December 31, 2020.
Employers will need to track emergency paid sick leave separately in their time tracking or payroll system as a special payroll item so that it can be calculated and reported for tax purposes.
Payroll Tax Credits
Employers will receive payroll tax credits for qualified emergency paid sick leave that they pay to employees. They will effectively be 100% reimbursed for what they pay out.
The tax credits include health insurance payments.
Expansion of the FMLA
The Family Medical Leave Act has been expanded to include another condition for employees who have worked for the employer for at least 30 days and who are unable to work because they need to care for their child during a public health emergency because their school or day care is closed.
The benefit includes two-thirds of the employee’s regular pay, up to $200 per day and $10,000 over the benefit period.
The duration of leave is 12 weeks, and the first 10 days taken may be unpaid, but the employee can use other paid leave for those days. Health care providers and emergency responders may be excluded.
After the leave, there are protections for job restoration with some exceptions.
Safe Workplace
OSHA requires employers to maintain a safe workplace for all employees. That means keeping the workplace clean and free of employees who might be contagious. Here is a list of approved cleaners that kill COVID-19: https://www.epa.gov/pesticide-registration/list-n-disinfectants-use-against-sars-cov-2
Employers have the right to send employees home that have a temperature, display symptoms, or otherwise endanger other employees. If sent home in the middle of the workday, they must be paid for their normal day.
The CDC guidelines have been updated for additional requirements such as social distancing and other strategies. You can find them here: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html
Layoffs and Furloughs
An employer can lay off or furlough workers. There are three kinds:
1. Permanent layoff is one where there is no rehire date. The employer must pay accrued vacation and sick leave, if any. 2. Temporary layoff is one where there is an intention of re-hiring within six months. The employer may be required to pay accrued vacation and sick leave. 3. Furlough is where hours are reduced or workers are asked to stop working for a few weeks.
In all three situations, employees should be directed to apply for state unemployment insurance.
If a small business finds that it can’t make payroll, the best thing to do is to contact your accountant and/or attorney to understand your options.
Guidance for Employers
If you need help understanding what you need to do in your small business to meet these new legal requirements, please contact your HR consultant, attorney, or accountant.
If you currently own or manage a small business, you’ve probably experienced an extremely high demand or you’re preparing for the worst – to be shuttered by law for a few weeks or longer.
In either case, your business needs a whopping dose of resilience right now. Here are four steps to safeguard your business and discover where you need to build resiliency.
1 – Protect Your Employees
The most important thing to do is to protect your employees. OSHA demands that we give them a safe working environment, and the definition of this just changed! If possible, make it mandatory for workers to work at home, and if not, get your workers protective gear and make sure your workplace is cleaned constantly.
There are brand new laws regarding sick leave; you will need to learn them and incorporate them into your policies.
If possible, try to continue paying your workers for as long as it’s safe for your business.
If you need to lay off workers, encourage them to pursue opportunities where demand has surged. As of this writing, Walmart is hiring 150,000 workers and Amazon is hiring 100,000 workers. Educate them to go where the demand is.
2 – Execute Your Business Continuity Plan
If you’re saying “What’s a business continuity plan?” right now, you’re not alone. Most small businesses don’t have one. If you have any kind of disaster plan in place, brush off the cobwebs and start from it.
A business continuity plan helps you create a process that you can follow before and after your company experiences a disaster of any kind. Many businesses have plans to recover from weather-related catastrophes, fire, and theft. These plans can be adapted to our new situation.
A business continuity plan can have many parts. For our current situation, cash flow planning can be an important first step. You can use multiple scenarios, for example, revenue levels, to determine how much cash you might need for the next few months.
You may need to evaluate inventory, supply chain, project backlogs, staffing, cash, and other areas of your business to project how things will change from normal operations. You will need to protect your various business functions – HR, IT, accounting, operations, and administration – during this time.
Once you’ve drilled down to the tactics of how you’ll move forward, you’re ready for the next step.
3 - Communicate to Your Stakeholders
Are you open? Closed? Changed hours of business? Changed the way you greet clients? Changed your services? Added delivery services? Customers and prospects need to know, so post a notice on your website letting them know what your business’s situation is.
If you don’t, you’ll confuse your current customers and miss out on new business. Everyone is wondering what’s open and what’s not right now. And if you’re open, they’re wondering how you’ve changed your cleaning methods and other procedures to keep them safe.
You may also need to reach out to your suppliers to keep them informed of your plans.
4 – Think About Recovery
What will recovery look like when it comes? The good news about our current situation is that we have more time to plan than we would if a fire or weather brought things down suddenly. We also will not have a disruption in electricity, water, or the local supply chain in as severe an impact compared to a weather event.
What we may not have in this case is customers (or we’ll have too many of them). When customers finally start coming back, what will look different in our world? Will we need to operate differently? How will our services change?
In both the continuity plan and the recovery plan, we truly need to be innovative thinkers. We may need to evolve our business model to be something else that people want once we reopen.
Your Business Continuity Plan
If you need help building your resiliency, or even just projecting your cash flow for the next few months, please reach out and let us help.
BizBoost NewsVolume 9, Issue 22For distribution 4/20/20; publication 4/23/20
How Business Owners Get Paid
At first glance, this article topic might seem too simple. After all, to get paid, don’t you just take money out of your business? Well, yes, but there is much more to it in the long run as well as from an accounting side. Let’s take a look.
The Traditional Paycheck
If you’ve ever worked for someone else, you probably received a paycheck every few weeks. It took care of three major things:
The employer took care of the needs you have today as well as some of your future needs.
Your Business Pay
Now that you’re the employer – of yourself, your business has to cover all of the items mentioned above. How it does that depends on the type of entity you chose when your business was formed.
Sole Proprietors
If you are doing business as a sole proprietor, you take draws from your business instead of paychecks. A draw is simply a cash withdrawal that reduces the ownership investment you have made in your company. The draws do not include any kind of taxes, including self-employment taxes; these need to be deposited separately, usually through quarterly estimated tax deposits to the IRS and to any relevant state agency.
As a sole proprietor, you’ll likely need to find your own health insurance. And the most important thing you’ll need to do is plan for your retirement by investing in IRAs or otherwise saving money that is earmarked for your retirement.
From an accounting standpoint, owner’s draws are shown in the equity portion of the balance sheet as a reduction to the owner’s capital account.
Corporations
If your business is formed as a C Corporation or an S Corporation, you will most likely receive a paycheck just like you did when you were employed by someone else. You will also be responsible for making the payroll tax deposit, funding the retirement plan, and paying for health care insurance.
Owners can also take money out of the business over and above their paychecks.
From an accounting standpoint, corporate payroll, taxes, and benefits are all considered expenses and are shown on the income statement. Any money taken out additionally is a reduction to the owner’s capital account, and this is shown in the equity section of the balance sheet.
Partnerships
If your business is formed as a partnership, each partner will be paid distributions based on the partnership agreement. Typically, that means receiving a base salary and a portion of the profits. You can also take money out of the partnership. Taxes are not included; you are responsible for making your quarterly estimated payments. Plus, you will also be responsible for paying self-employment taxes.
For benefits like retirement plans, partners can be eligible, but the tax treatment of these and other benefits is not necessarily the same as it is for a W-2 employee. The rules are complex for deductibility, so it’s best to contact a tax professional to find out more.
Evaluating Company Profits
It’s critical to understand where your wages show up on your books so that you can truly understand your business’s profitability. With corporations, the salaries are included in the expenses, so net income is after, or net of, salaries and payroll taxes.
With sole proprietors and partnerships, the net income figure on the income statement does not include owner salaries because there aren’t any. Instead, only the equity section is impacted. Net income for partnerships and sole proprietors should always be high enough to at least “cover” an amount equivalent to a “so-called salary” for all of the active, participating owners.
If you have questions or need help understanding how business owners get paid, please feel free to reach out any time.
Our latest blog: How Business Owners Get Paid. Subscribe here: [link]
For small business owners, there’s more to getting paid than just taking money out of your business—at least from an accounting standpoint. Find out more: [link]
Business Tip: It’s critical to understand where owners’ wages show up on your books so that you can truly understand your business’s profitability. [link]
Sole proprietors take draws from their businesses instead of paychecks. This also means that they’re responsible for paying self-employment taxes. [link]
From an accounting standpoint, corporate payroll, taxes, and benefits are all considered expenses and are shown on the income statement. Learn more: [link]
Net income for partnerships and sole proprietors should always be high enough to at least “cover” an amount equivalent to a “so-called salary” for all of the active owners. Find out more here: [link]
How does your business entity type affect your business pay? Find out here: [link]
How Business Owners Get Paid. Sign up for our newsletter: [link]
