Search Results for: operations

The Paycheck Protection Program — What’s Next? Part I: Loan Eligibility

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As one of the largest loan programs in American history was rolled out to help small businesses, it’s not unexpected to see many questions and responses by the U.S. Treasury in the form of FAQs to help clarify the government’s intent with respect to PPP funds eligibility and usage. But are they leaving businesses with more questions than answers?

Eligibility and usage are cornerstones as to whether a company will have its loan forgiven, or whether its owners, officers and directors will be subject to penalties and criminal prosecution for making an application when their company has alternative access to capital, such as the cases involving Ruth’s Chris Steakhouse and Shake Shack.

In a recent tweet, Zachary Warmbrodt of Politico stated, “Marco Rubio says the names of business that received PPP loans will be made public. ‘Treasury, SBA is eventually going to have to release that. I always thought they were going to have to, and if they don’t, we’ll make them do it.’”

The message being sent by the government? All companies need to be prepared to justify eligibility and forgiveness. Let’s start with a look at eligibility.

Eligibility: As simple as it looks?
At first glance of the CARES Act, the only eligibility requirements were that a business had to have no more than 500 employees. For companies with a NAICS code beginning with 72 (hospitality and restaurants), their employee count was based on a per-location basis. In addition, there had to be economic uncertainty resulting from COVID-19 impacting the business — a rather broad statement.

The SBA, in consultation with the Department of the Treasury, has issued guidance in the form of FAQs 31 and 37 as it applies to large companies (publicly held) and private companies (the rest of us).

Here’s what FAQ31 for public companies states in part: “Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that ‘current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’ Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”

Translation: It’s important to keep in mind that this is your certification, meaning banks may rely on a borrower’s certification regarding the necessity of the loan. In other words, just because your bank processes your loan application, that doesn’t mean you’re necessarily eligible for the funds.

FAQ 37 for private companies simply states see FAQ 31. So, what does this mean for the rest of us? To avoid problems, every business needs to document how it arrived at needing the funds based on the economic uncertainty surrounding COVID-19. Sounds simple, but consider these real-life examples:

  1. If a business doesn’t experience a significant revenue decline, but has a decline year over year of cash, does it qualify?
  2. Does a business where the business owner has some financial means qualify? Should this small business owner be required to liquidate investments or a 401(k) to infuse capital into their business?
  3. What about a small business with an established line of credit with a personal guarantee by the business owner? Should the small business owner be required to access these funds with a personal guarantee without regard to the PPP funds and jeopardize the small business owner’s personal financial well-being as well the well-being of the business?

I recently attended a webinar with some SBA representatives, where responses to most questions were referred to the Department of Treasury for additional guidance. However, there was much discussion regarding the above fact patterns.  In substance, the representatives continued to mention “good faith representation” regarding economic uncertainty.  At no time did anyone state that having a line of credit or a high net worth owner(s) would be a detriment to seeking the funds and being eligible. All stated it’s based on facts and circumstances and all factors should be considered in determining eligibility.

Economic uncertainty doesn’t only pertain to current conditions, but also the future economic impact on small business — meaning no one really knows how the economy will behave once the country is reopened. Receiving these funds may be the difference between survival, bankruptcy, or reduced work force.

In anticipation of being asked to justify your PPP application, have the following information ready:

  1. Business factors you were seeing which led you to change your business model from salary cuts to headcount reductions to overall expense reduction. One page is enough for a summary.
  2. Current and future impact on revenue/order cancellations.
  3. Impact on accounts receivable collections.
  4. Factors which led you to retain your employees.
  5. Concerns about the future which led you to apply for funding.
  6. Inability to access capital and liquidity
  7. Unwillingness or inability of a business owner to put funds into the business

[Important update 5.6 — Repayment date has now been extended to May 14, 2020. Borrowers do not need to apply for this extension.]
Although not all-inclusive, this should you give something to consider if and when the question is asked.  Keep in mind if a business is ineligible, it has until May 7, 2020 to return the funds with no repercussions. One thing the representatives on the webinar agreed upon is there will be more guidance, so stay tuned.

PPP update: Application delays & foreign-owned businesses

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The Treasury Department recently released a revised PPP application on its website. With the exception of Bank of America, we’re not aware of other banks accepting applications today. It’s likely there will be a 2- or 3-day delay with other banks. We urge you to continue to prepare the necessary underlying documentation to facilitate the computations of the 2.5x monthly average payroll. This new application also removes troubling language related to companies that are more than 20% foreign-owned and/or are not permanent residents of the U.S. The recently released regulations may make the following non-immigrant categories eligible for SBA financial assistance

  • B-1 Business Visitor
  • F-1/OPT Optional Practical Training
  • H-1B Specialty Occupation
  • O-1A Extraordinary Ability and Achievement
  • E-2 Treaty Investor; or
  • L-1 Intracompany Transferee

In addition, businesses owned by Foreign Nationals or Foreign Entities may be eligible. The Lender and Development Company Loan Programs Guidelines issued April 1, 2020 states businesses listed in Appendix 1 are not eligible.

If you are an eligible business, there are additional requirements for businesses owned by non-citizens other than Legal Permanent Residents (LPRs), including foreign-owned businesses:

  • The application must contain assurance that management is expected to continue in place indefinitely and have U.S. citizenship or verified LPR status.
  • Management must have operated the business for at least 1 year prior to the application date. This requirement prevents financial assistance to “start-up” businesses owned by aliens who do not have LPR status.

Lender must require the personal guaranty from management
The Applicant must pledge collateral within the jurisdiction of the U.S. with a liquidation value equal to no less than the approved loan amount at the time of first disbursement and, to the extent that the value of collateral declines during the life of the loan, the Lender must require the Borrower to pledge additional collateral to ensure a sufficient collateral coverage amount. If the Applicant owned by foreign nationals, foreign entities or non-immigrant aliens residing in the U.S. does not have sufficient collateral, the Applicant IS NOT eligible for an SBA-guaranteed loan.

In order for a business not to be subject to these additional requirements, it must be at least 51% owned by individuals who are U.S. citizens and/or who have LPR Status from United States Citizenship and Immigration Services (USCIS) and control the management and daily operations of the business. This can only be waived by the Director of the Office of Financial Assistance (D/FA) or designee.

Development of the regulations is fluid and there may be additional modifications. It’s best to immediately contact your bank or banker for further clarification, but be prepared — they may not have all the answers as these guidelines were released late last evening April 2, 2020.

As always, if we can be of assistance please call (973) 301-2300 or contact us via email.

When disaster strikes, how thorough is your business continuity plan?

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Whether you operate a small company or helm a large corporation, every business is susceptible to events beyond its control. Whether it’s a data breach, a weather disaster or communicable disease outbreak, a solid business continuity plan can help minimize the impact on daily operations and help your organization come out on top.

Your business continuity plan is a dynamic tool that documents the procedures and processes to get back to business as quickly as possible. The time spent developing and maintaining a comprehensive plan is an investment in your company. So, from emergency communications to facilities management, make sure these five areas are covered:

#1. Emergency management. Do employees know who’s in charge in the event of an emergency? Are they aware of appropriate measures to take? Even the best employees won’t automatically know what to do without a plan in place. Appropriate emergency responses should be clearly outlined, and test runs and drills made part of your standard operating procedure.

#2. Crisis communications. When a disruption or threat arises, how do you notify your team, customers, vendors and the greater community? Your plan should specifically address notifications, communication channels and expectations regarding any change in business operations.

#3. Facilities maintenance.  Office space, storefronts, warehouses — are your facilities equipped to withstand nature’s elements? A continuity plan can help ensure that your facilities are resilient, with the ability to tolerate or recover from the potential damage.

#4. Security. Chances are your critical records and data are stored electronically, so can your IT systems hold up against tampering or hacking? Is company data regularly backed up, both on-site and remotely? Are measures in place to protect your inventory, merchandise or equipment? Keeping physical and intellectual property, data records and other valuable materials safe from harm, theft or loss is another vital function of your business continuity plan.

#5. Health and safety. At the end of the day, what’s more important than the well-being of your employees and customers? If a workplace catastrophe occurs, your people are counting on you to protect them. Your business needs systems in place that offer a line of defense against any conceivable threat.

Room for improvement
Even if your business continuity plan is complete and in effect, your work isn’t done. As technology evolves and employees come and go, the plan should be regularly updated. Experts recommend meeting with key stakeholders annually to review and modify the plan. Then, share it across departments and business units, and gather feedback from the entire company to make sure nothing’s being overlooked. When everyone is on the same page, you can best ensure an organized, safe and timely recovery.

Preparing for the storm
There’s no better test of your organization’s resilience than the occurrence of an adverse event — but don’t wait for disaster to implement or evaluate your plan. Build your defense now, and make it a regular part of your strategic planning processes.

Digital transformation: How AI will supplement (not supplant) the role of the CFO

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Artificial Intelligence (AI) continues to revolutionize the financial realm. And as a result, the role of the CFO is evolving, too.

AI is changing the organizational structure of how financial departments function. It’s allowing businesses to work smarter and faster, enabling their transformation into full digital organizations. But as technology fulfills core accounting jobs, what does that mean for the future of the CFO?

There are some shoes AI will never fill
The rise of AI is not likely to replace the CFO, but rather create a strategic partnership. Even as robots get smarter and more economical, they’re not equipped to take on every function.

According to a recent McKinsey report, the determining factor in whether a job is likely to be replaced is the type of work involved. The more predictable and repetitive the job, the more likely it is to be taken over by automation. So, it’s safe to say the core functions of a CFO will not be automated any time soon, and here’s why:

Decision-making skills are difficult to program. Not every question or business challenge can be broken down into quantifiable factors for AI to solve. AI isn’t capable of making judgment calls and tackling decisions that can impact an entire organization. There will always be unexpected problems to solve and machines will never replace human judgement.

Machines can’t easily adapt to the unexpected. Consider the self-checkout lines at big retailers. While they may help move lines faster and lessen crowds, they’re also susceptible to theft. It’s too easy for someone to input the wrong code and make off with a sizeable discount. What does that mean for more complicated machines? System flaws within AI are often unavoidable.

Humans prefer to deal with other humans. When it comes down it, people put more trust into the ideas and intuition of other people rather than machines. While robots are entrusted with smaller duties, it’s unlikely that any company would trust AI with taking over critical tasks.

The true value of AI is enabling CFOs to analyze data in more valuable ways. But this insight is worthless if you’re bogged down with daily accounting operations, like managing financial transactions and producing reports. With technology taking over the grunt work, you’ll be poised to lead change within your organization.

Working in tandem
Today’s CFO is responsible for contributing to company growth and increasing profits. AI provides the actionable information to support decision-making to reach organizational goals — but not take it over. Machine-learning algorithms lend the power to analyze, interpret and make predictions to improve operations and productivity. With AI, the CFO gains:

  • Increased efficiency. As low-priority responsibilities are automated, time is freed up to concentrate on more strategic and revenue-generating tasks.
  • Improve planning. Accurate and reliable data offers higher visibility to detect anomalies, pinpoint inefficiencies and make better planning and forecasting decisions.
  • Smarter fraud detection. The ability to verify information in real-time and ensure compliance can help mitigate risk and prevent fraudulent activity.
  • New ideas. AI can make sense of volumes of data, initiating new ideas and possibilities.
  • Internal reliability. Use data as proof points to build trust with stakeholders and justify key business decisions.

The bottom line
Al gives CFOs a huge advantage. By harnessing the power of data and automation to rise above tedious tasks, they can move into the future with more certainty and maximize their contributions to the success or their organization.

Jump on board: 5 Next-level nonprofit trends for 2020

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In any given year, nonprofit professionals face a mix of significant accomplishments and relentless challenges. From donor expectations to new technology, the landscape is constantly innovating. Nonprofits must keep up to achieve their desired goals, or risk being left behind — along with the communities they serve.

To maximize your organization’s potential, here are some recommendations from NonProfit PRO for bringing in more donations, engaging more donors and improving communications to make your mission’s mark in 2020.

#1. Form non-traditional partnerships. With the changing political climate, nonprofits are shying away from government sources to help fund their operations. Instead, they’re building partnerships across new sectors to help protect their organizations from political uncertainty.

In the healthcare industry, for example, providers want to reduce the incidence of low-income patients being continuously readmitted because they have nowhere else to go. The solution? Stable housing. By providing disadvantaged patients with a place to live, it creates an opportunity for housing providers to partner with health systems to mutually benefit each people in need.

#2. Execute mobile-first technology. Are donors checking emails on their desktops or smartphones? The donor landscape continues to shift across generations, and nonprofits need to reach them in an increasingly mobile environment. This creates the urgency to understand and implement mobile-first technologies.

Don’t just accommodate mobile users with a full version of software that they must load onto their tablets. Give them information that’s designed specifically for mobile and touchscreen interfaces.

#3. Harness the power of AI. Artificial intelligence (AI) technology carries the ability to improve proficiencies and outcomes in various areas of the nonprofit sector.

For example, chatbot technology can be used to increase donor engagement across your social media pages. Or, you can use predictive analytics to optimize your campaigns to better speak to your donor base. The growing availability of AI and its ease of incorporation into your current processes holds great many possibilities.

#4. Focus on recurring gifts. Monthly giving allows donors to spread their contributions throughout the course of the year — so do your part to make it easier and more convenient. Leverage technology to set up monthly giving options.

Not only does this this provide a better idea of the giving forecast, it also offers stability to coincide with your year-round fundraising efforts. Remember, your nonprofit’s ability to expand giving options across multiple touchpoints — text, mobile, desktop, mail, etc. — plays a huge factor in the overall success of your efforts.

#5. Provide authentic communication. When it comes to your board, one of the biggest challenges is finding ways for members to connect with the cause. Like donors, board members are likely willing to volunteer and devote their time and energy to your organization because they have a natural affinity for its mission.

So, give them opportunities to experience the mission at work. Let them interact with the community and see first-hand how your organization is making a difference. This will help keep them engaged and enthusiastic in their roles, as well as generate new perspectives and ideas.

There’s no time like the present for establishing a fresh outlook. To strengthen your outreach and make a stronger impact, consider how you can best utilize these strategies to meet your organization’s specific goals and needs.

The rise of technology: What it means for today’s — and tomorrow’s — CFOs

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Organizations of all sizes are realizing the benefits of a digital transformation, and they’re turning to CFOs to adopt and develop critical technology-related skills. Once considered a numbers-only role, CFOs are now balancing traditional fiscal responsibilities with the increasing demand for data-driven analysis. As technology continues to steer change in the business environment, CFOs are playing an instrumental role in the success of a company’s digital initiatives.

A broader range of expertise
According to the Grant Thornton 2019 CFO Survey, 95% of finance executives report that the CFO of the future must possess increased levels of technology expertise, including data analytics. In fact, 55% identified data analytics as the number one skill they want to develop within the finance function, followed by:

  • Business strategy (40%)
  • Operations management (36%)
  • Technology acquisition (34%)
  • Innovation/entrepreneurship (32%)

In this digital era, CEOs look to their CFOs to lead the way. Finance teams are the go-to for delivering analytics and insights that support strategy and decision-making to help organizations identify new market opportunities, uncover trends, develop smarter forecasts for business planning and more. In the long run, organizations that embrace the digital will have the insights to bring innovative ideas to market before the competition. And the more time devoted to harnessing data and interpreting analytics, the greater the asset CFOs can be to their organizations.

Talking numbers
According to the study, finance teams are bumping up their use of emerging technology functions in the following areas:

  • Accountants payable/receivable (46%)
  • Financial reporting and control (44%)
  • Financial planning and analysis (43%)
  • Budgeting and forecasting (42%)
  • Corporate development/strategic planning (41%)

Going forward, executives plan to expand their strategic use of technology, especially in terms of financial planning and analysis (30%) and financial reporting and control (28%).

Future-proofing your CFO career
For finance professionals who want to achieve long-term success, Grant Thornton recommends adopting the following guidelines:

  • Identify processes that would benefit from automation and digitization. Partner with C-suite peers to determine which opportunities could offer the most value.
  • Shift your mindset to machine-first. Automate manual or low-level work, so employees can take on more strategic roles. Make sure you provide them the training to do so.
  • Implement better communication. How does finance interact with other business functions? Seek out new processes to ensure open lines of communication and mutual respect for each department’s needs.
  • Align investments. Determine how to measure the effectiveness of your digital transformation initiatives. How do technology investments link to your business investments and your ROI?
  • Create a culture of innovation. Give employees the tools to create and thrive in a digitally-aligned workforce.

CFOs: Rising to the occasion
Organizations aren’t just looking at data as a strategic asset, they’re executing strategies that leverage data to improve their business outcomes. And CFOs are at the forefront, driving initiatives to improve the bottom line.