At what point does your business throw out 2020's original budget and start over? Kidding! Sort of. If you predicted this significant impact on our overall economy and your business while you were putting your 2020 budget together, let's talk. I have many questions for you.
Budgeting
Your most conservative budget likely didn't account for the losses you are experiencing. Yet you may be on the other side, and business has never been better because you offer a product or service that people need right now (masks anyone?).
Wherever you find yourself in the financial landscape, it's time to reassess this year's budget and start moving money around to care for immediate and future needs. I get that it can be overwhelming since so much is still uncertain. For most businesses work travel, office supplies, conferences, events, recruitment, salaries, and bonus are probably not going to be as high as budget (I cringed as I added the last two to my list). For those that are booming right now, you may be in the situation where you need to move more money to travel (especially if you are delivering your product/service to the clients' home) or product supplies (because you either need more or the higher cost of materials now).
COVID-19 Related Relief and Government Regulations
In March and April, the government passed the Families First Corona Relief Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which aimed to provide relief to small businesses and some protection to all employees. These Acts give both assistance (in the way of credits and funding) and additional burden (record keeping and quick adaptation) for these businesses. For more details on how the CARES Act impacts small businesses, please read our article here. Each of these Acts has financial implications for businesses.
My team lives in Texas. When the Governor started talking about reopening Texas, he referred businesses to the website where, and I quote, they could "download our BOOK on Reopening Texas". The book guides businesses on the process he has put in place, which supersedes any local ordinances. This process includes providing appropriate PPE supplies to employees and shifts in the entire customer experience. For businesses that can open, every building has multiple signs from the door to the floor, declares the number of customers must be limited to a certain percentage of their maximum occupancy, and staff is required to sanitize the space continuously. For other businesses, they must cancel events; thus, they've lost not only revenue but also deposits. Keep these costs in mind and consider creating a couple of different projections for your cash flow and budget, depending on the nature of your business.
Payroll, Tax Credits, and Deadlines
The Family/Sick Live Tax Credits under the FFCRA, Congress created a refundable payroll tax credit to offset the cost of providing the required leave. Businesses with W-2 employees can defer payments of their 2020 payroll taxes, with 50% due by the end of 2021 and the remaining amounts due at the end of 2022 (this is called the Payroll Tax Deferral, CARES Act). Another credit under the CARES Act is the Employee Retention Tax Credit. For wages paid after March 12, 2020, through the end of the year, businesses and nonprofits would be eligible for a payroll tax credit of 50% on qualified wages for each employee for each calendar quarter. Total qualified wages for each employee shall not exceed $10,000 (maximum credit of $5,000 per employee).
Self-employed individuals can pay 1st and 2nd Quarter estimated self-employment taxes (typically due on April 15 and June 15, respectively) on July 15. Individual tax forms for 2019, which for many include a Schedule C "Profit or Loss from Business," have also been extended to July 15. Self-employed individuals must continue to pay 50% or their estimated self-employment taxes during 2020, with the remaining 50% deferred. 25% of the balance is due by the end of 2021, with the final 25% due at the end of 2022.
It is going to be incredibly important for businesses to track any of these tax credits and extensions they utilize carefully. For companies that will have indebtedness forgiven (including the Payroll Protection Program/PPP), they cannot use the Payroll Tax Deferral and/or the Employee Retention Tax Credit. Weigh the financial benefits of each and where possible use the one that has the most economic benefit to your business. Both options allow for a semi-immediate infusion of cash into the business or enable the company to hang on to the money they would have otherwise sent for payroll liabilities.
Capacity
Do you have the capacity and knowledge to handle financials right now? To ensure that you don't neglect your accounting and that you are taking advantage of any stimulus, this might be the best time to consider outsourcing your bookkeeping.
If you have W-2 employees and haven't been using a third-party payroll service, this might also be the right time to consider outsourcing this task.
By outsourcing, you have access to professionals that keep up with the financial and reporting implications of the pandemic and of stimulus offerings. These professionals keep or get your books in order so you can focus on keeping your business running. COVID-19 may cause you to think outside of the box. Outsourcing some of your staff responsibilities for the time being or long-term helps you do what you do best, serving your client as only you can.