As the United States marks National Small Business Month, accountants are deeply involved in helping their small business clients cope with the pandemic, particularly by helping them with various government assistance programs.
The US Small Business Administration’s Paycheck Protection Program has offered accountants a major opportunity to help clients apply for PPP loans and loan forgiveness since the program launched last year as part of the CARES law. The Consolidated Appropriations Act that Congress passed in December revived the PPP after it expired last summer, but it is expected to expire again at the end of this month.
This year, the Biden administration has focused on providing loans to small businesses in underserved communities and to businesses owned by women and minorities. He pursued a similar approach with the recent Restaurant Revitalization Fund, which aims to help restaurant establishments (see the story). Applications for the RRF were closed on Monday, but on Wednesday the SBA opened a new program called the Community browser pilot program, which aims to use a sort of hub-and-spoke approach to reach out to smaller businesses through community organizations, especially businesses owned by socially and economically disadvantaged people, as well as women and veterans.
During the pandemic, small business owners relied on their accountants for more than bookkeeping and helping government programs.
“Much like the 2008 financial crisis, small businesses have been hit harder than large businesses,” said Heather Bain, chair of the Small Business Committee at the Institute of Management Accountants. “It allows management accountants to leverage their relationships and become valuable advisors to small business owners. “
She also owns Bain CPA Business Strategies, a small business consulting firm in Houston, where she advises clients on cash management projections and budgeting. “We get a lot of calls as small business accounting practitioners about cash flow,” she said.
Business owners have a lot of questions, she noted. “Should owners take advantage of the business? How can we reduce costs? How can we increase sales? They really want to know what their cash flow forecast looks like and how they can budget, and if, if they are at 50% capacity, can they actually continue to do payroll? Can they make their loan repayments? Can they get additional funding through the local SBA or PPP agency? What funding is available? How to reduce the cost of transactions? I get a lot of questions about banking choices, about reducing bank fees associated with using services like Zelle or another payment system in addition to accepting credit cards, or about avoiding bank fees that happen every month, and lots of cash flow issues, ”Bain said.
Risk management, diversity and inclusion are increasingly areas of focus for the IMA Small Business Committee. “As a committee, we’ve talked a lot about insurance and policy changes, not just insurance policies, but actual internal policy changes within small businesses that could impact risk to the company. business, ”Bain said. “We’ve talked a lot about diversity and inclusion as the primary way to ensure that there is good innovation and that they reach target markets. Whenever there is prejudice within a business, it may not really understand its target market. They may not understand their employee population and outside of their employee pool, so they may not attract top talent if they don’t have a good diversity and inclusion policy.
The pandemic has exposed many inequalities that the SBA is now trying to correct in programs like the PPP. “We are already seeing in many states that PPP loans have kept businesses in business, but they have not reached under-represented small community businesses and women-owned businesses as much as they have across the board. small businesses, so the effort to level the playing field was one of the key issues, ”said Diane Swonk, chief economist at Grant Thornton at the Avalara Crush Virtual event on Thursday. “We know that inequality is something ineffective by definition, and the inequalities that we’ve seen the pandemic accelerate, expose and exacerbate really reduce our growth potential going forward, and you’ve really seen a recognition by state and local governments on this front.
Technology has been at the center of concerns for small businesses and their accountants as they grapple with the pandemic. “We were also involved in the technological changes because, of course, during the pandemic, there was a lot of technological change, and we were involved in the budgeting for that, and in the analysis of the costs and benefits of the changes. technology, and how we fundraise for technological change, and can they justify that over the life of technology, and that sort of thing, ”Bain said.
Accounts receivable services rely heavily on a mixture of technologies. “CAS essentially demands that your business be able to best meet the needs of all of your clients,” wrote Hitendra Patil, Director of Practice Development and Client Success at AccountantsWorld, in her new book: “The Ultimate Guide to Accounts Receivable Success. “In other words, your business’s technology stack, services, processes, and pricing packages must meet the needs of businesses of different sizes, revenue, and varying levels of technology knowledge. business owners and their employees. In other words, your firm should have the capacity to do some of the accounting work or all of the work that your clients offload to your firm. “
Marketing changes have been required for many businesses due to the pandemic, while small businesses have also faced supply chain shortages and uncertainties that have raised questions for their accountants. “Supply chain management is a very big topic because with the pandemic there has been a lot of supply chain disruptions, and there is a need to analyze how to overcome supply chain disruptions. while remaining profitable, ”Bain said. “With many small businesses dependent on raw material and import prices, and most distributors not being able to take advantage of economies of scale, how can they improve their supply chain affordably? ? They also asked a lot of questions about it.
She helped customers apply for the Restaurant Revitalization Fund and do the necessary calculations to ensure they were eligible for the program (see the story). She and other management accountants have also helped companies apply for the employee retention credit that was included under the CARES Act. The Consolidated Appropriations Act has enabled companies to take advantage of both PPP and ERC.
“Many of our small business practitioners also work with employee retention credit,” Bain said. “Many firms are not even taking this job right now because they are still overwhelmed by the other tax changes that have occurred, so management accountants can step in and fill this gap that some CPA firms were managing,” especially small CPA firms that simply don’t have the capacity to do it all. Internal accountants, if they are management accountants, understand the complexities. We’re not just talking about accounting. We’re really talking about advisory-type roles.
The P3 has proven difficult for some small businesses to operate, given the constant changes to the program. “I have clients who have actually applied for the second round of the PPP, but since there have been entity rule changes, this is a partnership and the partnership does not show income.” , Bain said. “Everything is distributed to individuals, and individuals did not want to take out the loan in their own name under their 1099 income. They wanted to take it as a partnership like they did in the first PPP, and because of the changes, they couldn’t do it, so they won’t be able to take the second round of the PPP. I think because they made changes to the nominations for the second round, it will exclude some candidates just because it is a little different from the first round.
Small businesses that experienced a significant drop in revenue last year have been able to benefit from both PPP and ERC, thanks to recent program changes. “They changed the threshold to what they see as a significant drop in revenue, which has been helpful for small businesses because obviously not all small businesses make a very large margin, so any drop in income can be the difference between making a profit or not, ”Bain said.
The 20% deduction for qualifying business income in the Tax Cuts and Jobs Act of 2017 was convenient for some small businesses, but not all could qualify. “There was a lot last year that didn’t have enough income last year to make it useful,” Bain said. “It’s based on wages as one of the criteria for determining how much the company can deduct, so if their paid wages were going down then that would be less helpful. “
Small businesses should be able to benefit from a more lax attitude on the part of national and local tax authorities who do not want to harm the economic recovery of local communities.
“I think we’re going to see a little less oversight,” Kim Rueben, senior researcher and director of the Public and Local Finance Initiative at the Urban Institute, said at the Avalara Crush virtual event on Thursday. “Last year we thought this was going to end up being a top place to do a lot of surveillance and try to eliminate fraud and make sure everyone was paying. Right now, I think there will be some of it, but that will go a long way to ensuring that there is this leveling of the playing field between local businesses and online or national businesses. The fact that state and local governments can breathe a sigh of relief means we won’t quite see the level of repression, but I think as things change places are going to try to ensure that their local businesses are doing well. . … I think we’re going to see more of the stuff where they offer economic incentives or help their local businesses and try to make sure they’re not penalized by what’s going on nationwide.