How did a 33-year-old recruiter from Silicon Valley compete in the halfpipe skiing event in the winter Olympics despite having none of the experience, training, or talent of an Olympic athlete? Because people who set goals are more successful.
Elizabeth Swaney had a clear objective: competing in the Winter Games. Through short-term goals and creating actionable to-dos, Swaney was able to reach her target and accomplish her end goal.
So, if goal-setting is the key to making people more successful (and turning average athletes into Olympians), shouldn’t the same logic apply to businesses and their employees?
Yes, as long as that list of goals is more than just a list: goals must be clear to everyone in an organization and include a plan of action that aligns with the business’ annual (or overall) goals.
Here are 5 reasons why setting strategic, quarterly goals is not only important but beneficial to your business’s productivity and success:
Quarterly business goals increase accountability
Setting measurable quarterly goals helps increase accountability and encourages departments and teams to put processes in place to support the achievement of those goals. Each department within the company should have attainable quarterly goals accompanied by a clear plan of action that helps them meet those goals.
Quarterly business goals require metrics to be relevant
Using the metrics of your quarterly goals to make strategic business decisions helps ensure that your company is being responsive to what is working and proactive about making changes where adjustments are needed. Your team will also be able to use the data to change and update existing goals, measure success, and show the lasting impact each member has on the company’s overall vision.
Achieving business success requires managing people and understanding how the metrics of those people’s performance support your company’s overall objectives. Long-term goals continually evolve throughout the life of the company, and short-term goals need clear metrics to be effective.
Quarterly business goals help maintain sustainable growth
Quarterly business goals encourage sustainable growth by setting measurable checkpoints throughout the year. For example, business owners may set goals to add new customers each month while retaining current customers or to increase sales in a specific vertical in order to reach their quarterly business goals.
To achieve sustainable growth, your leadership team needs goals that keep them focused on the critical processes that build success. Creating quarterly goals ensures that productivity, growth, expenses, and processes don’t go unaddressed in the hustle and bustle of running a business.
Quarterly business goals increase employee performance
Setting quarterly goals help employees prioritize their tasks throughout the year and allows managers to track progress within their teams. Creating quarterly goals also gives managers better visibility into each of their employee’s performance and overall productivity. Individuals who can see the results of their efforts are more likely to continue to perform at a high level and be increasingly accountable, productive, and engaged.
Setting realistic, short-term business goals helps employees along their path of professional development. For example, quarterly employee bonuses or incentive-based programs are tied to quarterly business goals and will increase their motivation to perform at a higher level. These goals can be anything from surpassing a quarterly sales goal to reducing departmental expenses. As long as the goal is specific, measurable, and attainable, it can supercharge productivity. Acknowledging employees who consistently meet their goals inspires future goal aspirations and creates a culture of celebrating success from within. In turn, this will also boost employee engagement and increase loyalty.
Quarterly business goals help everyone visualize the big picture
Setting quarterly goals helps make those bigger, longer-term goals feel attainable not only for the leadership team but for everyone on the team. Everyone from leadership to managers to employees are more apt to achieve success when they have a clear understanding of how their goals help drive the success of the company.
Signature Analytics provides the kind of high-level business advisory services that can help you set financial goals that support your company’s overall business objectives. If you need assistance creating or improving the accurate financial visibility needed to achieve success and drive your business objectives, contact us today to talk to an expert.
Even with the best strategic planning and forecasting, no one could have predicted the economic ups and downs of the past few years. As the economy comes weaving back from the pandemic, finance and accounting leadership is faced with the rising costs associated with inflation, a looming threat of recession, and continued (though lessening) supply chain issues.
The world was never “normal” so getting back to that state is impractical at the very least. So, what is a business owner to do to prepare for an uncertain future?
According to a recent analysis by Deloitte, the gross domestic product in the United States is poised to boom well beyond pre-pandemic numbers. What do a higher GDP, increased inflation, a recession, and falling unemployment numbers mean for business owners? Let’s explore:
What is Inflation and How Does it Affect Your Business?
Inflation is an economic environment in which the cost of goods and services increases rapidly. Inflation can be triggered by a shortage of services or products; this, in turn, leads to increased prices which trigger a cycle of rising costs, short supply, and long wait times, making it harder for businesses to keep margins profitable.
Forbes has a straightforward definition of inflation. “Inflation is identified by a rise in prices and a decline in the currency’s purchasing power over time.”
Reduced purchasing power means that businesses will have fewer products to sell, potentially lowering profits. Lower profits can mean a decreased ability to grow or invest back into the business.
As many companies with fewer than 500 employees were founded using the owner’s savings, inflation fallout puts small business owners at significant personal, as well as corporate, financial risk.
Effects of Inflation on Small to Medium Size Businesses
Being knowledgeable and prepared is the best defense in cases of economic uncertainty. Business owners and finance and accounting leaders need to consider the following three elements concerning inflation and the surrounding economic environment.
Erosion of Purchasing Power
Inflation negatively impacts the purchasing power of a currency as prices of goods and services go up. Historically, prices go up quickly during inflation but come back down much more slowly.
Shortages of Finished Products in the Market
The effects of inflation are not linear; they ripple through an economy affecting businesses in unexpected ways. One of the most immediate impacts is the shortage of supplies preventing the completion of finished goods.
When manufacturers are unable to get the raw materials they need to produce finished products, the impacts are far-reaching. While Just In Time (JIT) manufacturing was developed to address this problem, the inter-connected market leaves many entrepreneurs’ funds tied up in inventory-in-process, accumulating losses and driving demand and prices higher.
Inflation Raises the Cost of Borrowing
During periods of inflation, the cost of money goes up. In these periods, banks raise the criteria to qualify for loans just as business owners find themselves strapped for cash. The age-old conundrum is exacerbated in an inflationary environment, when you most need a loan most, you are least qualified to get one.
As a business owner, it may be beneficial to consider alternative lenders during a time when sourcing a bank loan may be challenging. Talk with your banker, CPA, financial advisor, or outsourced accounting experts to find out what options might be available.
How Businesses Can Manage Post-Pandemic Inflation
No matter what industry you are in, your business must make well-informed strategic decisions in a time of inflation. Here are five steps your business can take to mitigate the effects of inflation in 2022.
Evaluate Product Revenue Mix
Analyze product or service streams, compare performance over time, and consider different geographical markets, client types, and distribution channels.
Now is the time to streamline your business, cut costs, and improve margins. You may need to shift production to focus on higher-margin products and services.
Analyzing the potential short and long-term effects of the shift and understanding how it will affect the future of the business is essential before making these kinds of seismic shifts. Be proactive, thoughtful, and strategic, not reactive.
Adjust Your Pricing
The prices of almost every product go up during inflation. Your business may have to raise prices to stay in alignment with the rising costs in the market.
Before increasing prices, analyze the competition, be upfront with customers about increases and why they are necessary, and be clear on your long-term goals for returning prices to their pre-inflationary rates or accepting the new status quo.
Transparency will help customers adapt to the new pricing without negatively impacting their loyalty to the business.
Evaluate Risks to Your Supply Chain
Over the last few years, business owners have seen the effects of having their supply chain solely dependent on one supplier. When imports were halted due to the ongoing pandemic, business owners couldn’t keep up with demand. The result? Revealing the faults in many business owners’ supply chain strategy.
These events forced business owners to start strategically assessing the risk of their supply chain. Some of these risks can include:
Over-dependence on a single supplier
Using long-lead-time suppliers, such as importers
Heavy, bulky, hazardous, or perishable products that are hard to store
Materials that are passed through a JIT supply chain
There are steps you can take to mitigate supply chain-related risks in your business in a time of inflation, including:
Setting up an alternate supply chain – not merely finding an alternate supplier
Stockpiling critical supplies that have a low holding cost
Putting in place an expedited supply strategy
Reviewing stock levels at every stage of the JIT supply chain
Understand Your Inventory
When prices start going up, a robust inventory can be a competitive advantage. By the same principle, it is a better policy to maintain lower inventory when prices are low.
If your business engages in proactive scenario planning and forecasting, you will have a worst-case scenario plan at the ready. This scenario planning can help you anticipate wage increases, higher material prices, or unforeseen disruptions in the supply chain. A well-executed financial forecast addresses the amount of cash on hand your business needs to get through economic fluctuations.
They say, “Cash is king”, so do your best to keep cash available, have a strong banking partnership in place, and take steps to mitigate cash-flow risks. Beware of customers who use your business as a bank. Especially in inflationary environments, unpaid AR adds risks to a business if those receivables become uncollectible.
Regardless of the economic environment, a well-run business needs efficient accounting systems and processes to drive greater visibility into its financials. With accurate and reliable data, you can act fast and stay ahead of the competition. The real question is, do you know your numbers?
No matter your industry, you need a solid financial and operational strategy to evaluate the risks to your business and put measures in place to minimize them. Contact Signature Analytics and let us help you create and implement a successful accounting and financial strategy to help drive your company forward regardless of the economic times.
The U.S Small Business Administration (SBA) announced changes to the Economic Injury Disaster Loan (EIDL) program. Effective September 8, 2021, small businesses can apply for support until December 31 or deplete the available funds. Furthermore, small businesses can borrow up to $2 million and update existing funds to cope with COVID-related financial disruptions.
What Are The Key Changes To the EIDL Program?
The SBA released the Interim Final Rule to implement the changes to the Disaster Loan Program. These changes apply to all applications submitted on or after September 8 or COVID EIDL applications submitted before but approved on or after September 8.
The loan cap has been increased: The SBA has increased the loan cap from $500,000 to $2 million. Businesses that also applied for a loan before the changes can also apply for a loan increase. In addition, businesses under a single corporate group can apply for up to $10 million.
Interest: The interest rate for for-profit small businesses is 3.75% and 2.75% for nonprofit organizations over 30 years.
Amortization: While the amortization period is fixed, businesses can now defer payments for the first 24 months from the original closing date. During this period, interest and payments shall accrue. The borrower shall then make loan prepayments over the next 28 years. Fortunately, there are no prepayment fees or penalties.
Use of funds: The SBA has expanded the use of funds for expenditures and debts. For example, working capital, rent, maintenance, commercial debt, federal business debt, cards, payroll, and healthcare benefits. However, small businesses cannot use the funds to expand their business.
Amount: For businesses requesting $500,000 or less, the SBA considers if the business was operational before January 2019. In its calculation, the SBA considers double the business’s 2019 gross revenue and subtracts the cost of goods in 2019 to find the loan amount.
For loans above $500,000, the SBA will calculate the loan amount and conduct a cash flow analysis.
Exclusivity Period: From September 8, 2021, the SBA started accepting loan applications. Loan approvals are underway for loans below $500,000. Other loans will be disbursed from October 8, 2021. The thirty-day exclusivity period (September 8 to October 8) ensures that the smallest businesses access relief first.
The SBA is also optimistic about reviewing loan applications above $500,000 within six weeks to expedite the fund distribution. Businesses can also apply for extra fund amounts, but they should prepare for a long waiting period, approximately nine months, if the first loan is below $500,000 and the second above $500,000.
Guaranty: No personal guaranty is required for loans below $200,000. A personal guaranty from all individuals and entities that own more than 20% of the business is required for loans above this amount. The same rule applies to corporations and partnerships where an individual or an entity owns more than 20%.
If no one owns more than 20% of the business, at least one person must provide a full guaranty. Sole proprietors, independent contractors should also provide a personal guaranty. For general partnerships and limited liability partnerships, all partners should provide a personal guarantee.
Collateral: You do not require collateral for loans below $25,000. However, for loans above this amount, the SBA uses business assets such as furniture, fixtures, equipment, and machinery. Also, if you qualify for a $2 million loan but only have $500,000 collateral, you don’t have to fund the collateral gap.
In addition, if your business owns real estate and qualifies for more than $500,000, the real estate and property should be listed as collateral.
Loan forgiving: EIDL loans are not forgivable. However, businesses can also apply for advances under the COVID EIDL program. Fortunately, businesses do not have to repay these advances.
Fees: There are no application fees for loans below $25,000. However, for loans greater than $25,000, there is a one-time $100 fee. A one-time $100 fee for loans above $500,000 also applies when the SBA accepts real estate as collateral. The applicant shall also cover any associated costs with recording the real estate lien.
EIDL Program Background
The COVID EIDL program provides businesses with relief funds to alleviate the adverse effects of the pandemic. The fund aims to provide working capital and operating expenses to help keep small businesses afloat.
EIDL loans are different from other disaster recovery loans. This program allows the SBA to provide low-interest, fixed-rate, and long-term loans for small businesses to help them recover from the effects of the pandemic. The relief ends on December 31, 2021, or when the funds deplete, or whichever comes first.
The funds come at a critical time following a report by Goldman Sachs that shows 44% of small businesses have less than three months of cash reserves. As such, small businesses are likely to collapse if another COVID-related emergency should arise.
The research further revealed that the pandemic affected small businesses disproportionately. More than 51% of black-owned small businesses have less than three months of cash reserves.
Keep in mind that businesses cannot specify the loan amount. Enterprises can send their applications, but the SBA calculates the loan amount based on the economic injury. Economic injury is the change in the financial situation of a small business because of an effect of a disaster. In this case, the economic injury funds, EIDL, are being distributed following the COVID pandemic.
Am I Eligible for COVID EIDL Funds?
A small business qualifies if it has less than 500 employees. This includes businesses and their affiliates. However, the business must not have more than 20 locations.
Agricultural enterprises qualify if they have less than 500 employees.
An individual or sole proprietorship that operates without staff or as an independent contractor.
A corporative and its affiliates with any, with less than 500 employees.
An affiliate can apply for the loan if the qualifying entity has an equity interest or profit share of 50% and above.
Applicants must show “substantial economic injury” caused by the pandemic. The injury includes events that cause the small business:
Be unable to meet its obligations as it matures
Fail to pay its operating expenses
Market or produce services as marketed
The fund further emphasizes support to hard-hit industries. These include:
Accommodation and food services
Apparel manufacturing
Arts, entertainment, and fitness facilities
Clothing and clothing accessory stores
Educational services
Mining
Non-internet broadcasting
Non-internet publishing services
Personal laundry services
Rental and leasing services
Site seeing and scenic transportation
Sporting goods, books, and music stores
Transit and ground transportation
Who Is Not Eligible For COVID EIDL Loans?
Small businesses that were not in business before January 31, 2020
Businesses that do not meet the program’s size limitations. Employees are capped at 500 and 20 for physical locations for companies with multiple locations and affiliates.
Businesses engaged in illegal activity at the federal or state level.
What Can I Use The EIDL Funds For?
If you have applied and qualified for the EIDL funds, you need to channel the money to allowable uses. Many business owners are concerned about spending the funds incorrectly. Generally, it’s best to have a strong accounting program to track your spending for business visibility and future scrutiny by government agencies.
Working capital
Businesses have both to-date and future expenses. Usually, to-date expenses are reported as liabilities in the accounting books and which a business cannot fulfill due to the pandemic. In this case, the business can use the EIDL funds to pay debts and bring the working capital to normal levels.
Future expenses are business needs the entity cannot fulfill throughout the injury period. This refers to payments such as fixed debt payments and fixed payments such as rent, insurance, and utilities. In addition, businesses can use the funds to pay commercial debt such as credit card debts, lease payments and mortgage payments, and federal debt, including payments to the SBA. Debt payments can include monthly installments, prepayments, and deferred interest.
What Can’t I Use EIDL Funds For?
The payment of dividends and bonuses.
Payments to directors, partners, directors, stockholders, and officers.
Payment of stockholder or principal loans except when non-payment would result in hardship to the stockholder and when the stockholder injected the fund due to the disaster.
Expanding the business and acquiring fixed assets.
Repair physical damage to the business.
Payment for relocation.
Penalties for non-compliance with laws.
How to Apply
If you have already applied for a loan with the SBA, sign into your portal and find Form 4506-T to apply for the new revised loans. New applicants can submit the same form by visiting here. In addition, applicants should be ready to release tax forms to the SBA for revenue verification.
How to Make the Best Use of EIDL Funds
As a small business owner, it’s crucial to apply for the EIDL funds to recover from the COVID pandemic. However, once your loan is approved, the next step begins- spending the funds. Therefore, it’s essential to plan your finances and account for all the spending for compliance reasons.
At Signature Analytics, we’re excited to offer a warm welcome to Bill Ness and Zak Higson, who recently joined the team in two essential leadership roles. These executives bring several years of business expertise and experience to our one-of-a-kind group, and we wanted to take the opportunity to better introduce them to the local markets that they will be supporting along with our extended services team.
While welcoming these two to our team, we also want to highlight a recent and well-deserved promotion for our existing team member, Tony Sands, who’s been an integral part of the company’s success over the last several years.
“As Signature Analytics looks toward our next phase of growth, we were searching for leaders and team members that reflected our core values as a customer-centric company. With these new leaders, we not only found decades of business expertise at some of the region’s most respected companies but also a deep commitment to Signature Analytics’ mission to help business owners improve performance and achieve their goals.”
– Pete Heald, CEO
Please read below to find more about these recent additions and promotions and what they mean for the future ahead.
Meet Bill Ness, EVP & San Diego Market Leader
Bill recently joined the Signature Analytics team as our Executive Vice President & San Diego Market Leader. In this role, he’ll be leading our accounting, financial, and business advisory services team with his comprehensive operations expertise.
His experience is both extensive and impressive in the San Diego market and has served startups to Fortune 500 companies. He has a deep understanding of building service models, strategic operational planning, mentoring and developing team members, while also contributing to company expansion and growth, and is excited to put this knowledge towards helping business owners and company leaders improve and grow their businesses. He aims to foster a culture of team excellence and exceptional customer care and maximizing team resources to reach important business goals.
Whether you think you can, or you think you can’t – you’re right,”
– Henry Ford
Bill is originally from the East coast (Maryland) but has also done time in NC, AZ, and UT. A fan of crab cakes, Bill still connects to Maryland by shipping crab cakes to CA each month. Outside of work often you’ll find Bill at the gym, on a run, trying to find fun on the golf course, or helping watch his new grandson Cole.
Meet Zak Higson, EVP & New Market Leader
This past month, Zak also recently joined the team as our new Executive Vice President and New Market Leader. He has over two decades of finance, operations, and business consulting experience and was also a Co-Founder of several successful restaurants throughout San Diego County over the last decade.
Like many of our clients, he’s been a serial entrepreneur with a strong work ethic and has a great deal of experience in the food and beverage, hospitality, distribution, and manufacturing industries. His strong people skills, financial acumen, and deep understanding of our customer needs and challenges let us know that our clients will be in very good hands. As we look to further expand our reach in 2022, Zak will play an integral role in guiding the organization into new markets.
Zak and Bill will work alongside existing company leadership to take Signature Analytics to new heights. Their knowledge of our current marketplace and our customers is plentiful, and their presence is valued here.
It’s always ok to not know, but it’s never ok to not care.
– Zak Higson, Executive Vice President & New Market Leader
Zak is an avid hockey fan and a true-blooded Canadian at heart. He spends a lot of time with his three kids; Clark (11), Merara (3), and Rowena (1). Zak is involved in numerous food banks, has a passion for improving the food system, and even has a small hobby farm of his own.
Tony Sands, SVP – Business Development & Regional Sales Manager
Tony recently accepted the promotion to Regional Sales Manager for the Signature Analytics team. In this role, he’ll be leading our business development efforts within the Southern California markets of San Diego, Orange County, and Los Angeles. Throughout his 6+ years at Signature Analytics, Tony has continued to drive tremendous client success through listening to the needs of the clients and developing a custom solution to meet and exceed their goals.
His experience stretches throughout San Diego & Orange County markets since 2001. Always focused on middle-market businesses, starting with credit training at a regional commercial bank to portfolio management with a start-up bank and business development with a high-growth bank.
Tony’s passion for building relationships in the marketplace among partners and clients has been key to his success. He’ll continue to support current business development efforts to drive new business and company revenue growth. In his new role, his vast client expertise and consultative approach will be essential in developing, mentoring, and training our growing team. Tony is excited about the new challenge and has set ambitious goals for team success while fostering a culture of continuous growth.
“Luck Is What Happens When Preparation Meets Opportunity”
-Seneca
Tony is an alumnus of SDSU and has family throughout the Southern California area. He takes pride in using his finance degree daily. In his personal life, he enjoys spending time outdoors with his wife, Ashley, and daughter, Irelynn. He is committed to CrossFit, football fields, home improvement projects, winter sports, most importantly – he likes to be challenged!
Looking Ahead to the Future
At Signature Analytics, we know that every business leader we work with is faced with critical choices that impact their companies’ future, and they need good visibility to make the right decisions. Looking ahead, we’re still focused on delivering accurate, relevant, and timely financial information each month, enabling business leaders to make better decisions about their company’s future.
Having Zak and Bill join the company’s leadership team along with Tony’s new executive role is both exciting and pivotal for the next phase of Signature Analytics, which includes growing our team, improving our product and service offerings, and looking to expand into new markets.
Our vision is to help business owners and leaders improve performance to achieve their goals. This statement is essential to the values we embody as a consulting-based organization and why our culture focuses on driving continuous improvement, results, and growth for companies. We do this by providing a team of expert accountants and financial advisors who take your business beyond the numbers with actionable insights and recommendations that focus on forward-looking activities, direction, and strategy.
Managing the accounting function and financial reporting in a small or medium-sized business is an enormous undertaking for a growing team. Outsourcing your accounting needs gives you expert-level financial service and support to achieve your business goals.
When you identify the need for a partner in your financial department and begin the accounting outsourcing process, your business agrees to let a team of trusted experts come in and help you evaluate everything you currently do. Doing this can maximize your company’s potential whether you’re in a growth or transition period.
What does an outsourced accounting team do?
The experts you outsource should help you define, develop, and achieve your business goals. To begin that process, some firms will assess your current situation. For instance, we like to review four major pillars of your business which are your people, processes, technology, and reporting.
We’ll also take some time to outline your business goals. If you haven’t gone through this process before, a good financial expert can help guide you through various Q&A sessions with the company stakeholders.
From there, it’s essential you bring all of those elements together and design not only a roadmap for improving your accounting function, processes, and financial reporting but ensure that the right metrics, analysis, and KPIs are developed in relationship to the overall business goals. Whether that be raising capital, improving profitability, scenario planning, or managing hypergrowth. This is really bridging the gap between the day-to-day and the big picture stuff.
Structuring goal development and building a roadmap
Validating your information and process optimization
Structuring your financial reporting and conducting deep analysis
Managing the day-to-day accounting function
Focusing on business advisory & forward-looking activities
Structuring your company’s financial and overall business goals is an essential first step in creating alignment between your business and your outsourced experts.
Goal development and building a roadmap to achieve them
Although your outsourced experts are accounting and financial gurus, they are new to your business even if they have previous industry experience. To develop business goals, they’ll start by reviewing and understanding your business by doing an assessment.
This may be looking into your:
Industry
Business goals and major drivers
Current business concerns
Immediate needs and priorities
With the combined industry and business knowledge under your outsourced team’s belt, they can begin gathering information and validating your current processes.
Understanding your information and processes
One of the advantages of accounting experts at your business is evaluating all of your current accounting processes and your financial reporting (including accuracy and consistency), so you and your team don’t have to think about it. Additionally, this allows a new team to come in and see things from a fresh, unbiased perspective and make an impact.
The reason they do this is to:
Understand your team’s roles, current capabilities and skills, and development goals
Review and validate your existing information and structure
Perform data clean up to ensure historical accuracy
Validate processes, make recommendations for optimization, and implementing new ones where needed
Refine how they integrate with your existing team and where they need to fill the gaps
After this evaluation, the experts can seamlessly integrate into your company, your current team structure and are then able to set a foundation for accurate, relevant, and timely reporting.
Delivering sound financial reports and analysis
Now that your business leaders have had an opportunity to build trust with the experts and have reviewed their recommendations, the next step is to give you the information you need to make sound financial decisions.
That information is typically provided in the form of:
Expense management
P&L statements
Accounts receivables and payables
Cash flow management and reporting
Month-end closing
Financial metrics, reporting, and KPIs
Business and financial analysis
Board meeting support
Not only will your outsourced experts provide the above reports regularly, but they may also take this reporting one step further by providing business modeling and deeper financial analysis to help you reach your business goals.
This reporting may include:
Utilization analysis
Breakeven analysis
Margin analysis
Client profitability
Annual budgeting & benchmark reporting
Business-specific metrics & KPIs
With this measurable data provided consistently, you will create additional value by taking actionable steps to improve your business.
Supporting your day-to-day needs
Not only do your outsourced experts help you achieve your financial business goals, but they also support your day-to-day accounting and financial operations.
Some of that support includes:
Payroll processing
Manage A/R and A/P
Month-end close
Workflow documentation
Staff mentoring and supervision
Inventory process development and setup
Bank and credit card reconciliations
Whatever daily accounting operations help your business desires, your outsourced experts are there to ensure everything is getting done on time and there’s a clear delegation of duties and responsibilities, so you don’t have to.
Why would you need to outsource?
Outsourcing your accounting may be a need because of:
rapid company growth
cashflow has become a challenge
you’re not getting the reporting you need
you may have just lost a valuable member(s) of your financial department
you’re not quite ready to take on the financial risk of employing a full-time accountant
you’re having issues getting financial backing from a bank or investor
These are all valid reasons. Whatever the case is, enabling expert accounting, financial, and advisory help in your business – takes some of this burden off your plate. This team truly partners with you and your business leaders so you can focus on other areas of your business.
It’s a classic case of allowing you to start working on your business again instead of working in it.
Outsourcing for growth
As your revenue increase, so do your daily business demands. As a result, your financial needs or the complexities of your finances will also increase. When you’re scaling your business, it’s often helpful to outsource specific back-office operations, such as your finance and accounting department.
Doing so allows you to hire a team of consultants who specialize in going beyond the numbers and meet your growth needs. As a result, this may include implementing new processes, reporting methods, or technology to match your scaling business needs.
Outsourcing due to turnover
When a prominent part of your financial team, like a senior accountant, controller, or CFO, leaves your business, it can be challenging to fill their shoes immediately, and doing their work on top of your own in the interim could lead to burnout.
Additionally, hiring a replacement may not solve the issues that ultimately led to them leaving the company. Many common reasons we see:
they feel unsupported by management and have no career path
they tend to have too much on their plates and are feeling burned out
they are constantly burdened by either doing too low level or work or even too high-level beyond their skillset
By outsourcing, you’re able to fill these gaps with vetted experts who are in the right role because financial experts hired them.
Even if these employees haven’t left your company, we’re able to come in and provide supplemental support, oversight, training, and career path development for your team.
And as you grow, you may eventually need to hire more in-house employees full-time, and your outsource team will still be to support the onboarding or transition of duties when necessary.
Outsourcing because you desire flexibility
If your accounting needs are becoming more complex, you might find yourself spending a lot of time managing them, taking away from other parts of your business. You may also feel uneasy about taking on the financial risk of building out a finance team or are unsure if it’s the right time to do so or who you should hire next.
By outsourcing to a team of experts, you gain the same benefits of having a full finance and accounting team that you usually see are a larger company; however, you pay for fractional support instead of paying for full-time salaries.
And as the business grows or contracts, so can the flexibility of your team. The model is designed to work for your business based on its needs, unlike a full-time staff or staffing agency.
If your business needs accounting and financial expertise and could use a trusted partner as an advisor, consider outsourcing an ideal solution.
Over the years, we’ve worked with several types and sizes of businesses and have seen so much success using this model – that, in many cases, we’ve made lasting relationships as a result.
Businesses still seeking relief from the impact of COVID-19 may be able to find it in the second round of PPP loan legislation passed by Congress in late December of 2020. The Consolidated Appropriations Act, 2021 seeks to overcome some flaws of the first round of the Paycheck Protection Program (PPP) while providing additional assistance to businesses still suffering in the wake of the COVID-19 pandemic.
Even those who were unable to get funding during the first round of PPP loans can apply for their first-draw under the new guidance. With relaxed rules on which expenses are eligible for forgiveness and specific funding set aside for lenders who operate in lower-income areas, businesses owned by POC, and small businesses, this round of PPP loans is better suited to serve the American population as a whole equally.
Since the program’s initial launch, our team of experts have had a chance to review the program in greater detail and want to provide our findings below. We know navigating through this legislation can be tricky, just know we are here to provide support and guidance to business leaders in need.
Quick Overview of Changes:
Dramatically expanded payroll and non-payroll expenses eligible for forgiveness
Additional clarity on loan terms
Updated limits on loan amounts
Clarity on forgiveness and tax savings opportunities
Flexibility on the covered period of the loan
Revenue reduction proof requirements
PPP Loans: The Changes for Round 2
Covered Expenses
To be eligible for PPP loan forgiveness, borrowers must use the funds on approved, covered expenses. Under the new legislation, the 40/60 split is still required: borrowers must use 60% of the funds on payroll expenses and can use up to 40% on approved, non-payroll expenses.
However, covered expenses in both categories have been expanded. Existing payroll costs included:
Salary, wages, commissions, tips
State and local payroll taxes
Paid leave
Healthcare payments
Retirement plan contributions
Expanded payroll costs now include:
Group life insurance
Group disability insurance
Group vision insurance
Group dental insurance
Existing covered non-payroll expenses included:
Interest on mortgage payments, excluding prepayments
Rent
Utilities
Interest on debt obligations incurred before the covered period
Additionally, the new legislation expanded forgivable non-payroll expenses to include:
Certain operational expenditures like software and cloud computing service payments used to facilitate business operations, accounting, service or product delivery, payroll processing, billing, inventory, and HR functions
Property damage costs incurred during public disturbances that happened in 2020 and were not covered by insurance
Select supplier costs including payments to suppliers of goods that are essential to operations
PPE equipment and other worker protection expenses incurred to comply with CDC, HHS, OSHA, or state and local government authority after March 1, 2020, until the president’s national emergency declaration expires
Note that expenses for HSAs, QSEHRA, and Commuter Benefits like mileage reimbursement are still not covered under the new PPP guidance.
PPP Loan Terms
The new legislation brings additional clarity to the terms of PPP loans. Here are some of the highlights:
Interest rates are fixed at 1%
Interest is non-compounding and non-adjustable
No yearly fees
No guaranteed fees
No prepayment penalty
Borrowers are not required to provide collateral or a personal guarantee
Providing this guidance ensures that lenders cannot take advantage of borrowers seeking PPP loans. Additionally, while the maturity for PPP loans is five years, payments aren’t required until borrowers know how much of the loan will be forgiven.
Borrowers who do not apply for PPP loan forgiveness, however, will have to make payments within 10 months of the last day of their covered period.
Loan Funding Limitations
For first-draw borrowers, there is a limit of $10 million or 2.5 times the average monthly payroll and healthcare costs; whichever is less. Some exceptions may exist for restaurants and other hospitality businesses.
The loan limit for second-draw borrowers is $2 million and includes a stricter method of calculation, which is:
2.5 times the average monthly payroll and healthcare costs in the year prior to when the loan was received or the 12-month period prior to when the loan was made
Most hospitality and entertainment businesses, including hotels and restaurants, are eligible for up to 3.5 times the average monthly payroll and healthcare costs using the same methodology as above
If borrowers with an outstanding, unforgiven PPP loan would have been eligible for more resources under the new, expanded covered costs, they may amend their loan application and request a higher amount. Loans that have already been forgiven are not eligible to be amended.
Forgiveness and Tax Deductibility
With the expanded eligible expenses, forgiveness is much easier to receive. Additionally, the SBA has simplified the forgiveness process so that borrowers with loans of $150,000 or less may utilize a one-page application.
Tax benefits also exist for PPP loans. The funds are not included in any gross income that a business is required to report. Better yet, expenses that are paid for using the funding from a PPP loan are tax-deductible. That creates a double tax benefit as no taxes are due on the amount received and business can deduct expenses paid using the funds.
The Covered Period
New legislation has provided additional flexibility as to when borrowers use their PPP loan funds. While the covered period for the first-draw remains unchanged, second-draw borrowers can choose a covered period anywhere between 8 to 24 weeks after receiving the loan. This provides much-needed freedom to utilize the funds as necessary and eliminates the restrictions faced during the first-draw covered period.
Updated Eligibility Requirements
First- and second-draw loan recipients each have specific eligibility requirements. Both types of applications require that a business was operational before February 15, 2020, and remains operational. The first difference occurs in the required number of full-time, part-time, or seasonal employees:
First-draw applicants: Must have less than 500 employees
Second-draw applicants: Must have less than 300 employees or less than 300 employees per business location
Additional Eligibility Requirements for Second-Draw PPP Loans
Proof of 25% Revenue Reduction
One of the more stringent expectations of second-draw borrowers is the required proof of revenue reduction. In order to qualify, borrowers must show a revenue reduction of at least 25% in the first, second, or third quarter of 2020 when compared to that same quarter in 2019. The following are all required to be included in the revenue calculation:
Fees
Dividends
Commissions
Sales of products or services
All revenue from every source in whatever form received or accrued by the borrower and any affiliates
The funding from first-draw PPP loans is, however, excluded from this revenue calculation.
Only loans totaling over $150,000 will require borrowers to submit documentation to prove revenue decline during the application process. However, all borrowers will need to submit this information when applying for forgiveness. Here are some forms that will help provide the proper documentation:
Relevant tax forms
Quarterly financial statements
Bank statements
Fully Used First-Draw PPP Loan
In order to be eligible for a second-draw PPP loan, borrowers must have already used or will use their entire first-draw PPP loan.
Eligible Businesses
The following are eligible businesses for both first- and second-draw PPP loans:
Sole proprietors
Independent contractors
Self-employed individuals
Certain 501(c)(6) non-profit organizations
Seasonal employers
Faith-based organizations that have less than 150 employees
Housing cooperatives that employ less than 300 people
Applications are ready for borrowers now and will remain live until March 31, 2021. Funds are first come, first serve so it’s best to apply as soon as possible. Finding lenders is easier than ever using the SBA’s Lender Match website.
Before applying, it’s best to gather these documents for both 2019 and 2020:
Tax returns, if available
Financial statements, including profit & loss
Bank statements
Payroll records and reports
Borrowers can also review the first-draw application and second-draw application when preparing to apply. When in doubt, hiring a professional accountant can help borrowers get the maximum amount from their PPP loans.
