Horizons Fall/Winter 2020

As always, organizations need to plan and act on what makes the most business sense, then weigh and integrate the incentive programs to move the strategy forward. Preparation, planning and research are key. Planning for the Unexpected The businesses that are able to plan and effectively manage their cash flows during these unprecedented times will be well positioned for a quicker recovery and may also be able to capture market share from their less-prepared competitors. Proper financial planning and analysis can not only help businesses survive the downturn, but also empower business leaders to make better-informed decisions regarding growth initiatives, cost/expense controls, staffing decisions, investments in capital expenditures, and financing, among other key financial decisions – not only during these times, but as a best practice in any environment. For those businesses that have received PPP loans, and specifically loans in excess of $2 million, it is probably in your best interest to be proactive in terms of scenario planning and documenting scenarios that support the need for the PPP funding, in connection with the need certification required by the Small Business Administration (SBA). One crucial aspect of sound financial planning and analysis is to consider a variety of potential outcomes (not only a ‘most likely’ scenario – which is a good start – but also alternatively, less likely scenarios that could push your business to its limits). Much of this can be illustrated through a scenario-based cash flow modeling exercise, in which the impact from a variety of outcomes – e.g., how customers, employees, and the economy as a whole are able to cope with and recover from the challenges

brought about by the pandemic – can be estimated in terms of cash flow.

PPP Loan Forgiveness The Paycheck Protection Program Flexibility Act was signed into law on June 5, 2020. It provided a new set of rules that impact forgiveness and is a positive development because most borrowers should now be seeking close to (if not 100%) forgiveness. This is due to the flexibility of when and how to file for forgiveness. In addition, the application is not a simple check the box form. For those that do not qualify for the EZ application, the actual calculation and supporting documentation requirements present a daunting task and can be extremely time consuming. But even for those filing an EZ application, the documentation supporting the business certifications will need to be gathered, analyzed and maintained. The most time consuming part of the entire standard application is on the schedule A worksheet. This is where borrowers list out every employee that was employed during the loan period. The borrowers have to split the employees into two groups: The first being any employee making over $100,000 on an annualized basis during any pay period in 2019 and the second being all other employees (apart from owners.) This allocation of employees forces borrowers to comb through all of their 2019 payroll files to ensure that any employee making more than $1,923 in any given week is flagged and listed on the correct table on the schedule A worksheet. Just as everyone started to get a handle on how forgiveness was going to work and were

Helping Businesses Weather A Pandemic

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