September 29, 2020

Net Operating Loss Carrybacks Offer a New Cash Flow Opportunity Under the CARES Act

The CARES Act has created many tax planning opportunities for individuals and businesses alike. One of these opportunities is the ability to carry back a net operating loss (NOL) that occurred in a taxable year beginning after December 31, 2017 and before January 1, 2021.

What is a net operating loss?

A net operating loss (NOL) occurs when a company has more allowable tax deductions than it has taxable income. NOLs reduce either past or future taxable income from loss carrybacks or carryforwards. In recent years, tax reform bills have altered the treatment of NOLs though the Tax Cuts and Jobs Act of 2017, and the more recently passed CARES Act.

What are the carryback benefits?

NOLs can now be carried back up to five years to fully offset a prior year’s taxable income resulting in a refund of income tax paid in that year. If choosing to take advantage of this opportunity, the losses must first be carried back to the earliest available year of income.

Since the loss can be carried back to years before the Tax Cuts and Jobs Act, refunds can be generated at a more favorable tax rate of up to 35%, rather than the more current 21% rate. These refunds have the potential to provide cash flow relief for many manufacturers.

How can I claim a refund for NOLs?

Depending on the year the loss incurred and date the return was filed will determine the best method to file a claim for refund. Businesses will be allowed to file Form 1139, Corporation Application for Tentative Refund, or file an amended corporate tax return. Individuals, trusts and estates can file Form 1045. If you have the option, Form 1139 will be processed faster, resulting in a quicker refund compared to filing an amended return.  Please refer to Notice 2020-26 for further filing information.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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September 29, 2020

How Not-for-Profits Can Manage Cash Flow in a Crisis

Not-for-profits have to walk a delicate line even in the best financial situation. Now with more financial strain on organizations as a result of COVID-19, executive directors, boards and leadership teams need to not only focus on income streams and reducing costs, but they need to concentrate on the balance sheet to optimize cash and maintain liquidity. It’s imperative to keep an eye on your cash flow, regularly monitor your cash position and develop some survival strategies to get you through the crisis.

Developing a Cash Flow Management Strategy

Instituting an effective cash flow management strategy may be the most important action you can take to navigate through these challenging times. Below are some useful tips to control cash:

Actively Manage Receivables

The typical 30 or 45-day account review probably won’t cut it anymore. Now is the time to shorten collection times and improve your collection process. You may also want to closely review your grantors/donors, identifying those that absorb cash from the organization.

Review Accounts Payable More Closely

While you don’t want to hurt your credit or supplier relationships, speak to your suppliers about ways to assist in managing your payments and shipments.

Thank Your Donors

Saying thank you is one of the most important ways to make sure your organization survives. A simple thank you card, maybe handwritten from an employee or someone helped by their donation, can mean the world to a donor. That thank you card might just result in another donation.

Adjust Staffing Levels

Look at needs and utilize resources to right-size your staff. There are currently opportunities for loans and additional monies for unemployment that could help and still provide for your staff.

Review All Costs

Determine which costs might be eliminated, reduced or renegotiated.

Review All Agreements

Look at current and upcoming commitments, and determine if some could be restructured, delayed or cancelled.

Review Plans for Capital Investments

Determine which capital projects can be delayed, eliminated or modified.

Establish a Deeper Relationship with Your Banker

Make sure to discuss your cash flow and liquidity positions with your banker. Pay attention to any debt covenants.

Prepare a Cash Flow Forecast

If don’t already have a cash flow forecast, now is the time to start. Begin with a simple 13-week projection containing your major cash inflows and outflows each week. This will allow you to understand periods of cash difficulty and provide you with time to maneuver. But after you have prepared the 13-week forecast, make sure you forecast out the next 12 months. For not-for-profits, many funding streams only happen once a year. You need to be able to determine if you can make until the next large influx of cash.

The tips outlined above are very important in the current environment. Liquidity and cash flow are always critical to an organization’s continuity. While it is an old cliché, cash is king today.  Every organization should evaluate short-term cash flow and financing needs. This will provide you with the information needed to make the difficult decisions ahead with greater confidence. Cash flow planning done today will allow not-for profits to see the bigger picture of the COVID-19 impact on the organization and the length of time it will take to recover.

The Anders Not-for-Profit Group can help your organization identify opportunities to increase cash flow or handle the financials for you with outsourced accounting. Contact an Anders advisor below to learn more or visit our COVID-19 Resource Center for more insights.

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September 29, 2020

What Not-for-Profits Need to Know About Sales and Use Tax

When it comes to not-for-profit organizations, each state may treat them differently from a tax perspective. Some not-for-profit organizations may be nontaxable on their purchases and taxable for their sales, or vice versa. Some states will tax both sales and purchases or treat both as nontaxable. It’s important to know that being exempt from federal income tax does not always translate to being exempt from sales tax. There are many factors that come into play when a not-for-profit organization is paying or collecting sales tax.

WHAT IS SALES TAX AND WHAT DETERMINES IF I OWE?

Sales tax is a tax on the retail sale of tangible personable property and enumerated taxable services. For not-for-profit entities, where they are located, their main activities or functions, and type of entity can determine whether they pay or collect sales tax.

JEOPARDIZING YOUR EXEMPTION

Pursuant to federal law, there are certain activities that can cause an organization to lose its tax exemption. For example, the following activities can endanger exempt status of an organization:

  1. Activity that results in private benefit or inurement to a private shareholder or individual
  2. Lobbying activity, if it constitutes a substantial part of the organization’s overall activities or if it exceeds a predetermined dollar amount
  3. Activities that are illegal or violate fundamental public policy
  4. Failure to comply with annual filing requirements
  5. Any political campaign activity
  6. Unrelated business activity that is substantial when compared to the organization’s exempt function activities

SALES AND USE TAX FOR ILLINOIS NOT-FOR-PROFITS

Purchasing

Under Illinois law, purchases by not-for-profit organizations are generally exempt from sales and use tax in Illinois, but the organization must have and provide their active state exemption certificate. Nevertheless, there are factors that can cause organizations to pay sales and use tax. If the organization is not operating “exclusively for charitable, religious or educational purposes,” it may not be exempt from paying sales tax on purchases.

Pursuant to Ill. Admin. Code 130.2005(n), “exclusively” has not been given its literal interpretation by the Supreme Court regarding not-for-profit organizations. It means that an organization’s primary activity or function must be charitable, religious or educational. Purchases made by the organization must relate to the primary activity or function of the not-for-profit organization to be exempt. If a substantial activity or function of an organization is not operating exclusively, it will not be considered exempt.

Selling

Sales by exclusively charitable, religious and educational organizations are taxable, unless specifically exempt. Tax exempt sales in Illinois for not-for-profits are:

  • Sales to members, students in the case of schools, or patients in the case of qualifying hospitals, of tangible personal property to be used primarily for the purposes of the selling organization
  • Sales that are noncompetitive with businesses; or occasional dinners, socials and similar activities, whether they are open to the public or not.

For a sale to be considered noncompetitive all proceeds must go to the organization, transactions must be handled through the organization’s members, sales cannot be continuous and the main purpose is to make a charitable donation. Only two “occasional” dinners or similar activities may be exempt per calendar year.

SALES AND USE TAX FOR MISSOURI NOT-FOR-PROFITS

Purchasing

Under Missouri law, sales and use taxes are not applicable to sales made to any religious and charitable organizations and institutions provided they are acting within their religious, charitable or educational functions and activities. For not-for-profit civic, social, service or fraternal organizations to be exempt from tax, the net proceeds must be designated for civic or charitable functions or activities. All purchases must be solely in their civic or charitable functions or activities. Not-for-profit organizations must have and provide their active state exemption certificate. Out of state not-for-profit organizations may purchase or sell exempt, as stated above, if their home state exempts such transaction in that state.

Selling

For the most part, the same guidelines for purchasing apply to sales by the not-for-profit organization.

If you have any questions, our State and Local Tax team is here to help. Contact your Anders advisor below to learn more about how any taxes apply to your not-for-profit organization.

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September 29, 2020

How Associations Can Build an Online Community to Retain Members

Now more than ever associations need to find a way to connect with their members. Peer support is an exclusive need that only your association can deliver for your professional or industry-based community. As we continue to wade through the effects of COVID-19, online community is one of the best ways to engage your membership.

3 Ways to Stay Connected

In today’s content-saturated environment, associations need to offer members online resources and designated spaces for dialogue. Some leverage tools such as LinkedIn or Facebook, and others host their own platform to bring members together. How can your association build the community it needs to retain members? Below are three easy ways to create a space for real relationships.

1) Host Online Events

Many large associations are having luck hosting online events in place of their in-person member events. These events can be topic-focused on issues that affect membership, or on tools that can move the association forward. Even small online events are beneficial so that participants can share and collaborate. Small groups can be organized by size, location or specialty. Instead of participants only listening to the host, they can engage with the each other to discuss their current situation and ideas.

Looking for guidance on which platform is best for you? Anders Technology can analyze your current technology setup to make sure you’re prepared to host seamless online events.

2) Ask for Testimonials

Take advantage of this time to ask your membership to submit testimonials. The best way to attract new members is by word-of-mouth, and they want to hear the experience of current members and the benefits of being part of your association. Make it easy for your members by creating a simple survey that asks about their involvement and understanding of why they are part of your association. This survey not only provides a testimonial but can double as valuable feedback to further improve your association.

3) Build an Online Resource Center

What are you offering members to draw them to your website or social media page? Do you have resources that can be easily accessed? While simply having a safe space for members to communicate is ideal, it’s not enough, they need to find valuable assets there as well. Make your online space a go-to destination for those seeking support and have designated ambassadors there to provide expertise and best practices. Create a consistent blog or reach out to industry thought leaders for targeted content.

In order for your online presence to grow, you must stay on brand and let your purpose drive your actions. Members want to be a part of an association that understands who they are and the industry represented.

Our Not-For-Profit advisors are ready to help your association make strategic decisions to move your organization forward. Contact an Anders advisor below to discuss financial and operational strategies for your association.

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September 29, 2020

Internal Controls for Not-for-Profits in the New Normal

As stay-at-home orders and social distancing have shifted the workforce in many ways, not-for-profits are left with many changes to their accounting and financial reporting environments. Many of these changes were expected, but some changes may have unintended consequences. Pre-pandemic policies were designed to set up effective and efficient controls. However, the controls that were designed may not be effective, or even applicable in the current environment. These changes present the perfect opportunity for management to reevaluate their control environment, begin assessing and updating the risks that lie within that environment, and redesign their policies and procedures.

How to Assess Your Internal Controls

The first and most important step in the process will be assessing where risk lies within the accounting and financial reporting systems. Management should consider where and how fraud or misstatements could occur. Once management knows where the potential risks are, management can insert the needed controls to deter and reduce those risks.

Segregation of Duties

One of the strongest ways to reduce risk is to achieve segregation of duties. This separates the physical custody of assets, record-keeping of the transactions, and authorization of transactions. Under the new normal, segregation of duties may have some barriers that need to be overcome. There are many resources that are available to help achieve better segregation of duties. One example would be using a lock-box to accept deposits. Once the receipt is entered into the lock-box, the accounting department can record the deposit, without having physical custody of any cash or checks. On the cash disbursement side, there are tools such as Bill.com or positive pay to ensure the vendors you want to pay are actually paid.

Strengthen Review Process

Another key control in the internal control environment is review. This can range from the review of KPIs, review of check support, review of bank reconciliations, or financial statement review. However, the review process is only as good as the reviewer. Too often, someone is going through the motions of the review, mainly as they are not exactly sure what they should be looking for. It is key that the reviewer has proper expertise or training. For example, while reviewing the bank reconciliation, they should review the list of payments, outstanding checks and other reconciling items and any other transactions that hit the cash account and reconciliation. The person tasked with the review should be familiar with the organization’s vendors so they would recognize any irregular payments.

As not-for-profits typically have a robust board and other oversight committees, such as a finance committee, the reviewer should have a great deal of organizational knowledge and some accounting knowledge. Typically, the chair of the finance committee, or treasurer of the board would handle the review process. It’s also key to get that person involved in developing the processes so they are aware of the level of detail and review required.

Electronic Approval

For many organizations, some degree of remote work may be permanent. The amount of physical paperwork that circulates through the office may be significantly reduced, thus the approval process will look differently. Where old procedures would require formal written sign offs, such as initials on the bank reconciliation or signature on the support for cash disbursements, there may not be hard copies of these items to sign with a formal sign off. This is where electronic approval may replace old, hard copy approvals. It is important to note in the electronic approval what was reviewed and what is approved. This can take the form of an email approval to the appropriate personnel, or utilization within various software, such as DocuSign.

The workforce will continue to evolve over the next year, and each evolution should bring new considerations to the control environment. As mentioned above, the first important step is to assess the risk environment. This will be a continual process that management can implement into their daily processes. As each day brings about new changes, it is important to document and apply changes to the environment as they occur.

The Anders Not-for-Profit Group can help you implement stronger internal controls in your organization. Contact an Anders advisor below to learn more or visit our COVID-19 Resource Center for more insights.

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September 28, 2020

Keep Cash Flowing by Increasing Membership in Associations

The middle of a pandemic might seem like an unlikely time to embrace the recruitment and retention of association members. However, this should be one of your highest priorities and a way to manage your budget and keep your association financially sound in 2020.

COVID-19 has had adverse impacts on almost every association, so now is the time to re-visit your strategic plan. To advance your organization in a virtual environment, you will need to make appropriate changes and then analyze and align your budget with those changes.  At the very top of your list should be membership. 

6 Ways to Boost Recruitment and Retention of Members

Associations certainly are not a one size fits all, but when it comes to members, there are ideas that can work across most industry and trade platforms. Here are a few ways to re-think your recruitment and retention strategy:

1) Launch an Association Stimulus Program

A stimulus program should extend renewals for existing members. Some of your members may have been hit hard financially, so giving them some extra time to renew their membership could be advantageous for both parties.

2) Offer Trial Memberships for New Members

If your association has embraced virtual learning and has a valuable resource center or library of information on your website, consider offering a three-to six-month trial. Education is a good way to entice new members.  Then work hard to convert these trial memberships into long-term ones.  And if you are not an association that has adopted online learning, now is definitely the time to start.  

3) Offer Reduced Fee Memberships to Past Members

Now is a great time to showcase what past members are missing. With so many people at home, they are looking for ways to engage with others, so take advantage of that opportunity to appeal to them and their areas of interest. 

4) Provide Student and Young Associate Memberships

If you are looking for retention and succession planning opportunities in your association, look to students in colleges, universities and trade schools or recent graduates of those programs. They are looking to get ahead and may not be aware of the advantages of belonging to an association in their particular field. It is a great opportunity for them to connect and build relationships. You may want to reach out to educational programs that align with your association and offer programming for them. Or perhaps reach out to a high school or middle school where educators are looking for new ideas and ways to engage students and offer programming.

5) Start a Scholarship or Sponsorship Program

Although some industries are reeling, others are still on pace or exceeding their financial goals. If you have members in the latter two categories, talk to them about sponsoring a new member by picking up all or part of the membership fees in order to keep your association on sound financial ground.

6) Increase Sponsorship Opportunities and Charge to Attend Your Online Offerings

In the spring as both for-profit and not-for-profit organizations alike clamored to go virtual through one of the many online platforms, meetings and even some conference sessions were primarily free. Now, savvy organizations are charging a fee and not-for-profits are looking to regain lost sponsorship dollars by charging third parties or member companies to host or sponsor an online event. The dollar amount of these sponsorships is increasing as virtual programming has become a must. Survey other associations and not-for-profits to compare what they are charging for sponsorships and attendance in your market. Events are a major source of revenue for associations so if you haven’t already, now is the time to take your conferences and programming online, and charge for them. You can use the guidelines in the first five points to offer a sliding scale for attendance costs.

Associations have been around for years in some form. They have survived during other pandemics, the Great Depression and many financial crises, and have always served a pivotal role in keeping their organizations and members moving forward. As association leaders today, now is your time to keep cash flowing, budgets sound and embrace new strategies. The key is in your members and adopting innovative ways to engage them.

Our Not-For-Profit advisors are ready to help your association make strategic decisions to move your organization forward. Contact an Anders advisor below to discuss financial and operational strategies for your association.

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September 28, 2020

Why PPP Loan Fraud is on the Rise

In response to the global COVID-19 pandemic, the US Congress moved extremely quickly to enact the largest economic stimulus bill in modern history. At Anders, we’ve been dissecting the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act), including each of the stimulus elements in the Act. One major portion of that economic stimulus, estimated at $669 billion, came in the form of Paycheck Protection Program loans (or PPP Loans). These PPP Loans were potentially forgivable loans issued to small businesses with the intention of keeping their employees employed.

While PPP loans offered much-needed assistance to many businesses impacted by COVID-19, there have been a few instances where the relief efforts were abused. We are now in the midst of the first wave of notable PPP Loan fraud cases, which presumably will continue to make headlines for quite some time.

Uncovering PPP Fraud

PPP Loan issuance began in earnest in April 2020. In a matter of months, alleged PPP Loan fraud was already being reported across the nation.

In late July 2020, it was reported that a Miami, FL man had been charged with bank fraud for allegedly lying on PPP Loan applications. The alleged fraudster used the PPP Loan proceeds for luxury items such as purchases at Saks Fifth Avenue, luxury hotels, jewelry stores, and most notably a Lamborghini Huracán EVO, valued at nearly $320,000.

On August 4, 2020, the US Department of Justice issued a press release regarding a Houston, TX entrepreneur who allegedly obtained more than $1.6 million in PPP Loans, using those funds to purchase a Lamborghini Urus, a Rolex watch, and real estate among other things.

In September, Reuters reported that according to an internal memo, JP Morgan Chase & Co., one of the many banks tasked with distributing the PPP Loans, was investigating employees who may have been involved in the misuse of federal funds meant to help struggling small businesses hurt by the COVID-19 shutdowns.

Most recently, former NFL wide receiver Josh Bellamy was arrested as one of eleven participants in an alleged $24 million PPP Loan scheme. Bellamy allegedly used funds to purchase luxury goods from Gucci and Dior and withdrew over $300,000 in cash.

These are just a handful of notable PPP Loan fraud examples that have made the news headlines. As of mid-September, the Justice Department had charged 57 people with trying to steal a total of $175 million in PPP Loans, and this is likely just the beginning.

Preventing PPP Fraud

To ensure this type of fraud doesn’t happen in your company, businesses should become familiar with the concept of the fraud triangle, and how it can be a useful tool in understanding fraudulent behavior. Put simply, the concept theorizes that fraud is likely to occur when three elements occur together. Those elements are opportunity, motive/pressure, and rationalization.

The COVID-19 pandemic prompted an unprecedented governmental response in an attempt to prevent millions from losing their jobs.

In a haste to distribute these funds, an unprecedented opportunity for fraudsters was created which would not have been available under normal circumstances. There was no time for the PPP Loans to go through the normal vetting and underwriting procedures required for most commercial loans, as more than 5.2 million PPP Loan applications were prepared and processed during a matter of months.

At the same time, in what was likely the worst economic downturn since the great depression, there was ample motive and pressure for many to commit fraud. That is casting the ever-present motive of greed to the side.

Finally, while we know fraud is not a victimless crime, some may find it easy to rationalize “borrowing” money from the Federal Government. Afterall, the Federal Government just prints the money, don’t they? And who is going to miss a few hundred thousand dollars from a $2.2 trillion relief bill?

In reality, these fraudulent actions hurt us all. Taxpaying citizens are the ones being taken advantage of. Further, people are stealing from a program designed to help struggling businesses keep employees on the payroll during a time of great turmoil.

Sadly, but predictably, these fraud cases are appearing, and unfortunately will likely continue for some time to come but preventing fraud in your own company is key.

If you have any questions regarding PPP Loans or fraud prevention, please contact an Anders advisor below. Learn more about Anders Forensic and Litigation services or how we help businesses with COVID-19 Business Recovery.

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September 24, 2020

Communicate Easier from Anywhere with Microsoft Teams Calling Plans

Over the past few months, many of us have received a crash course in using collaboration tools such as Microsoft® Teams. Even those employees who were the most vocally opposed to working outside of the office are now developing new knowledge and skills with remote collaboration tools. On March 31, 2020, Microsoft reported a new record of 2.7 BILLION Teams meeting minutes spent in one day, a 200% increase from just two weeks earlier.  We are all learning new tools right now at a pace that can seem overwhelming.

Bridging the Communication Gap Between Employees and Customers

One of the major pain points of remote work is knowing how to reach employees, wherever they are, on whatever device they’re using. Microsoft Teams helps internal employees with this. They can install Teams on almost any device and take it with them wherever they go.

But what about customers? What about vendors? What about any phone in your company that might be ringing to an empty desk? How can we leverage these new technology tools to make your phone system more flexible? Wouldn’t it be nice if you could have the same corporate phone number that rings whether you’re in the office, at home, at school, or at the grocery store? It’s possible with Teams Calling Plans.

Replacing Your Company’s Phone System

We’ve previously touched on the basic functionality of Microsoft Teams. Those features however, barely scratch the surface of what’s possible.  With Teams you can:

  • Utilize calling plan numbers anywhere a Teams app can be installed – on a PC, a Mac, a smartphone, a tablet, a video conferencing device, or a compatible desk phone
  • Assign phone numbers to Teams users and place or receive calls using the Teams app
  • Port your company’s existing phone numbers into Teams and assign them to users
  • Build Auto Attendants, Call Groups, and Phone Trees
  • Receive voicemail, transcribe it, and automatically forward voicemails to Outlook
  • Assign and reassign phone numbers to your employees as needed
  • Call internationally if necessary

You can effectively use Teams as your company’s entire phone system, wherever your employees are located.

Getting Started with Microsoft Teams Calling Plans

Teams Calling Plans are available as add-on licenses with Microsoft Office 365.  Microsoft licensing can be very complex. As a Microsoft Gold Partner, Anders Technology has both the expertise and the experience to guide you to a solution that’s tailored to your company’s unique and specific needs. Contact an Anders advisor below to discuss your situation.

Download our recorded Teams webinars to learn how to collaborate remotely with Microsoft Teams.

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September 19, 2020

Uniform Guidance Updates for Organizations with Federal Grants

Organizations that receive greater than $750,000 of federal grants are usually subject to additional audit requirements, commonly referred to as a single audit, or Uniform Guidance audit. The federal government’s response to the COVID-19 pandemic has created some new programs and relief packages for non-governmental agencies, and some may now be subject to the single audit requirement. Here are some guidelines and updates for Organizations that receive federal grants:

  • Paycheck Protection Program (PPP) Forgivable Loans administered by the US Small Business Administration do NOT count toward the $750,000 threshold and are NOT subject to the single audit rules.
  • Provider Relief Funds (CFDA 93.498) administered by the US Department of Health and Senior Services are subject to the single audit rules.
  • Economic Injury Disaster Loans (EIDL) administered by the US Small Business Administration are subject to the single audit rules.

The US Office of Management and Budget (“OMB”) which oversees these audits, released the 2020 Compliance Supplement on August 18, 2020. When organizations prepare the schedule of expenditures of federal awards (SEFA), they should separately present “COVID-19 Emergency Act funding”.  The OMB has indicated there will be no new clusters of programs added for Coronavirus Aid, Relief, and Economic Security (CARES) Act programs, however, the final guidance (to be issued in an Addendum) specifically addressing all federal program under the CARES Act is expected to be issued soon.

Finally, the OMB has issued two formal memos addressing single audit due dates and other administrative matters:

The first memo M-20-11, “Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly impacted by the Novel Coronavirus (COVID-19),” provided extensions specifically to  organizations who are receiving funds under H.R. 6074 for coronavirus preparation and response.

On March 19, 2020, the OMB issued memorandum M-20-17. This memo provides extensions more broadly , and applies to organizations with year-ends through June 30, 2020 that have experienced a loss of operational capacity due to the COVID-19 crisis, and have not yet filed Single Audit reports with the Federal Audit Clearinghouse (“FAC”) as of March 19, 2020. The extension allows for delayed submission of the Single Audit reporting package up to six months beyond the original due date (normally the earlier of thirty days after receipt of the auditor’s report, or nine months after the end of the fiscal year).

The Anders Not-for-Profit Group can help you navigate the evolving regulations so you can always stay in compliance. Contact an Anders advisor below to learn more.

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September 17, 2020

How Businesses Can Add Value to Recover from COVID-19

If you’re like most business owners, the first quarter of the year was progressing like any other. Then, suddenly a world-wide pandemic hit. As the world started shutting down, some businesses had to start closing their doors and rethinking their sales strategies. Perhaps you’ve stabilized your company, or you might still be experiencing the worst of it. Either way, you’re probably a different person and business owner as a result of this pandemic.

While we all hope for a quick return to pre-coronavirus activities, it’s hard to estimate when that will happen. Below we discuss two constructive options business owners can consider to help overcome the virus stress.

Option #1: Rebuild a More Durable Business

Another constructive reaction to this crisis is to commit to building a more durable business that can better withstand shocks to the system in the future.

Option #2: Sell

Many owners—especially those that experienced the brunt of the 2008–09 global financial crisis—have been so traumatized by this pandemic that they don’t have the stomach for another disaster. As a result, they’ve decided to start planning their exit proactively. 

How to Add Value

If you find yourself choosing to rebuild or sell, your immediate action plan will be the same. There are some things you can do now that will make your business more durable in the long term as well as more sellable:

  1. Focus on the products and services where you have a point of differentiation. You’ll have more pricing authority in the short term, have better cash flow, and be more attractive to an acquirer in the long run.
  1. Create recurring revenue streams that generate sales while you sleep. These can be in the form of service contracts, subscriptions or maintenance plans. Aim to get the majority of your revenue automatically.
  2. De-risk your business, ensuring you’re not too reliant on a single customer or supplier. 
  3. Create an employee handbook and systematize your processes to lessen your dependence on a key employee, or you calling all of the shots.
  4. Clean up your bookkeeping.
  5. Generate as much cash as possible from customers up front to create a positive cash flow cycle.

Speaking to an advisor about how this pandemic has impacted your business can be therapeutic and help pave a way forward, and Anders is here to help. Anders can help your business add value to build a more durable business coming out of the pandemic and help transition the business when you’re ready. Learn more about our Business Transition Planning or COVID-19 Business Recovery services or contact an Anders advisor below.

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