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How to Manage COVID-19-Related Business Risks

April 10, 2020 by Reynolds & Rowella Leave a Comment

The coronavirus (COVID-19) outbreak has had a crippling effect on the global economy. This is clearly uncharted territory. As millions around the globe do their best to minimize their exposure to the virus, business owners and managers face an uncertain and stressful future.

Faced with faltering demand, anxious employees, health safety risks and a lack of clarity regarding what the future holds, what can small and medium-sized business owners do to prepare for a global economic slowdown? Here are eight steps to consider to help your company navigate these uncertain times.

1. Develop Financial Scenarios

Create best, worst and most likely financial scenarios for your company. Consider these questions:

  • How much do you estimate revenue will change over the short and long run?
  • Which costs are variable vs. fixed?
  • How long will it take for you to run out of cash and inventory?
  • Is there extra cushion to draw from on your line of credit?

Projecting financial statements for the next few months may require some guesswork, but the exercise may uncover areas that require immediate attention. For example, you may find an opportunity to reduce your costs by canceling a subscription or downgrading a service.

2. Scrutinize Your Cost Structure

It’s important to dedicate additional time to combing through every line item of your financial statements for costs to remove. As a general rule of thumb, if an expense doesn’t directly contribute to generating revenue, consider removing it. Also look for ways to lower your costs. For example, if you’ve not switched insurance companies recently, now may be the time to seek an alternative, lower-cost provider.

3. Reach Out to Lenders, Landlords and Creditors

As the effects of the economic slowdown take hold, many business owners worry that they’ll default on a loan, face an eviction or be sued for unpaid debts. The federal government and many individual states have already taken steps to stop evictions. How far such government remedies extend and for how long remain unknown.

If your business is unable to make a payment on a loan, mortgage or unsecured debt, be proactive and reach out to share your situation. You may find those you owe money to are receptive to amending the terms of your arrangement in these challenging times.

4. Reconnect with Key Customers

Reach out to major customers and learn of the challenges they face. This provides an opportunity to engender long-term customer loyalty and goodwill. Depending on your company’s financial health, you may be able to offer support, including providing discounts on future orders or extending payment terms.

These conversations also will provide information to improve the accuracy of your financial projections. And you’ll open the line of communication in case circumstances deteriorate further.

5. Communicate Regularly with Employees

It’s human nature to struggle with uncertainty. Make communicating with employees a priority — even if you have no news to share.

Employees need to know you understand their concerns. They must also believe you have their best interests at heart. If you anticipate laying off staff or cutting their hours and know of companies in a hiring mode, share that information with employees. When normal operations resume, former employees may return if they remember your willingness to help them in times of crisis.

6. Revisit Your Staffing Model

Ideally, small businesses would like to keep valued employees on the payroll as long as possible. But, for some businesses, now might be the time to engage contractors instead of full-time employees. By doing so, you’ll potentially lower your costs and increase your staffing model’s flexibility.

7. Consider Bartering

Instead of exchanging cash with supply chain partners, be open to bartering goods and services with other businesses. Bartering allows you to conserve cash. Plus, connecting with other businesses may help uncover additional tools and techniques to help your company weather the economic fallout from the COVID-19 outbreak. Be aware that bartering does have tax implications.

8. Monitor Government Responses

Federal and state governments are working on various financial relief measures to help businesses during these trying times. In addition to following local and national news, reach out to your tax, human resources and legal advisors to let them know you’re interested in gaining access to government aid when it becomes available. Also sign up for email communications from federal agencies, including the Small Business Administration (SBA) and the IRS, to make sure you learn of the programs as soon as they’re available.

WE’RE ALL IN THIS TOGETHER
Now’s the time to confront the reality of COVID-19 head on. That requires a collaborative effort with your customers, suppliers, employees, creditors and professional advisors. By working together to fortify your defenses, you’ll be in a better position to protect your business and ensure its survival during these unprecedented times.

REYNOLDS & ROWELLA | ACCOUNTING AND CONSULTING

Reynolds + Rowella is a regional accounting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, give us a call at 203.438.0161 or email us.

Filed Under: COVID-19 Tagged With: COVID-19, Global Economy, How to Manage COVID-19-Related Business Risks, Reynolds + Rowella

CARES ACT UPDATE: TAX RELIEF FOR INDIVIDUALS

March 31, 2020 by Reynolds & Rowella Leave a Comment

The Coronavirus Aid, Relief and Economic Security Act (CARES Act), passed on March 27th, is designed to provide relief to individuals and business. This legislation addresses concerns ranging from small business interruption to individual, family, and business economic relief. This summary focuses on those provisions relevant to individuals.

Recovery Rebates

Individuals, other than nonresident aliens and individuals who can be claimed as dependents (whether or not they were claimed as such) who have a Social Security number, are eligible for a one-time refundable federal income tax credit. The tax credit is:

  • $1,200 ($2,400 for individuals filing jointly);
  • plus $500 for each dependent (under age 17), which could be a child of the taxpayer or other qualifying relative.

The amount of this credit is reduced and phased out for taxpayers with more than a threshold adjusted gross income (AGI). The amount of the credit is reduced (but not below zero) by five percent of the taxpayer’s AGI in excess of: 

  • $150,000 for joint return filers
  • $112,500 for head of household filers
  • $75,000 for filers other than joint filers and head of household filers.

The credit is based on the individual’s 2019 tax information, but 2018 tax information will be used if the 2019 income tax return has not been filed. So, if a taxpayer would not qualify for the credit in 2018 but would in 2019 it is imperative to get the 2019 income tax return filed as soon as possible to avoid delay. Additionally, if the taxpayer is not required to file a tax return, the Service will look to the taxpayer’s Form SSA-1099, social security benefit statement or RRB-1099 Social Security Equivalent Benefit Statement – but you are better off filing a tax return.

The payments will be made between now and December 31, 2020. In many cases, it will be paid electronically if you have provided direct deposit information to the IRS on your 2018 or 2019 tax returns.

The payments will be made between now and December 31, 2020. In many cases, it will be paid electronically if you have provided direct deposit information to the IRS on your 2018 or 2019 tax returns. In the event the IRS does not have an individual’s direct deposit information, a web-based portal is being developed by the Treasury to provide banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.

Qualified Retirement Plans

The 10% penalty for early withdrawals from retirement accounts is removed for coronavirus-related distributions, which are defined to include distributions made on or after January 1, 2020 and before December 31, 2020 to either:

  • An individual diagnosed with COVID-19 or whose spouse or dependent is diagnosed with COVID-19;
  • An individual who experienced adverse financial consequences as a result of quarantine, lay-off, reduced hours, inability to work due to child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Secretary of Treasury.

An individual taxpayer may receive Coronavirus related distributions during 2020 up to $100,000 and may elect to spread out the income inclusion over a three-year tax period. The taxpayer may then repay the distribution within 3-year period following the distribution and such repayment will be treated as a tax-free rollover.

The CARES Act also stipulates that the limit on loans from qualified plans is increased from $50,000 to $100,000.  The loan is limited to the present value of the non-forfeitable accrued benefit of the employee under the plan. The loan limit is increased for a 180-day period starting on March 27, 2020.

Temporary Waiver of Required Minimum Distributions

For calendar year 2020, the Act waives the required minimum distribution rules for certain defined contribution plans and Individual Retirement Accounts:

  • A defined contribution plan under section 403(b).
  • A defined compensation plan which is an eligible deferred compensation plan under section 457.
  • An individual retirement plan.

 Charitable Contributions

To incentivize charitable contributions, the CARES Act provides an above-the-line deduction for qualified charitable contributions up to $300 for individuals who do not itemize deductions. A qualified charitable contribution is a charitable contribution which is made in cash to a charitable organization that is not a supporting organization, Donor Advised Fund or a contribution carryover from a prior year. The CARES Act also increases the income limitations on charitable deductions by suspending the 50% AGI limitation for 2020.

Individuals may deduct qualified contributions in 2020 up to 100% of their AGI. Any excess qualified contributions are carried forward to future years in the same manner as other charitable contribution carryovers.

Reynolds + Rowella professionals are closely following the development of COVID-19 relief measures in order to offer insight into the potential impacts on taxpayers. If you have questions about how the CARES Act may affect your personal tax situation, please contact your R+R tax advisor.

REYNOLDS & ROWELLA | ACCOUNTING AND CONSULTING

Reynolds + Rowella is a regional accounting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, give us a call at 203.438.0161 or email us.

Filed Under: COVID-19 Tagged With: Aid Relief and Economic Security Act, CARES Act Update, Coronavirus Updates Ridgefield, Reynolds + Rowella, Tax Relief for Individuals

Congratulations Jarrett Meiers

June 29, 2018 by Reynolds & Rowella Leave a Comment

 

From all your friends and family at Reynolds + Rowella, congratulations on this well-deserved award. For the past 14 years, you have been a very important part of the firm. Whether it be your expertise with all matters IT, your inward focus on making things better at R+R or your numerous community volunteering endeavors, you have proven yourself as a great asset to the firm and more importantly, a great person. We look forward to the next 14 years and all the great things to come!

Filed Under: Winner forty under forty Tagged With: Accounting Services Fairfield County CT, Best Accounting Firms Fairfield County CT, Financial Planning Fairfield County CT, Jarrett Meiers, Jarrett Meiers Winner Forty Under Forty, Reynolds + Rowella

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