This is a thought leadership article by PrimeGlobal member firm Moore Colson discussing cash flow and business strategies to help your firm recover from the Covid-19 pandemic.

As we enter the final months of 2020, the COVID-19 pandemic continues to bring uncertainty to the economic landscape and many businesses are feeling the financial impact. For these companies, implementing cash flow and tax planning strategies is essential in setting themselves up for a faster recovery.

In an effort to assist companies during uncertain times, Moore Colson is providing the following checklist of top 6 cash flow planning and top 3 tax strategies to consider.

Cash Flow Strategies:

1. Rolling Cash Flow Projections

Create a rolling 13-week cash flow projection to better manage your business during these uncertain times. Make sure to compare actual results to your projection and adjust as needed.

2. Vendor Payment Strategies

Be strategic with respect to your vendor payments. While you want to be fair to your vendors, it is not necessary to pay bills before they are due. In addition, consider opportunities for temporary extensions of payment terms.

3. Invoice Timing and Follow-Up

Make sure that you are issuing invoices on a continuous and regular basis. Issuing timely and regular invoices is an important best practice to manage your cash collection cycle. In addition, consider sending reminders prior to the day the invoice is due to your customers.

4. Explore Operational Efficiencies

During uncertain economic times, businesses naturally look for areas to decrease costs. In addition to pure cost reductions, it is often helpful to explore areas of your operation where you can gain efficiencies. Examples could include exploring changes in processes, shifting to technology that may be less expensive, reductions in business travel and additional areas that may be specific to your type of business or industry. You could also consider whether it is a good time to automate your processes, especially processes that require physical paper, which can be very difficult to perform when no one is in the office.

5. Evaluate Federal Loan Programs

In addition to the Paycheck Protection Program (PPP), the Federal government has established additional lending programs such as the Main Street Lending Program (MSLP) and Economic Disaster Injury Loan (EIDL). Unlike the PPP, these loans are not forgivable but do provide a source of liquidity at favorable terms and are worth consideration.

6. Consider City and Local Relief

Many city and local governments are offering aid to small businesses through grants and other lending programs. These programs often provide access to cash at little or no cost to the business.

Tax Strategies:

1. Consider Payroll Tax Deferral

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows for employers to defer payment of the employer’s share of Social Security Tax. Employers can defer 50% of their share until the end of 2021 and the remaining 50% until the end of 2022. Originally, this deferral was not available to employers that received a PPP loan, but subsequent legislation removed this restriction.

2. Assess Eligibility for Employment Tax Credits

Businesses that have been impacted by COVID-19 may qualify for either the Employee Retention Credit or the Credit for Sick and Family Leave. The Employee Retention Credit provides for a refundable tax credit for wages paid by a business whose operations have been partially or fully suspended due to a governmental order, or businesses that have a significant decline in gross receipts compared to 2019. The Credit for Sick and Family Leave, provides a refundable credit based on compensation paid to employees who are unable to work due to conditions provided in the Families First Coronavirus Response Act (FFCRA).

3. Assess Tax Savings Opportunities in the CARES Act

In addition to financial relief provisions, the CARES Act provides several tax relief provisions that may be advantageous. First, net operating losses that are incurred in 2018, 2019 and 2020 are now eligible for carryback to prior tax years. The ability to carry net operating losses may provide a source of cash flow through tax refunds. Secondly, the business interest limitation has been increased from 30% to 50% of adjusted taxable income, which may reduce current year tax obligations.

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Moore Colson

Moore Colson has been providing accounting, advisory and consulting services to mid-market businesses and Fortune 500 companies in the Southeast and nationwide since 1981. Headquartered in Atlanta, Moore Colson is one of America’s largest and top award-winning firms delivering innovative and practical solutions in a true partnership model. We offer expertise in tax compliance & consulting, accounting & auditing, team members benefit plan audit, IT audit security & consulting, Sarbanes-Oxley consulting, restructuring and turnaround services, management consulting, estate and trusts services, lender advisory services, transaction services, forensic & litigation support services, and fiduciary & bankruptcy services for more than 15 industries.

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