Accountants helping small businesses during National Small Business Month

As the U.S. marks National Small Business Month, accountants are deeply involved in helping their…

As the U.S. marks National Small Business Month, accountants are deeply involved in helping their small-business clients cope with the pandemic, particularly in assisting them with a variety of government aid programs.

The U.S. Small Business Administration’s Paycheck Protection Program has provided a major opportunity for accountants to help clients apply for PPP loans and loan forgiveness since the program debuted last year as part of the CARES Act. The Consolidated Appropriations Act that Congress passed in December revived the PPP after it expired last summer, but it’s set to expire again at the end of this month.

This year, the Biden administration focused on providing loans for small businesses in underserved communities and to women-owned and minority businesses. It pursued a similar approach with the recent Restaurant Revitalization Fund, which aims to help food and beverage establishments (see story). Applications for the RRF closed on Monday, but on Wednesday the SBA opened a new program called the Community Navigator Pilot Program, which aims to use a kind of hub-and-spoke approach to reach the smallest businesses through community organizations, particularly businesses owned by the socially and economically disadvantaged, as well as women and veterans.

During the pandemic, small-business owners have been relying on their accountants for more than just bookkeeping and help with government programs.

“Just like the 2008 financial crisis, small businesses have been hit harder than large firms,” said Heather Bain, who chairs the Institute of Management Accountants’ Small Business Committee. “This allows management accountants to leverage their relationships and become valuable advisors to small-business owners.”

Closed stores on Grant Avenue in San Francisco

David Paul Morris/Bloomberg

She also owns Bain CPA Business Strategies, a small-business consulting firm in Houston where she counsels clients on cash flow management projections and budgeting. “We get lots and lots of calls as small-business accounting practitioners about cash flow,” she said.

Business owners have lots of questions, she noted. “Should the owners take a draw from the business? How can we reduce costs? How can we increase sales? They really want to know what their cash forecast looks like and how they can budget, and whether or not, if they’re at 50{a25bda0f8ab6dac90e68079d6f038584ef6ac53f1f4621de3ad526e35cd6c0d6} capacity, can they actually continue to make payroll? Can they make their loan payments? Can they get additional financing through the SBA or PPP local branch? What financing is available? How to reduce the cost of transactions? I’m getting a lot of questions about banking choices, about reducing the bank fees associated with using services like Zelle or some other payment system besides accepting credit cards, or avoiding the bank fees that are occurring every month, and lots of cash flow issues,” said Bain.

Risk management, diversity and inclusion have been increasingly areas of focus at the IMA’s Small Business Committee. “We as a committee have been talking a lot about insurance and policy changes, not just insurance policies, but actual internal policy changes within the small businesses that might impact risk to the business,” said Bain. “We’ve been talking a lot about diversity and inclusion as a primary way to ensure that there is good innovation and that they’re reaching target markets. Anytime there’s bias inside a company, then they may not actually understand their target market. They may not understand the population of their employees and outside their employee pool, so they may not be attracting top talent if they don’t have a good diversity and inclusion policy.”

The pandemic exposed many of the inequalities that the SBA is now trying to address in programs like the PPP. “We’re already seeing in many states that the PPP loans kept businesses in business but they did not reach the underrepresented community small businesses and women businesses as much as they did at overall small businesses, so the effort to level the playing field was one of the key issues,” said Diane Swonk, chief economist at Grant Thornton during Avalara’s Crush Virtual event on Thursday. “We know that inequality is something that’s inefficient by its definition, and the inequalities that we saw the pandemic accelerate, expose and exacerbate really chop away at our potential to grow going forward, and you’ve really seen an acknowledgement by state and local governments on that front.”

Technology has been a major focus for small businesses and their accountants as they cope with the pandemic. “We’ve also been involved in technology changes because, of course during the pandemic, there were lots of technology changes, and we’ve been involved in the budgeting for that, and doing cost benefit analysis on the technology changes, and how do we raise money for the technology changes, and can they justify that over the course of the life of the technology, and that sort of thing,” said Bain.

Client accounting services rely heavily on a mix of technology. “CAS essentially requires an ability for your firm to be able to best serve the needs of all your clients,” wrote Hitendra Patil, director of practice development and customer success at AccountantsWorld, in his new book, “The Definitive Success Guide to Client Accounting Services. “In other words, your firm’s technology stack, services, processes and pricing packages need to cater to businesses of different sizes, turnovers, as well as various levels of tech-savviness of the business owners and their employees. In yet other words, your firm should have the ability to do part of the accounting work or all the work your clients offload to your firm.”

Marketing changes have been necessary for many companies due to the pandemic, while small businesses have also faced supply chain shortages and uncertainty that have been prompting questions for their accountants. “Supply chain management is a really big topic because with the pandemic there have been a lot of supply chain disruptions, and there’s a need for an analysis of how to overcome the supply chain disruptions and still be cost effective,” said Bain. “With many small businesses relying on commodity prices and import prices, and most of the distributors not being able to take advantage of economies of scale, how can they improve their supply chain at an affordable cost? They’ve been asking a lot of questions about that too.”

She has been helping clients apply for the Restaurant Revitalization Fund and do the calculations needed to make sure they qualify for the program (see story). She and other management accountants have also been aiding businesses in applying for the Employee Retention Credit that was included as part of the CARES Act. The Consolidated Appropriations Act allowed businesses to leverage both the PPP and the ERC.

“Many of our small-business practitioners also do work with the Employee Retention Credit,” said Bain. “Several firms don’t even take on that work right now because they’re still overwhelmed with the other tax changes that have happened, so management accountants can step in and fill that gap that some CPA firms were handling, especially smaller CPA firms that just don’t have the capacity to do all of it. Internal accountants, if they’re management accountants, understand the complexities. We’re not just talking about bookkeeping. We’re really talking about advisory type roles.”

The PPP has proven to be difficult for some small businesses to leverage, given the constant changes in the program. “I have some clients who actually applied for the second round of the PPP, but because there were some entity rule changes, they’re a partnership and the partnership doesn’t show income,” said Bain. “It’s all distributed to the individuals, and the individuals didn’t want to take the loan in their own individual name under their 1099 income. They wanted to take it as a partnership like they did on the first PPP, and because of the changes they couldn’t do it, so they’re not going to be able to take the second round of the PPP. I think that because they have had some changes to the applications for the second round, it will exclude some applicants just because it’s a little bit different from the first round.”

Small businesses that experienced a significant drop in revenue last year have been able to leverage both the PPP and the ERC, thanks to recent changes in the programs. “They did change the threshold on what they consider a significant drop in revenue, which was helpful to small businesses because obviously not all small businesses make a really large margin, so any drop in revenue can be the difference between making a profit or not,” said Bain.

The 20{a25bda0f8ab6dac90e68079d6f038584ef6ac53f1f4621de3ad526e35cd6c0d6} deduction for qualified business income from the Tax Cuts and Jobs Act of 2017 was handy for some small businesses, but not all could qualify. “There were a lot last year that didn’t have enough income last year for it to be useful,” said Bain. “It is based on wages as one of the criteria for how much the business can deduct, so if their wages paid were down, then it would be less useful.”

Small businesses should be able to benefit from a more lax attitude from state and local tax authorities who don’t want to harm the economic recovery in local communities.

“I think we’re going to see a little bit less oversight,” said Kim Rueben, senior fellow and director of the state and local finance initiative at the Urban Institute, during the Avalara Crush Virtual event Thursday. “Last year we thought this was going to end up leading places to do a lot of monitoring and try to weed out fraud and make sure everybody was paying. Right now, I think there’s going to be some of that, but it’s largely going to make sure that there’s going to be this leveling of the playing field between local businesses and online or national businesses. The fact that state and local governments can breathe a sigh of relief means we won’t see quite the level of crackdown, but I do think that as things shift, places are going to try and make sure that their local businesses are actually doing OK. … I think we’re going to see more things where they’re giving economic incentives or help to their local businesses and trying to make sure that they’re not being penalized in what’s going on nationally.”