By Shannon Clinton
As stay-at-home mandates were being issued a year ago and businesses ordered to close or greatly alter operations, accountants’ phones began ringing with new questions about the impact of COVID-19 in the midst of an already busy tax season.
Suddenly thrust into the roles of therapist and financial prognosticator, these accounting professionals have spent subsequent months helping clients of all different sizes and sectors navigate the pandemic’s present and lasting effects.
By late March 2020, “the calls were fast and furious,” said Jennifer Miloszewski, director in charge of the Lexington office of Blue & Co.
She works primarily in traditional audits, assurance and consulting for construction and tech-based companies, and typically her client contacts are controllers, owners, chief financial officers and occasionally human resources professionals.
“The primary (questions) were, ‘What do I do with my people?’ ” Miloszewski said. “We work primarily with closely held businesses and in most of our clients, payroll is the No. 1 expense.”
Without ongoing revenue, some questioned how long they’d be able to stay in business.
“Those were the ones that were the most heart wrenching,” she said.
It’s been an economic rollercoaster, to be sure. The booming stock market experienced record single-day losses—and gains—in mid- to late March 2020.
According to the Bureau of Economic Analysis/U.S. Department of Commerce, real gross domestic product decreased a stunning 31.4% in the second quarter of 2020, then increased the third quarter at an annual rate of 33.4% as some COVID-19 restrictions eased. Government stimulus checks and boosts in unemployment aid struggled to stem the flow of new unemployment claims, along with unprecedented levels of food insecurity and rent shortfalls.
First, stay with the plan
Erica Horn is a tax associate director of tax services in the Lexington office of Dean Dorton and a member of the firm’s six-member COVID-19 solutions team, assisting clients and others with accessing economic relief.
Horn, who is also a former attorney, has often worked with manufacturing and construction clients, engineers, physicians, dentists and those in the equine industry.
When navigating economic ups and downs, Horn said it’s important for business leaders to maintain existing plans to the extent they’re able and look for ways to expand with new markets, talents or opportunities.
“I don’t think we know … what the full impact of all this is going to be,” she said. “There’s still too much time left to deal with the pandemic, too much time before we’re all vaccinated and we can return to life as normal.”
At MCM CPAs and Advisors in Louisville, CPA Diane Kilner is a partner and small-business services team leader working primarily with small and medium-sized privately held businesses and individual clients.
She began receiving calls in mid-March from worried clients. Some were spooked enough that they wanted to start selling off their portfolios, which she strongly warned against.
Stick with the facts
While searching for reputable resources to help grasp the situation, she said she asked clients to hang on and think toward the future. The firm soon began providing specific, updated advice in the form of regular webinars and email blasts.
“We tried to stick with what we knew and what the facts were,” Kilner said.
She also raced to get clients a piece of the Paycheck Protection Program (PPP) pie. Kilner said the time-sensitive nature of determining eligibility and applying for forgivable PPP loans was crucial for clients, and proved a nonstop exercise in patience.
“Being able to get funds for them was a huge peace of mind,” she said.
Her colleague Mark Schmitt is a CPA, partner and auto dealer services team leader and partner in charge of the tax department for MCM’s Lexington office, often working with individuals, auto dealers, contractors, manufacturers, coal extractors and restaurants.
Schmitt said some car dealerships closed temporarily, then grappled with the issue of customers returning to showrooms. Many sellers turned to contactless and online car buying options that will likely remain in place once the pandemic is over.
The restaurant and hospitality industries, even after vaccinations are widespread, will undergo a longer recovery period, Schmitt said.
“They’ve just been devastated and that is where the market is hardest hit,” he said.
Watch that cash flow
Alan Long is a CPA and managing partner at Baldwin CPAs in Richmond. His client base is primarily not-for-profits, medical services providers, construction and other industries.
When shutdown orders came, clients were greatly concerned about employees and their own business and financial futures.
“Folks got panicky— including us—because nobody’s lived through this before, and we didn’t know how this was going to affect everyone,” Long said.
While there wasn’t much information to convey until CARES Act legislation was passed, he asked clients to scrutinize cash flow and be in contact with their bankers in case loan payment extension requests were warranted. He assisted in preparing PPP applications and released several webinars on the topic.
Though there’s still a lot of uncertainty, now there are glimmers of optimism.
“The vaccines starting to roll out is good and the clients see it as good,” Long said.
Derek Gray is a tax consultant and director at the Louisville office of Blue & Co. His experience lies in distilleries, manufacturing, real estate, biotech and insurance, and he deals with clients with annual revenues ranging from $100,000 to $250 million.
Based on his experience with distillery clients, Gray said larger brands are doing well, but startup craft distilleries may be falling a bit short of projections. Some switched to making hand sanitizer, which not only was good for the community but brought in a bit of revenue.
“They were small and nimble and intelligent enough to pivot right in the middle of a pandemic,” he said.
With an extended tax deadline and amidst rapidly changing legislation last year, Gray said, “I don’t know what normal is anymore. I don’t think our clients know what normal is anymore.”
However, he added, “I think some of them are starting to see the light at the end of the tunnel” as vaccinations increase along with hopes for long-term economic stabilization.
For now, Gray reassures clients they’re all learning together and he’ll help them for the long haul.
CPAs became therapists, too
In addition to advising on tax matters, Gray has also become a small-business banker, cash-flow manager and de facto therapist for clients. He turned to experienced colleagues and Small Business Association resources for guidance and listened to press conferences with then-U.S. Treasury Secretary Steven Mnuchin.
And though he evaluates posted information for factual merit, Gray said, “Honestly, as crazy as this seems, there’s a lot of good information out there on Twitter and social media.”
To best advise his clients, Doug York, director at Deming, Malone, Livesay & Ostroff turned to colleagues, the Indiana and Kentucky society of CPAs, and resources provided by BDO alliance, an association for independent CPA firms.
York practices public accounting in the Metro Louisville/Southern Indiana area, focusing on tax code and compliance, succession planning and financial systems design for construction and transportation industries, among others.
As York communicates mostly with owners and CFOs, the extent to which the pandemic potentially impacts succession planning has concerned some.
“I think people are putting together strategic plans, more thinking about the future, thinking about retirement, and how can I get my business into position so that I can sell it later or transfer it to the next generation effectively,” York said.
Not all companies have experienced financial hardship. At Blue & Co., Miloszewski said she works with clients in the information technology industry who have experienced some lulls, but generally that segment is expanding. Other clients working in data centers and with digital signatures report doing well, she added.
Ingenuity, imagination and pivoting were key for businesses to stay afloat and even woo new customers, she said. For example, one client provided signage nationwide but shifted to manufacturing Plexiglas dividers and face shields and added online ordering capabilities.
Some not-for-profit and arts organizations were able to secure grants to help ease shortfalls, Miloszewski said, and health care clients who suffered financially when elective surgeries were canceled early on are now seeing revenue figures recover.
Outdoor recreation-oriented companies had some of the best sales years ever in 2020, Schmitt said, as people could still go boating or camping in relative safety.
Kilner said her clients have maximized their social media presence, opening new drive-through services for scheduled pickups and sometimes making and/or selling different products and she has helped them with resulting changes.
Find, and jump on, opportunities
With a focus on commercial services, specifically manufacturing/distribution, tech and nonbank service-based companies, Matt Berrian is a CPA and director in the assurance practice at BKD CPAs and Advisors based in Louisville.
Several partners there took the lead in pushing out guidance about PPP funding and other topics for clients to use, he said, and many took on new roles to meet demands. The financial services group pivoted from due diligence work in the second and third quarter last year to help clients with 13- and 24-week cash-flow projections. Others became immersed in learning the minutia of emerging legislation.
His discussions with clients often center on how to make the most of their situation, taking advantage of any growth opportunities. Sometimes though, as with hospitality, tourism and entertainment venues, the situation has been pretty bleak. Some clients have been able to save money by not attending conferences or delaying capital expenditures.
“Sometimes the only thing there is, is to preserve cash flow,” Berrian said.
Now that Miloszewski’s clients are no longer putting out daily financial fires, she advises them to remain goal-oriented and receptive to change and opportunity.
“I think there’s still wariness,” she said. “We try to work with them on focusing on the long term and not moving away from what your strategy might have been, just tweaking that strategy.”
Berrian said he doesn’t wait until clients make contact with questions or concerns, but instead reaches out to see how they’re doing or to pass along useful information.
Long said clients sometimes just need a pep talk. “A lot of times right now, clients just want to talk to you,” he said. “It really doesn’t have to do with any specific question. … People just want to be reassured because we’re all in this together.”
The impacts of any economic downturn have a cascading effect, Horn said, affecting many different areas like customers’ ability to pay on time or the ability for companies to continue to pay for services, payroll and rent.
But, Horn said, business clients are smart and savvy and in the end, she believes they’ll persevere.
“That’s how they got to be where they are in the first place,” she said. “And we’ll do everything we can to help.”