How to Advise Struggling Business Clients


Now is the time for advisory services and helping clients navigate the economic crisis. When the tax year 2019 filing deadline was postponed until July 15, many firms shifted gears from tax preparation to advising struggling businesses about the tax and stimulus options available in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

In a recent roundtable discussion with Intuit®, a group of more than 20 practitioners said they wished they had coached clients to build more cash reserves to weather this crisis. While it’s too late for many businesses to improve their liquidity, it’s not too late for tax professionals to make a difference by advising on how to maximize tax and stimulus benefits.

Here are some advisory best practices:

  • Get educated. The new legislation is complex, but as tax professionals, we’re experts at learning tax law, asking the right questions, making educated assumptions where necessary, and applying the law to our clients’ circumstances. There are many continuing education courses available to help, including “Stimulus Loans & Advising Clients Under the CARES Act” and “Five Steps to Help Manage Cash Flow Right Now.”
  • Be proactive. Clients want and need your expertise as a trusted tax advisor. They are barraged by media messages that often cover only one or two stimulus programs available – and might be confused. Be proactive to apply the right tax and stimulus strategies for each client. Many owners are overwhelmed and will appreciate your leadership as a trusted advisor.
  • Scale your expertise. Sharing webinars, articles, newsletters, videos, and other general education can increase awareness about options and help your clients get organized for advisory engagements.
  • Focus on people. Clients normally seek our guidance about the tax and financial implications of decisions. Today, advisory engagements should begin with empathy for owners, employees, and families, and a willingness to help navigate personnel decisions. It’s important to treat everyone with respect and dignity throughout this experience, and not just as numbers in a spreadsheet. People are the lifeblood of every business, and how owners lead through this crisis will impact how they emerge on the other side. 
  • Update the forecast. It’s either time to update a client’s business forecast or create one. If the financials are current and automated, then developing a weekly cash flow forecast is the next step, using an integrated app or spreadsheet. Creating multiple scenarios (worst case, likely, best case) can deliver a reality check for owners. The faster you and your clients take action, the more resilient the business may be. Some clients may even be in a position to grow during the crisis.

The media has heavily covered the Paycheck Protection Program (PPP), which includes a limited amount of funding, but there are potentially better options available to many employers that do not receive a PPP loan. Here’s a summary of tax and stimulus programs available to assist businesses, employees, and families. As a trusted advisor, combine these programs to help clients achieve the best outcomes.

Example of options

Let’s evaluate each program for a typical small business employer with eight employees, a monthly payroll of $23,300, and subject to shut down from March 27 to May 29, or nine weeks. 

  • Expanded unemployment benefits. The CARES Act provides an additional $600 per week on top of state unemployment benefits, which typically range from $300 to $500 per week for up to 13 weeks until July 31, 2020. This benefit may result in some lower paid employees receiving more unemployment benefits than they would have earned when they were working. For employers that are subject to closure or facing a significant revenue decrease, furloughing some or all employees may be a good option. Unlike the PPP, this benefit is not a first come, first served program. Many states are not charging back employers if unemployment was COVID-19 related. In our example, the eight employees could receive about $72,000 of benefits over the nine weeks of closure ($400 state benefit + $600 federal benefit X eight employees X nine weeks).
  • Employee Retention Credit (ERC). The CARES Act provides a refundable payroll tax credit of 50% of wages, up to $10,000 per employee for eligible employers. In our example, the employer would qualify because they were subject to a shutdown, and would remain eligible until the quarterly revenue exceeded 80% of the comparative quarter the year before. As employees come back to work, this would likely result in $40,000 of tax credits available in Q2 and Q3 against payroll tax deposits. An important caveat is that the ERC may not be claimed if the employer received a PPP loan.
  • The CARES Act created forgivable stimulus loans administered through the SBA. Small businesses can apply for approximately 2.5 X their monthly payroll expense, for employees with annual wages below $100,000. If 75% of the funds are spent on payroll during the eight weeks after funding and before June 30, the loan may be forgiven. In our example, the business could qualify for$58,250 ($23,300 monthly payroll X 2.5). If they spend at least $43,687 on payroll expenses, the entire balance could be forgiven. In our example, that might be challenging if the employees return to work around May 29 and only have four weeks of payroll before June 30. The purpose of the PPP is to retain employees, even if there is no work to do, and not use unemployment benefits. If an employer receives a PPP, they may not claim the ERC. 
  • Economic Injury Disaster Loan(EIDL). The SBA provides more traditional loans to businesses experiencing a temporary loss of revenue. Loans are up to $2 million for up to 30 years at 3.75% to pay general expenses. No personal guarantee is required for loans up to $200,000, and up to $10,000 of this loan may be forgivable. Employers may get a PPP and an EIDL loan, but not for the same expenses.

Other stimulus programs:

  • Payroll credits for sick leave under the Families First Coronavirus Response Act.
  • Employer Payroll Tax Deferral under the CARES Act.
  • Individual stimulus payments of $1,200 per person, with varying amounts depending on income.

Never before have tax advisors had so much opportunity, so quickly, to make a difference for struggling clients. By carefully navigating the requirements, an advisor could put a package together for the example above that provides $122,000 (unemployment $72,000 + ERC $40,000 + EIDL $10,000) of stimulus program benefits, which is higher than the $58,250 PPP available. Every client situation is different; clients need the expertise of trusted advisors to maximize the programs available and comply with the rules to realize the forgiveness.

One silver lining of this crisis might be that more firms update their service offerings to lead with planning and advisory services to help clients better prepare for challenging times.

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