New Business Direction LLCIf you keep any kind of digital information in your business, you have a chance of becoming a victim of a cybercrime. The odds have increased exponentially during the pandemic, with more cyberthreats and scams floating around than ever before. Here are some ways to reduce your chances of getting attacked.
Social Engineering
Social engineering is when thieves try to get your employees to provide confidential information via a phone call or email. You can reduce your risk here by developing procedures and training any employees that take customer phone calls for the business. Require them to ask for identifying information such as a pin or code, or simply prevent them from giving out any information over the phone.
Passwords
Passwords are terribly inconvenient but incredibly necessary. Almost everyone is guilty of using passwords that are simply too easy to guess. Here are some password tips:
- Avoid using dictionary words, even if the syllables are broken up in the password.
- Always use a combination of upper and lower case, and don’t just make the first letter uppercase which is too predictable.
- Include special characters, and don’t just use the exclamation point.
- Use separate passwords for everything, especially for banking apps, accounting apps, and social media apps which are frequently hacked.
- Make your passwords at least 12 characters. Better yet, utilize a password vault app to generate secure passwords.
Receiving and Delivering Information
If you deliver or receive information, it should be done safely and securely. One way to do this is to use a customer portal such ShareFile or SmartVault, where the information is securely stored in the cloud. Another tool to safeguard information delivery is encrypted email.
Anti-Virus
All computer users should have anti-virus software implemented and active on their devices, including tablets and cell phones as well. Company procedures should dictate the settings as well as the brand to use.
Spam Protection for Email
Anti-spam software is also necessary to protect the device from bad links in emails. Users should be trained to detect and avoid phishing emails.
Malware Protection
Malware can be installed on your computer without your knowledge and if you are not careful. To protect against these threats, avoid file-sharing when possible, be careful when visiting unknown websites, don’t download software that you don’t recognize, and be careful with links in emails.
You may also need to protect your website from malware attacks by installing a firewall or other preventative solutions.
Software Releases
Stay current with all of your software updates and upgrades. Updates and upgrades can patch vulnerabilities, so you are safer with each new installation.
Data in the Cloud
Make sure any data that you have in the cloud is behind an acceptably secure technology solution. Today, this generally means files are stored with AES 256-bit encryption. You can also look for SOC1 and SOC2 certifications.
Need to Know
There are many policies that need to be developed for employees with regard to data handling. One example is providing data access to employees on a need-to-know basis. For example, an operations manager does not need the password to the payroll system, but the payroll manager does.
Reducing Business Risk
These items above are the tip of the iceberg when it comes to having good data security practices in your business. Develop an excellent set of policies, train and monitor employees, and set a great example yourself when it comes to this growing threat to your business.
The Employee Retention Credit is one of the many IRS tax breaks for businesses that was included in the 2020 CARES Act as well as the recent Consolidated Appropriations Act, 2021. This credit is intended to provide financial relief to businesses that suffered from the effects of coronavirus but retained their employees.
The credit is available to eligible employers that paid qualified wages from March 13, 2020 through June 30, 2021. To be eligible, a business’s operations must have been fully or partially suspended as a result of national, state, or local orders or it must have experienced a significant reduction in gross receipts within a single quarter of 2020 compared to the same quarter of 2019 (this is defined as fifty percent or more in the first three quarters of 2020 and twenty percent or more in the fourth quarter of 2020 and first two quarters of 2021).
Wages and health costs paid by the employer on behalf of the employee can be counted for the credit, and there is a cap of $10,000 per employee per year in 2020 and $10,000 per employee per quarter in 2021. For 2020, the credit amounts to fifty percent of qualifying wages, and for 2021, the credit covers seventy percent of qualifying wages. Any wages used in a Paycheck Protection Program loan forgiveness process are not eligible; in other words: no double-dipping.
This tax credit is a little different as it interplays with payroll taxes and not income or business taxes. The credit can be taken on the IRS Form 941. Some employers can request an advance by completing Form 7200. Tax professionals are awaiting further guidance on details of the expanded program.
For qualifying employers, the amount received from the credit can be substantial. Since this credit affects your payroll taxes, payroll tax forms, and payroll tax filings, you will want to make sure it doesn’t fall through the cracks, especially if your payroll function and income tax preparation are handled by two different companies.
If you believe your business may be eligible, contact your tax professional to see how to get started.
Independence is a key concept in accounting, especially in the assurance or auditing area of accounting. Assurance services are services where a licensed CPA reviews an organization’s financial statements and accounting records and provides an opinion about them. This opinion takes the form of a report that can be shared with third parties such as banks and shareholders. Auditing services are one of many forms of assurance services.
Only a licensed CPA can provide assurance services; this is regulated by the states. A CPA who provides certain assurance services must be independent of the business that it is writing an opinion for. Essentially, independence means that the auditor must be able to do their work objectively and with integrity. And it goes further. The auditor must not be perceived as having any kind of bias or connection with the business it is auditing. There must be no perception of any impropriety.
To this end, the auditor must not have a relationship with the company’s executives. A CPA cannot, for example, audit her brother’s company. A CPA cannot be an investor in the company and also be the auditor because of the financial relationship. The audit opinion must not be influenced in any way by a relationship between the auditor and anyone in the company. The CPA must be able to provide an honest, professional, and unbiased opinion when auditing financial statements.
Being independent also means the CPA must have a healthy dose of skepticism. A common phrase in the accounting profession is “Trust, but verify.”
Numerous rules abound to protect auditor independence. For example, an auditor cannot be paid on a contingent or commission basis. All practicing CPAs must complete ethics courses every few years, and these almost always include independence scenarios and case studies.
If you have any questions about independence or assurance, please feel free to reach out any time.
A great way to start 2021 is to take a fresh look at your business finances. Many things changed in 2020, and if you are in the habit of spending on the same items year after year, it’s the perfect time to decide what is essential and what can go.
There are only a few ways to increase profits when you think about it in black and white terms. You can either raise revenues or cut costs. Let’s take a look at where we can potentially cut costs.
Publications
These expenses tend to be monthly or yearly, and we tend to just let them automatically renew time after time. But do we really need them? Take a look in your Dues and Subscriptions account to evaluate what you really need to stay informed, and cancel the rest.
Memberships
If you are a member of an organization or two, what benefits are you getting from your investment? Does it raise revenue for you? Do you use everything the membership offers? If not, it might need to go on the chopping block.
Memberships are especially tricky if the organization provides a local meeting component as a benefit and your state or county has been shut down. There’s a tradeoff right now between supporting the organization so that it’s still there when we can freely meet again and being responsible about your own business costs.
Office/Store Rent
With many employees working from home, the question has come up in many businesses about how much space they really need. As leases expire, consider how much space you really need. Some employees may love to work from home permanently, which frees up space.
Retail stores that have moved their business online may be able to cut back on customer-facing space but might need more inventory storage space. A restaurant that has successfully transitioned to pickup and delivery orders might be able to get by with a smaller seating area.
Software Apps
Are you paying for any technology applications that you are simply not using? This is a good place to look for cuts.
Some applications charge by number of contacts. Keeping your lists clean inside these apps will avoid increases and cut costs in some cases.
Office Supplies
Do you really still need things like staplers and scissors on everyone’s desk? If your business is going paperless, you can save a lot on office supplies.
Printing
Do you need to spend money on printing, or can the printed item be delivered electronically?
Shipping/Postage
While information can be delivered electronically, physical goods still need to be shipped. Make sure you have the best deal with your shipping vendors based on your volume. You may also need to consider building your shipping costs into the price of the product or add a shipping fee to the bill if you don’t already.
Marketing
A great way to increase profits is to become more intentional about your marketing costs. Are you able to measure what’s working and what isn’t? Or are you doing the same thing year after year?
Marketing has changed so much, even in the last few years. It might be time to implement digital marketing methods, which can be more cost-effective than older, outdated methods.
Labor
Make sure employees manage their time effectively by providing the right training and supervision. This should help to reduce labor expenses.
Telephone/Internet
Has your business changed? Do you need all those extra features you are paying for? Could you do without those extra lines? Would another phone plan save you money on long distance or international calls? Many telecommunication companies will often bargain with you or offer you a new deal just for checking in with them.
This gives you ten places to look to cut costs and correspondingly increase profits for 2021. If you need help reviewing your income statement, please reach out.
Qualifying small businesses can now apply for Paycheck Protection Program (PPP) loans through certain lenders. The Small Business Administration (SBA) reopened its PPP portal on January 11, 2021 after Congress passed and the President signed legislation in December 2020, authorizing the continuation of the program and an additional $284 billion in funds.
The program allows for two types of applications:
- First Draw Loans to qualifying entities that did not receive a PPP loan in 2020, and
- Second Draw Loans for previous PPP loan recipients and with a narrower set of qualifications.
First Draw PPP Loans for First-Time Borrowers
Borrowers that qualify for first-draw PPP loans can apply for up to 2.5 times their average monthly payroll costs (with caps), for a maximum loan amount of $10 million. Generally speaking, the applicants must have been in operation on February 15, 2020 and be among the following types of businesses:
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
- Sole proprietors, some self-employed individuals, and independent contractors
- Nonprofits, including churches
- Sec. 501(c)(6) businesses
- Food or lodging operations with NAICS codes that start with 72 and with fewer than 500 employees per location
- Certain news operations with qualifying NAICS codes in the 51 range
A number of entities are specifically prohibited from receiving loans.
The SBA application for First Draw Loans is here:
https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form
The applicant must attest to the necessity of the loan, among several other declarations.
Second Draw PPP Loans for Borrowers That Received a PPP Loan in 2020
Borrowers that qualify for a second-draw PPP loan can apply for up to 2.5* times their average monthly payroll costs (with caps), for a maximum loan amount of $2 million. Generally speaking, the applicants must qualify as follows:
- Employ no more than 300 employees
- Have spent all of their first PPP loan on eligible expenses
- Do not have to apply for forgiveness for the first loan ahead of receiving the second loan
- Can show a 25 percent drop in gross receipts in any one 2020 calendar quarter from 2019. If it’s easier to show a 25 percent drop for the entire 2020 year compared to 2019, applicants can submit their tax returns as proof.
*Companies with NAICS code 72, which generally speaking are food and lodging operations, can borrow up to 3.5 times their average monthly payroll costs (with caps).
The SBA application for Second Draw Loans is here:
https://www.sba.gov/document/sba-form-2483-sd-ppp-second-draw-borrower-application-form
The applicant must attest to the necessity of the loan, among multiple other certifications and declarations.
Loan Forgiveness
PPP loan recipients can apply to have PPP loans forgiven if the funds are used within a specified covered period from 8 to 24 weeks on the following eligible costs: payroll (60 percent of funds), rent, covered worker protection and facility modification expenditures, covered property damage costs, certain supplier costs, accounting (!) expenses, and a handful of other qualifying expenses.
Timing
The SBA portal opened Monday, January 11, 2021 for first-draw loans by lenders (about 10 percent) that cater to underserved communities. These include Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs) and Microloan Intermediaries.
On Wednesday, January 13, 2021, the SBA application portal began accepting applications for Second Draw loans. A few days later, additional lenders will be added to the portals.
SBA says it “plans to dedicate specific times to process and assist the smallest PPP lenders with loan applications from eligible small businesses.”
What to Do Next
Here are some suggested steps to get ready for this next round of PPP funds.
- Determine which lender you want to use to apply for PPP funds.
- Visit your lender website to see if they have a PPP notification signup so you can get notified of updates.
- Collect the documents you need for the application.
a. Payroll summary reports
b. Profit and loss statements
c. Tax returns - Begin calculating the amounts you’ll need for the application:
a. Gross receipts by quarter for 2020 and 2019
b. Average monthly payroll costs, including cap limits for wages over $100,000, for the year you want to use (2020, 2019, or the year from the application date) - Contact us if you need help with documentation or calculation or other advice.
- Contact your tax preparer about tax ramifications.
- Contact your attorney to evaluate the loan agreement.
Further PPP Resources
Updated PPP Lender forms, guidance, and resources are available at www.sba.gov/ppp.
CARES Act Treasury page: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses
Jan 6, 2021 SBA PPP Interim Final Rule – 82 pages
https://home.treasury.gov/system/files/136/PPP-IFR-Paycheck-Protection-Program-as-Amended-by-Economic-Aid-Act.pdf
Jan 6, 2021 SBA PPP Second Draw Interim Final Rule – 42 pages
https://home.treasury.gov/system/files/136/PPP-IFR-Second-Draw-Loans.pdf
Sign up for our FREE newsletter
Tips & Tricks in QuickBooks®
