COVID-19: Long Term Cash Flow Management Tips Term Cas… · Aaron Chaitovsky, CPA, CFE, Partner &...

COVID-19: Long Term Cash Flow Management Tips

franchise.org/coronavirus

Today’s Speakers

Aaron Chaitovsky, CPA, CFE, Partner & Co-Practice Leader, Franchise Accounting &Consulting Practice – Citrin Cooperman

Aaron Chaitovsky, CPA, CFE is the Founder and Co-Practice Leader of the firm’s franchiseaccounting and consulting practice, focusing on audit and consulting services for franchisors andmulti-unit franchisees. Mr. Chaitovsky has more than 35 years of experience in accounting andauditing and focuses his practice on a number of key niches, including franchising, manufacturing,restaurants, and professional service firms. His work with franchisors includes audits of financialstatements, implementation of revenue recognition in regard to ASC 606, international taxstructuring, expansion consulting, due diligence and acquisitions services, the structuring of royaltyaudit programs and advertising funds, and succession planning. Mr. Chaitovsky is actively involvedin the IFA and currently holds positions as a member of the board of the IFA, a member of the IFABudget and Finance Committee; Chair of the Supplier Forum Advisory Board Executive Committee;The IFA membership committee and the Task Force for Franchising in the Social Sector. Aaron’scommitment to the franchise industry is proven by his involvement in a special task force organizedby the IFA, and the FASB. Aaron is a frequent author and lecturer with regard to various franchisetopics.


Today’s Speakers

Alan G. Badey, CPA, CGMA, President and New York City Managing Partner – CitrinCooperman

Alan Badey serves as president of Citrin Cooperman where he focuses on driving the Firm toprovide an exceptional client service experience, building and sustaining a one-firm culture, andenhancing opportunities for all partners and staff. He is also managing partner of the Firm’s NewYork City office, a member of the Firm’s executive committee, and serves on the CEO’smanagement team. These core leadership roles provide Alan with the opportunity to have a directimpact on the overall firm mission and strategy. As a hands-on tax and business advisory partner,Alan works closely with business owners to employ best practice strategies with the goal ofimproving efficiencies and growing his clients’ businesses. His greatest strength is his ability tocommunicate and simplify complicated issues. He is known for his warm and personal style, whichcombined with his technical knowledge makes him a valuable member of any business advisoryteam. Throughout his over 25 year career, Alan has worked with private and family, closely-heldbusinesses in various industries, including healthcare, law firms, and manufacturing & distribution,among others. Regardless of industry, he is committed to learning about his clients’ businesses andlife in an effort to be able to provide actionable, realistic guidance. As part of helping his clientsgrow their businesses, Alan has an expertise in mergers and acquisitions consulting. Whether aclient is ready to acquire or sell, or is proactively planning ahead for an exit, Alan advises his clientson preparing their business, due diligence, deal structuring, and more.


Today’s Agenda

• Surviving and Then Thriving• Short Term Triage• Long Term Triage


Short Term Triage

• Stay close to your customers• Reduce or defer expenses• Communicate with your bankers• For individuals and businesses with a federal tax liability• There are many insurance considerations • Review all existing contracts


Short Term Triage

• Stay close to your customers• Consider offering additional discounts if payments of outstanding balances are

accelerated or paid immediately by wire or credit card.


Short Term Triage

• In order to reduce of defer expenses, consider...• Evaluating your payroll costs; consider “across the board” pay reductions or reduced work weeks, as opposed

to terminations and lay-offs

• Contacting your suppliers and vendors to request extended payment terms and/or reduced costs (i.e., utilities, freight, etc.)

• For all rent and lease contracts (office, automobiles, equipment), requesting deferral or reduction of upcoming lease payments

• Evaluating purchase commitments (inventory, capital expenditures, etc.) and consider requesting deferral or cancellation

• Analyzing current inventory levels; if there are excess levels request to return for cash refund or future credit

• Eliminating all non-essential spending (i.e., direct marketing)

• Contacting your credit card companies to obtain waiver of late payment penalty fees and reduction in interest rates


Short Term Triage

• Communicate with your bankers and consider... • Your ability to meet upcoming covenants; have waiver discussions early.• Refinancing or requesting extended repayment terms for outstanding debt.• Non-traditional lending options (i.e., factoring, equity- based lending, SBA,

asset-based lending) for new cash needs.• Drawing down on available lines, or extending the need to pay them down.• Requesting a short-term increase in the borrowing rates to assist with cash

flow requirements if your borrowing base is a function of accounts receivable and inventory levels.


Short Term Triage

• For individuals and businesses with a federal tax liability, consider...• Deferring up to (i) $1.0 million of personal income taxes due on April 15, 2020 on balances due for 2019

and 2020; and (ii) $10.0 million of corporate income taxes due on April 15, 2020 on balances due for 2019 and 2020

• Contacting the IRS to cancel automatic debits for tax payments scheduled for April 15, 2020 and paying balance due by July 15, 2020 with a check

• Adjusting 2020 estimated tax payments for individuals and businesses based on projected taxable income for the entire tax year

• Claiming payroll tax credit for business and self-employed individuals for paid leave for qualifying individuals

• Filing your Federal tax return earlier than July 15, 2020, the new deadline in light of the coronavirus outbreak, if you are owed a tax refund to get your money on a timely basis


Short Term Triage

• There are many insurance considerations...Businesses should proactively set up separate accounts in their internal accounting system and collect financial documents to support any losses related to COVID-19 expenses, such as:• Historical and current annual financial statements• Federal and state annual tax returns• Monthly profit and loss statements• Budgets, forecasts, or projections done prior to and after the event• Monthly bank statements• Inventory reports• Payroll records• Invoices and purchase orders• General ledger accounts established to account for any expenses related to the loss such

as additional payroll, shipping, temporary facilities, etc.• Documentation to support extra expenses including receipts, invoices, time sheets,

advertising costs, etc.


Short Term Triage

• Review all existing contracts to determine whether theycontain force majeure (literally, superior force) clauses• Look specifically for language relating to nonperformance resulting from

pandemics, viral outbreaks, medical epidemics, or acts of government. If aforce majeure provision is triggered, there may be formal requirement - makesure those requirements are complied with.


Long Term Triage

• Cash Forecasting (effective use of 13 week cash flows)• How long will my liquidity last me?• What is my cash runway for the next week, month or quarter?• How do I reforecast my cash burn rate?• Reforecasting in my budgeting tool (stress testing).

• Liquidity• Are my historical sources of liquidity still valid?• Can I re-negotiate the terms of my lines of credit?• Can I still access new lines of credit?• How can I access government funding?

• Compliance• What disclosures do I need in my financial statements due to COVID-19?• Who can help me review my major contracts (e.g., lease, vendors, etc.).


Long Term Triage

• Internal Controls•With our workforce working from home did you review your controls surrounding remote cash disbursement procedures.

• Stakeholder Confidence•Validating our plan with my stakeholders?•Being honest with the need to constantly monitor and change.


Long Term Triage

• Government Programs• What relief is available to individuals?• What relief is available to small businesses through the Small Business

Administration (SBA) and others?• Are there loan forgiveness packages available?

• Process• Where do I even start?• What do I need to apply for aid?• Who should I be asking for help (e.g., banks, insurers, accountants, etc.).


Long Term Triage

• HR Concerns• What is the optimal level of staffing I need to maintain my operations?• How do I best staff my organization (e.g., insource, outsource, loan staff, etc.)• When should I consider furloughs or layoffs?• How do I design these packages?• What about payroll tax relief?

• Workforce Enablement• How do I enable my team with Work From Home (WFH) technologies?• What are the risks of WFH technologies?• How do I ensure my employees understand what solutions are available to

them – and how to use them?


Long Term Triage

• Cybersecurity• How do I protect against cybersecurity threats?• What is most important for my workforce to understand as they

WFH, considering the heightened cyberattack environment?• Do I need resources for cyber training, cyber vulnerability

detection and protection programs?


Take Away Nuggets

• Short Term Triage• Can’t sit still, you must act now

• Long Term Triage• You are going to be around…many many years. Plan for

it.


About Citrin Cooperman


THANK YOU!

Aaron Chaitovsky, CPA, CFEPartner & Co-Practice Leader,

Franchise Accounting & Consulting Practice

Citrin CoopermanT: 646.695.7820

E:[email protected] Alan G. Badey, CPA, CGMAPresident & New York City Managing

PartnerCitrin CoopermanT: 347.505.6338

E: [email protected]

Find constant, real-time access to tax alerts, industry-specific communications, and recession preparedness tools you can use to

help with your business needs. Please visit our Recession Readiness Toolbox at

(www.citrincooperman.com/Recession-Readiness-Toolbox).

http://www.citrincooperman.com/Recession-Readiness-Toolbox

COVID-19: Long Term Cash Flow Management Tips Term Cas… · Aaron Chaitovsky, CPA, CFE, Partner &...

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