Implications for Tax-Exempt Organizations :CARES ACT

The Coronavirus Aid, Relief, and Economic Security (CARES) Act (HR 748) was signed into law on Friday, March 27, 2020, and includes both tax and nontax measures. An overview of the act’s key provisions for tax-exempt organizations follows.

Please read our additional alerts for overviews of the act’s implications for business and individual taxpayers. 

Tax-Exempt Organizations Filing Form 990-T

Net Operating Losses

The act restores the five-year net operating loss (NOL) carryback for losses arising in any taxable year beginning after 2017, but before 2021.

This could be beneficial if your organization generated unrelated business taxable income (UBTI) in years preceding the year of generating an NOL. It could also be an opportunity to file a carryback claim for refunds. A taxpayer can also elect to forgo the carryback.

Special rules are provided for taxpayers that had a transition tax obligation under Section 965 in one of the carryback years.

Impact of Reporting Unrelated Activities

It’s not yet clear in the guidance if the tax reform law passed in 2017, commonly referred to as the Tax Cuts and Jobs Act (TCJA), of reporting unrelated activities separately could impact the carryback of certain activity losses to pretax reform years.

Carry-Forward Limit Suspension

Since the enactment of the TCJA, NOLs carried forward are limited to 80% of taxable income for the tax year. The CARES Act suspends this rule until the taxpayer’s first taxable year beginning after 2020.

This means 100% of UBTI for the tax year can be offset with an available NOL within the same unrelated activity.

Increased Limitation on Charitable Contributions for 2020

The act increases the limitation on a corporation’s deduction of charitable contributions from 10% of taxable income to 25% for 2020. The excess is carried over for five years. Eligible charitable contributions must be made in cash during 2020 and can’t be made to a Section 509(a)(3) supporting organization or donor-advised fund.

In addition, the limitation on donated food inventory during 2020 has increased from 15% of taxable income to 25%.

Employee Benefits and Employer Payroll Tax Relief

Payment of Employer Payroll Taxes Deferred

Employers can defer payment for the employer portion of payroll taxes incurred between the date the CARES Act is enacted through December 31, 2020.

If deferred, the employer would instead pay 50% of this amount by December 31, 2021, and the remaining 50% by December 31, 2022. The eligible payroll taxes are the employer’s portion of Social Security taxes—6.2% of an employee’s wages.

Employers that have indebtedness forgiven under Section 1106 of the act with respect to a loan under the Paycheck Protection Program—Section 1102 of the act—aren’t eligible.

Employee Retention Credit for Employers

Eligible employers may claim a credit against Social Security taxes, for each qualifying calendar quarter, equal to 50% of qualified wages, up to $10,000 of all quarters, per employee. If the credit for the quarter exceeds the employer’s Social Security tax liability, the excess is refunded.

Eligible employers operating a business during 2020 must have experienced either:

  • A partial or full suspension of the operation of their trade or business during the calendar quarter due to governmental orders that limited commerce, travel, or group meetings due to COVID-19
  • A significant decline in gross receipts from 2019

A significant decline is defined as beginning during the quarter in which the gross receipts for the quarter were less than 50% of those in the same quarter in the prior calendar year. The decline ends with the quarter in which gross receipts are greater than 80% of the gross receipts for the same quarter in the prior calendar year. 

In the case of an organization which is described in Section 501(c) of the Internal Revenue Code and exempt from tax under Section 501(a), the significant decline beginning and ending periods above apply to all operations. All operations isn’t defined within the act, so further guidance will be needed.

Eligibility by Employee Population Size

For employers with under 100 employees, the credit applies to qualified wages paid to all employees. For employers with more than 100 employees, eligible wages are those paid to employees who aren’t providing services due to circumstances described above.

Exclusions

This credit doesn’t apply to governmental employers including:

  • The US federal government
  • State governments or their political subdivisions
  • Any agency or instrumentality of any of the aforementioned

As a result, this excludes the following organizations from benefiting from the credit:

  • State colleges and universities
  • Public district hospitals
  • Municipal utilities
  • Federally chartered credit unions

Employers that take advantage of the payroll protection loan program—Section 1102 of the act—aren’t eligible. Also, qualified wages don’t include amounts paid for the sick leave credit or The Family and Medical Leave Act (FMLA) credit enacted by HR 6201.

Loans Available for Not-for-Profits

The CARES Act identifies a number of loan options available to not-for-profits. You can also reference this chart from the National Council of Nonprofits.

Paycheck Protection Program

The following organizations are eligible for government-guaranteed loans administered by the Small Business Administration (SBA):

  • Private colleges
  • Section 501(c)(3) organizations exempt from tax under Section 501(a)
  • Section 501(c)(19) veterans organizations
  • Tribal businesses

In some cases, number of employees is limited to less than 500 employees to be eligible. It’s not currently clear whether or not student employees in a higher education institution currently count as employees for purposes of this loan program. This could put the loan program out of reach for many institutions.

Allowable Uses of SBA Loan Proceeds

SBA loans can be used for:

  • Qualifying employee payroll costs
  • Paid vacation, and parental, family, sick, or medical leave
  • Insurance premiums
  • Mortgage and other interest
  • Rent
  • Utility payments
Required Substantiation

Borrowing organizations will be required to make a good faith certification that:

  • The loan is necessary due to the uncertainty of current economic conditions caused by COVID-19.
  • Loan funds will be used to retain staff and maintain payroll, lease, and utility payments.

Organizations will also need to show they aren’t receiving duplicative funds for the same uses from another SBA program.

Loan Timeframe and Exclusions

The covered loan period is from February 15, 2020, through June 30, 2020. Organizations receiving these won’t be eligible to also receive the employer retention payroll tax credit mentioned above nor will they be able to defer payroll taxes if they have taken advantage of loan forgiveness under the paycheck protection program. 

Loan Amounts and Interest Rates

The maximum loan amount will be $10 million through December 31, 2020. The act provides a formula by which the loan amount is tied to payroll costs incurred by the organization to determine the size of the loan. The maximum allowable interest rate on loans is 4%, and the maximum term is 10 years.

Loan Deferment and Forgiveness

Deferment of loan payments is allowed for at least six months, but not more than a year. The SBA is required to provide guidance to lenders on the deferment process within 30 days.

Borrowers may also be eligible for loan forgiveness for the first eight-week period after the origination date of the loan under certain circumstances.

Eligible payroll costs don’t include compensation above $100,000 in wages, compensation to employees whose principal place of residence is outside of the United States, or qualified sick and family leave for which a credit is allowed under the Families First Coronavirus Response Act.

Loan forgiveness under this program won’t be included in the borrower’s taxable income. For more information, see this guide on the US Senate Committee on Small Business & Entrepreneurship site and an article from the US Treasury.

Low Interest Loans for Mid-Size Organizations

Tax-exempt organizations with between 500 and 10,000 employees may have access to loans through the Federal Reserve. Interest rates for these loans won’t be higher than 2% per year and payments won’t be due for the first six months. 

This is a largely undefined program to be created by the Treasury Department to fill the gap between the Paycheck Protection Program for smaller organizations and the industry stabilization loans to big businesses.

Eligible borrowers must self-certify that:

  • The loan is necessary to support ongoing operations
  • 90% of its workforce will be retained until September 30, 2020
  • Jobs within the organization won’t be outsourced for two years following repayment of the loan

Economic Injury Disaster Relief Loan and Emergency Grants Program

Another program available for tax-exempt organizations is the Expanded Economic Injury Disaster Relief Loan (EIDL) and Emergency Grants Program or SBA 7(b) Loans. Please see our previous Alert for more information.

Student Loan Repayment Benefit

An employer may contribute up to $5,250 annually toward an employee’s student loans. These contributions would be excluded from the employee’s income.

The $5,250 cap applies to both:

  • The new student loan repayment benefit
  • Educational assistance such as tuition, fees, and books provided by the employer under current law

The provision applies to any student loan payments made by an employer on behalf of an employee after the date of enactment and before January 1, 2021.

Charitable Giving Incentives

Eligible individual taxpayers will be allowed an above-the-line deduction for taxable years beginning in 2020 in an amount not to exceed $300 of qualified charitable contributions made in cash during the taxable year.

This will allow individuals that elect not to itemize deductions to benefit from giving to qualified charitable organizations. Qualified charitable organizations don’t include organizations described in Section 509(a)(3) or the establishment of a new, or maintenance of an existing, donor-advised fund. 

The act also lifts the existing cap on annual cash contributions during 2020 for those who do itemize, raising it from 60% of adjusted gross income to 100%.

Corporations are allowed a deduction up to 25% of taxable income versus the lower 10% of taxable income for cash contributions during 2020.

Additional Provisions

Other notable provisions in the act related to tax-exempt organizations allow for:

  • Expanded unemployment benefits
  • COVID-19 relief funds for certain distressed businesses including air carriers, tribal governments, state governments, and units of local governments
  • Higher education funding and student aid support

We’re Here to Help

To learn more about how your organization can use the relief measures of the CARES Act, contact MCDA today.

Note on COVID-19

During this unparalleled time, we’re closely monitoring the COVID-19 situation as it evolves so we can provide up-to-date guidance and support to help you combat uncertainty. Contact MCDA representatives today for a no obligation free consultation.

Understanding the Paycheck Protection Program

As part of the CARES Act passed by Congress on March 26, the federal government is implementing many programs to help businesses. One such program is the Paycheck Protection Program (PPP), meant to incentivize business owners and decisionmakers to keep employees on their payrolls. Like many of the other loans authorized by the CARES Act, these loans will be disbursed through Small Business Administration (SBA) lenders. Here are a few of your questions about the Paycheck Protection Program, answered.

What is the Paycheck Protection Program?

The Paycheck Protection Program is intended to provide cash-flow assistance to businesses through federally guaranteed loans. The loans are disbursed to employers who maintain their payroll during the COVID-19 declared emergency. Employers who comply with payroll maintenance are eligible for loan forgiveness for certain expenses and 8 weeks of payroll forgiveness. Payroll forgiveness will be determined by employee retention rates and salary levels.

Unlike other loans provided by the SBA, the PPP loans are not subject to SBA fees. Payment can also be deferred for six to twelve months in an effort to ensure that businesses can make their other payments and keep their doors open in the wake of COVID-19.

Small businesses and other businesses, like nonprofits, can apply for the loans if they had economic injury as a result of the state of emergency. The dates of economic injury are between February 15, 2020 and June 30, 2020. The CARES Act also provides that the program be retroactive to February 15, 2020 to incentivize employers to bring laid off and furloughed employees back onto their payroll.

Who is eligible for the Program?

In order to be eligible for the Paycheck Protection Program, the business must have been in operation on February 15, 2020. This is a measure enacted by Congress to dissuade loan application fraud. In addition to being in operation on February 15, Congress and the SBA have given the following guidelines for who is eligible for the PPP:

  • Any of the following businesses with fewer than 500 employees or the applicable North American Industry Classification System (NAICS) standard provided by the SBA:
    • Small businesses
    • 501(c)(3) nonprofits
    • 501(c)(19) veterans organizations
    • Tribal business concerns
  • Independent contractors
  • Certain self-employed individuals
  • Any business that employs fewer than 500 employees per physical location with an NAICS code beginning with 72 will have their affiliation rules waived
  • Affiliation rules are also waived for businesses assigned a franchise identifier code by the SBA

How do you apply for the Paycheck Protection Program?

You can apply for a PPP loan through any of the SBA’s pre-approved 7(a) lenders. These include banks, credit unions and other financial institutions. The CARES Act also gives the SBA the resources to approve additional lenders to accommodate the influx of applicants. A list of SBA-approved 7(a) lenders can be found here.

To apply, you’ll need the following statements, reports and documentation:

  • Your 2019 IRS Quarterly 940, 941 or 944 payroll tax reports
  • The last twelve months of payroll reports beginning with your last payroll date
  • 2019 IRS Form 1099 for any independent contractors that would otherwise be your employee
  • Documentation showing total of all health insurance premiums paid by the company
  • Documents showing the sum of all company-paid retirement funding
  • Documentation showing employer contributions to 401K and IRA plans

What can I use my PPP funding for?

Funding disbursed from your Paycheck Protection Program loan can be used for any of the following:

  • Employee compensation, including:
    • Salary and wages
    • Commission, cash tips or the equivalent
    • Vacation time or Paid Time Off (PTO)
    • Family, medical or sick leave
  • Healthcare benefits and insurance premiums
  • Retirement benefits
  • State or local tax assessed on wage compensation
  • Interest payments on mortgage obligations, not including principal
  • Rent, including rent for a lease agreement
  • Utilities
  • Interest payments on other debts incurred before February 15, 2020

If the funding is used for anything other than a pre-approved expense dictated by the SBA and the CARES Act, the business owner will not be eligible for loan forgiveness.

Is the Paycheck Protection Program compatible with other CARES Act loans?

Your Paycheck Protection Program loan is compatible with other CARES Act loans and other loans you may have already had. Often, businesses that are eligible for the PPP are also eligible for other Economic Injury Disaster Loans (EIDLs) provided by the SBA. The SBA is allowing the disbursement of both to those that are approved, but the funding cannot be applied to the same expenses.

For example, say you are using your PPP loan disbursement for payroll and mortgage interest payments. Your EIDL could not also be used for payroll and mortgage interest payments. You would have to use the disbursement from your EIDL for another expense.

How do you get loan forgiveness from the Paycheck Protection Program?

You can apply for loan forgiveness through the lender you used to apply for the PPP loan. In order to apply for loan forgiveness, you must provide your lender with the following:

  • Documentation verifying the number of employees on your payroll. This document should include:
    • Each employee’s pay rate
    • IRS payroll tax filings
    • State income tax filings
    • Unemployment filings
  • Documentation verifying the payments you’ve made on mortgage interest, lease or rent payments and utilities payments.
  • Certification from an authorized representative of your company that states that the documentation you’ve provided is true. This document should also certify that any amount that is being forgiven was used in accordance with the SBA’s PPP guidelines.

The Paycheck Protection Program is one of many financial and economic stimulus options available to business owners. MCDA has representatives and CFO consultants standing-by to help your business secure funding through the stimulus options.

Working From Home…Beware of Scams!

Companies are continuing to make arrangements for employees to work from home, and others are fast tracking HR policies to meet the requirements of shelter-in-place orders by state officials.  These actions are making it an even higher risk for people being targeted by scammers, especially through phishing emails or through an unsecured network connection.

Employees transitioning from an office setting to a home office may find themselves more vulnerable to tech support scams.  With either limited IT resources or strained IT resources, employees may attempt to solve technical issues themselves when confronted with pop-ups and virus alerts.  I recently just read about a victim losing nearly $250 to a tech support scam. The report stated a pop-up window appeared when the user’s computer froze. The instructions on the pop-up window said to contact a company claiming to be affiliated with Apple. After following the directions, the consumer paid for what they thought would fix the problem and never heard from the tech support company again. Although this seems silly, under the stressful conditions and the fear of losing your job, employees are doing whatever it takes to keep operating as normal as possible, which may include them trying to fix a problem on their own to avoid, “getting in trouble.”

Another concern for employees transitioning to a work-from-home environment is Business Email Compromise (BEC) scams. BEC scammers impersonate emails that appear to come directly from the boss. These fraudulent emails are often used to request large payments to “vendors” via wire transfer. While this is a common scheme, scammers may change their approach and use current events as a way to convince the recipient to take action. Compromised business emails may be used to request payments for things such as reimbursements, bogus invoice payments, or office equipment.  You may have seen that this type of scam became a media sensation recently when Barbara Corcoran of Shark Tank was hit with a $400K loss.  She was one of the lucky ones, recovering almost all of her $400K loss.

Advertised work from home opportunities aren’t always what they seem, especially for people who have recently been furloughed or laid off.  Employment scams are ranked the top riskiest scam in both the 2018 and 2019 Scam Tracker Risk Report.  A common red flag to make note is the opportunity to work from home and what seems like a high hourly wage with minimal effort.  However, as more employers practice social distancing and require employees to work from home, differentiating between legitimate and fraudulent job opportunities will become more difficult.

While working from home and watching to see how the situation surrounding the COVID-19 outbreak develops, here are some tips from MCDA to avoid falling victim to scams:

  • Be aware of unusual procedures. Job offers without interviews are a red flag of employment scams, as well as employers that overpay and ask to wire back the difference. Take note of companies that promise opportunities or high income if you pay them for training.
  • Check official job postings. Scammers will often use emails, social media or online job boards to reach targets. They are also known to use actual company names, addresses and human resource contacts found on the internet. If a job posting seems too good to be true, go directly to the company website and check their career page directly. If a website is charging you for information about a job opening, it is probably a scam.
  • Set up work-from-home IT policies. When setting up remote employees, establish a plan to help them with technical problems they may face. Instruct them on who they should contact, and who to avoid, for tech support. A plan can protect employees, the business and your customers from having their personal and professional information compromised.
  • Maintain office billing policies at home. One of the best ways to combat business email compromise scams is to set a policy requiring employees to confirm payment requests in person or over the phone, rather than over email. If the employees that handle billing are working from home, have them maintain these policies by calling to confirm any payment requests made by email.
  • Review safety practices with employees. As employees are working remotely, remind them of the best practices to avoid scams. Practices such as avoiding clicking on pop-ups or links in unsolicited emails are encourage and if they aren’t sure of the origin of an email, have them contact a colleague or supervisor by phone. Make sure they know tech support professionals would never call them unless they had requested assistance first.

If you need assistance setting up a remote work policy please contact MCDA today for a free consultation. (714) 872-2393 or you can email directly to Mike@mcdaccginc.com

 

 

Do You Need To Apply for an SBA Disaster Loan?

Everyday more businesses are forced to close their doors to keep up with the ongoing health and safety standards and revenue is plummeting.  The government is working to provide economic relief to American businesses, and some of the relief solutions are already available.  The SBA (Small Business Administration) has extended their disaster loans to small businesses and private non-profits affected by COVID-19.

The loans are low interest and long-term.  The repayment plans go up to 30 years and the interest rates are 3.75% for a small business and 2.75% for nonprofits.  Disbursement from the loan is meant to pay for things like fixed debts, payroll, accounts payable and any other bills that your business cannot afford to pay because of a loss of revenue that can attributed to COVID-19.

To apply for a disaster loan from the SBA, here are a few things you’ll need to consider

Lenders at the SBA are looking for the “5 C’s”.

Capital

You will need some working capital to make a down payment on your disbursement. This assures lenders that you will also be making loan payments and handling your disbursement responsibly.

Credit

Often, the owner of the business’ credit history will be a factor in whether the business is accepted for a loan. Owners with solid credit scores and a history of paying off debt will attract lenders.

Capacity

No matter how long-term your repayment plan, you will have to illustrate an ability to pay off the loan eventually. The lender will generally take things like your annual revenue during a good year into account.

Collateral

You will need property to guarantee the loan. That is, you’ll need to have an asset that the lender can rely on for repayment in the event you default on your loan payments.

Character

The character of the business owner taking out the loan is also important to lenders. They will generally look at your past business experience to determine what kind of businessperson you are. For example, have previous enterprises of yours gone bankrupt? Have you been sued? Lenders will look at these factors and more when deciding on your character

The SBA’s decision is faster when your application is submitted online.

The SBA recommends that applications are submitted through their secure website for the quickest response times. However, paper applications can be mailed to the SBA. Because the SBA is a government entity, the paper application can also be dropped off at a local disaster recovery center.

Submitting your application online does not mean you are more likely to be approved for a loan. However, your application will enter the queue for review immediately after submission, so it does mean you are more likely to get a decision sooner. Those awaiting a response on a paper application will have to wait for the postal service. Keep in mind that postal delivery can be delayed several days by a disaster.

There is a deadline for each disaster.

The deadline for applying for a disaster loan for economic injury is 9 months after the day the emergency is declared. The SBA may elect to issue extensions, though. Any extensions or changes will be listed on the SBA’s website and we advise you to check the website regularly for updates.

There are required documents you’ll need to add to your application.

All required documentation included with your application needs to be complete and accurate. It also needs to be signed by each principal owning 20% or more of the business. These principal signatures need to be collected once each for any owner who has more than a 50% ownership in the business and any affiliate businesses.

The required documents include:

This form gives the IRS permission to provide the SBA with your tax return information.

  • Current financial statement
  • Current schedule of liabilities, including all fixed debts

The SBA does have a format they recommend for the schedule of liabilities on their website. However, the document can be filled out in whatever format you’d prefer to use.

  • A copy of your most recently filed federal income tax return
  • IRS Form 8821

This is a Tax Information Authorization Form, which gives authorized organizations permission to access your tax information. IRS Form 8821 only needs to be included with online applications.

This form is used by the SBA to analyze your ability to repay the loan. This is used to determine your character and creditworthiness.

Each of these forms needs to contain correct information and be signed and dated to ensure quick processing.

Applying for a disaster loan can be overwhelming. Consider hiring an outsourced accountant from MCDA to help you compile your records and ensure that your application is accurate. A professional accountant may mean the difference between rejection and acceptance of your SBA Disaster loan application.

MCDA will be running a discounted rate special for all of our professional accountants helping small businesses with SBA loan applications.  Call us today for a free consultation and to book your appointment.

 

Selecting The Right Accounting Software for Your Business

Let’s face it, we can all benefit from accounting software in our business. The shoebox full of receipts and closet full of other financial junk just isn’t going to get it done. The accounting software your business chooses is a very important choice.  It will record transactions, will estimate your income taxes, payroll taxes, can handle your purchasing and inventory, lets you know your bank account balance, and can give you the ability to pay your employees.

In addition, good accounting software allows you to send invoices and manage receivables, lets you see and analyze sales trends, and give you the ability to generate balance sheets and income statements.  All critical components to managing your business effectively.

There are plenty of options out there when it comes to accounting software for your business, but here are a few questions to ask yourself before you just grab something because its popular

Will we be using this in 3-5 years? – If you’re currently looking for an accounting solution, you might have kept your financial information in that shoebox or closet but hopefully at a minimum on a series of spreadsheets in the past. Now think about how often the spreadsheets went from a business solution, to a problem. It is easy to outgrow an accounting software, especially when your business is in its infant stages. Make sure the software you choose can grow with you and the cost of scaling services is manageable.  We offer a great list of software to get you started – Email us today!

Will it interface with other software your business uses?– Does your company already use a point of sale system, tax preparation software, or a CRM? The accounting software you choose should be able to interface with them, or better yet, the current software may have an accounting upgrade available.  The more you can roll into one piece of software the better.  Depending on your size of business you may want to explore an ERP system.

Will the software offer customized options for my industry? – Many software options, like Quickbooks for instance, are a one-size-fits-all solution. This isn’t a bad thing at all, but if your business is in a specialized market such as a restaurant or law firm, financial management software that is customized to the unique demands of your industry may be a better option.  When it comes to customized solutions beware that you aren’t dumping money into a customization that really isn’t needed.  Consultants and software companies are quick to convince you that you need it to make that extra buck.

How many users will you need? – Most accounting software solutions allow for a few logged in users at a time and charge to open up additional user profiles. The default may work for now, but as your business expands, you should be sure you can afford the cost of adding users. Do you have the ability to give your customers and clients access to things like 1099’s and invoices?

How easy is it to use? – You shouldn’t need to be one of the world’s greatest financial minds to be able to pull an accounts receivables report from your accounting software. Pay attention to the user interface and how it feels. Are you able to use the software on your mobile device?  Ask for software demo’s, a good software company will offer a demo and you should be able to play with it and make sure that you are comfortable.

How secure is the software? – What security measures do you need to already have in place to keep your data (and your customer’s data) secure? How is information backed up? Is there an option to use the software with cloud-based computing?  Data breaches are a daily occurrence, beware, and protect your business!

Does it leave an adequate audit trail? – Knowing the source of a transaction and being able to trace revenue is important in case your business is ever audited. On the other hand, the lack of an audit can look suspicious.  At MCDA we have been consulted for numerous forensic accounting audits and you would not believe how many businesses out there do not have an adequate audit trail.  Again, protect your business!

What kind of customer service and user support do the software publishers provide? – Inevitably, there will be a feature that doesn’t work properly, or there is something you will need to unlock – meaning you either need to become an expert yourself, or call one and have them provide support.  Another very important question to ask is if they outsource their customer support.  Some companies will outsource to a call center and they have to “escalate problems” creating a severe delay in providing you the support you need.

What is the total cost? – When you buy the base software package, are you buying everything your business needs, or will you need to pay for additional features?  Some base programs may be free, but if you find you’re having to add too many mission-critical features, there may be a solution available that is, overall, cheaper and more complete. Also, is it a subscription-based package?

There are a lot of questions that need to be answered to find the accounting software solution that best fits your business. Customized accounting software will pay off greatly with tighter control of your finances and the ability to do more with your financial information. MCDA may help you answer these questions and assess your accounting software needs to get the best solution for your money. Call us today for a free consultation!

 

HR6201 Leave Summary Effective April 2, 2020

Paid Family Leave

Effective April 2, 2020 FMLA provides workers with up to 12 weeks of job-protected leave when they can’t work—either onsite or remotely—because their minor (under age 18) son’s or daughter’s school or child care service is closed due to a public health emergency. The FMLA defines “son or daughter” as a biological, adopted or foster child; a stepchild; a legal ward; or a child of a person taking the place of a parent.

The first 10 days of leave can be unpaid. An employee can request to substitute accrued vacation, personal or sick leave during this time, but an employer may not require an employee. For the other 10 weeks, eligible workers must receive two-thirds of their regular rate of pay, which will be capped at $200 a day (and $10,000 total).

Paid Sick Leave

Effective April 2, 2020 many employers will have to provide up to 80 hours of paid-sick-leave benefits if an employee:

  1. Has been ordered by the government to quarantine or isolate because of COVID-19.
  2. Has been advised by a healthcare provider to self-quarantine because of COVID-19.
  3. Has symptoms of COVID-19 and is seeking a medical diagnosis.
  4. Is caring for someone who is subject to a government quarantine or isolation order or has been advised by a health care provider to quarantine or self-isolate.
  5. Needs to care for a son or daughter who’s school or child care service is closed due to COVID-19 precautions.
  6. Is experiencing substantially similar conditions as specified by the secretary of health and human services, in consultation with the secretaries of labor and treasury.

Paid sick leave must be paid at the employee’s regular rate of pay, or minimum wage, whichever is greater, for leave taken for reasons 1,2,3 above. Employees taking leave for reasons 4,5,6 may be compensated at two-thirds their regular rate of pay, or minimum wage, whichever is greater. Part-time employees are eligible to take the number of hours they would normally work during a two-week period. Employers cannot require an employee to use other paid leave before using the paid sick time provided in the new legislation.

Under the legislation, paid sick leave is limited to $511 a day (and $5,110 total) for a worker’s own care and $200 a day (and $2,000 total) when the employee is caring for someone else.

8 Key Skills of Effective Management

Reflect back and think about the best manager you’ve ever had; one that helped you develop your skill set, or inspired you to push through adversity, and genuinely impacted your life. In reality both inside and outside of the office.

Once you have been lucky enough to experience the benefits of a great manager, you know that being a manager is more than advancing your own career – it’s a great opportunity and even greater responsibility to empower your team to succeed and take on challenges.

Being an effective manager requires a unique skill set, and each of these skills cane learned and developed.  Whether you are a new manager or a seasoned professional, there is always room to continue straightening the abilities that will help you effectively lead a team.

Here are the 8 skills that are key to being a successful manager:

  1. Communicate Clearly
  2. Manage Your Team’s Time
  3. Facilitate Teamwork & Collaboration
  4. Delegate Tasks to Promote Development
  5. Solve Problems With Your Team
  6. Set Team Goals & Analyze Results
  7. Develop Your Emotional Intelligence
  8. Be Tactful in Your Transparency

 

A Detailed Look Into the 8 Key Management Skills

1. Communicate Clearly

Despite the many miracles of modern science, your team won’t be able to read your mind, no matter how hard they try. Knowing that, it’s up to you to create open lines of communication, for everything from project-specific items to personal well-being and career goals. Not only will this build trust with your employees, it allows them to thrive individually and boost their contributions to collective goals.

Make sure to schedule weekly team meetings and monthly one-on-ones, and regularly ask for feedback on how you’re doing in your role and how you can better support your team. And of course, always listen first. Communication is a two-way street, and when you communicate clearly with your team and show them that you value their input, they’ll do the same with you.

2. Manage Your Team’s Time

a person pouring water into a timer that has a plant growing out of it

Whatever your management style, time management is about more than work-back schedules and checklists. It’s providing adequate time to think through problems and execute solutions, while pushing back against unrealistic expectations from clients or project owners.

Yes, there will always be last-minute requests or urgent projects that don’t come with the luxury of time. In those situations, be sure you’re bringing your team on board right away to figure out how best to gather up the time that you do have.

3. Facilitate Teamwork and Collaboration

Accepting the fact that you can’t be hands-on with every project can be tough. Sure, you might be able to finish the task faster if you have more experience, but do you really need to be at every brainstorming session? As a manager, it’s your job to take a step back when it comes to completing tasks, and still making yourself available for buy-in and checkpoint meetings to approve project directions and ensure things are rolling out smoothly.

Knowing when you can or should be involved is just as important as knowing when you can’t or shouldn’t be involved — and making this distinction will help you avoid micromanaging. If you want your employees to learn to ride a bike, you have to take off the training wheels.

4. Delegate Tasks to Promote Development

Delegation is about more than dividing the workload — it’s another opportunity for you to continually help your team members learn, develop, and grow. To make teamwork, well, work, you need to be able to recognize the strengths and weaknesses of your employees. By understanding their abilities and considering their professional development goals, you can delegate tasks and structure team projects in a way that contributes to each employee’s evolution. It’s all about making the most of their individual skills, while also providing the opportunities to continue building on them.

5. Solve Problems With Your Team

Inevitably, you and your team will face challenges and difficulties. Being able to quickly analyze the situation and envision potential steps forward will drive your ability to make effective decisions. It’s important to adopt a forward-thinking mindset so you can begin to spot issues before they arise.

Solving problems independently can be necessary in a crisis, but it’s also essential to involve your team in the day-to-day process. Not only is it an opportunity for your team to talk openly about tough situations, but coaching them through different approaches to overcoming adversity will enable them to take the lead on future problems.

6. Set Team Goals and Analyze Results

As a manager, you’re sandwiched between your team and your superiors, acting as a go-between. You have to help your team turn the company goals into tasks, and then show your superiors how you team’s tasks led to results. By setting objectives and key results at the start of project planning, it will be easier for you to demonstrate your team’s success down the line.

As important as setting goals, is analyzing them. Measuring goals is of course a good first step, but then you should always consider their meaning. Why did your team succeed (or not)? What worked well that you can try again, and what new ideas do you want to test out next time? Schedule meetings with your team to go over outcomes and pinpoint learnings.

7. Develop Your Emotional Intelligence

Summer Perks for Employees – Two They Want and Two They Don’t

Employees often look forward to summer as the time to sort of slow down and schedule some of their hard earned time away from work.  Employers, however, still need to get the work done and summer’s dip in productivity can create a challenge.  Making the season work for both employee and employer can mean some compromise and communication.

Recruitment and retention of your employees starts with knowing what they want.  It’s very important to listen to learn what motivates them the most without sacrificing productivity.  It is also very important to know your market – most importantly what your competition is doing.

 

WHAT EMPLOYEES WANT

In a recent survey by a large staffing firm a staggering Fifty-two percent said flexible scheduling, followed by 27% who would love to be able to leave early on Fridays. Flexible schedules align with several company policies, with 54% of senior managers saying they offer the perk, but just 32% of companies offer summer Friday hours.

WHAT COMPANIES WANT

Instead, 53% of companies cited a relaxed summer dress code as a perk they provide, and 48% noted a company picnic or potluck—two perks that employees care least about. Just 11% of employees said a relaxed dress code during the summer was their top priority.  I think that is directly related to so many businesses already offering a very relaxed and casual dress code. And holding a company picnic or potluck was bottom on the list of desirable summer employee perks, with just 10% of employees saying this would make them happy. Employees want flexible schedules or reduced hours instead of an ice cream social.  Employees are looking for a break from work away, not a break from work with work people.

IMPLEMENTING SUMMER PERKS

If you decide to implement summer perks around schedules, sit down with different managers before you get too far into the season and set policies for the organization. Another option is to leave it up to each department depending on their needs.

Some companies mark the official start of summer as when the school year ends, while others create summer policies that run Memorial Day to Labor Day.

Flexible summer hours will depend on what your company does and if you have peak hours that need to be covered. One way to cover peak hours is by rotating schedules with certain people coming in later and staying later, and others coming in early and leaving early.

Letting employees leave early on Friday might be a bigger hurdle to pass in some organizations.

It doesn’t surprise me that managers put leaving early on Friday further down on the list because it could mean fewer hours of production. It’s also more of a change than some of the other summer perks that already exist in organizations. It’s easier to jump into something in existence, since it’s something that’s known and you have less adjustment.

Managers shouldn’t worry, though, as employees often compensate by increasing their focus, setting goals, and getting more work done in a shorter amount of time. Managers can also make it an ad hoc policy with parameters, such as certain tasks getting done or goals being hit.

Offering summer perks that workers actually want is smart business, as it can improve employee morale and make your company a more attractive place to work. These perks come at little cost to companies but often go a long way in keeping staff happy and engaged.

What Is A Brand Ambassador And How Can You Use One?

Consumers are tired of being marketed to, especially on social media. In fact, 74 percent of millennials and generation Z consumers don’t want to be targeted by ads in their newsfeed, according to Lithium. What’s more, 56 percent of these consumers are cutting back on social media as a result of advertising.

The answer? Brand ambassadors. Brand ambassadors are consumers who love your product or service, and share their love with your potential customers. They typically share their appreciation on social media or their blog, but brand ambassadors also work in-person giving out samples or speaking about products at events.

WHY USE BRAND AMBASSADORS?

These advocates humanize your brand and add authenticity to your marketing efforts.  Hootsuite also suggests that brand ambassadors can help drive traffic to your website, increase your brand presence in targeted regions, and provide positive word of mouth. The key is choosing the right brand ambassadors.

To figure out if you could benefit from a brand ambassador, first consider if your organization is ready for the broader reach and increased attention.

CONSIDER THESE FIVE FACTORS WHEN SELECTING BRAND AMBASSADORS

When choosing ambassadors, consider these important qualities:

  1. Passion: How passionate are they about your brand? Have they already been acting as ambassadors, sharing their love for your brand on their social media channels? Have they reached out on their own about working with you?
  2. Product use: Have they already purchased your products? Customers are the best place to start your search for ambassadors “Do you notice that some of your customers rave about you on social media without any prompting from you? They might be a natural brand ambassador that can carry your new product into spaces you couldn’t reach on your own.”
  3. Influence: How influential are they within your target demographic? You can determine this by looking at their follower count and calculating engagement rate per post.
  4. Authority: Do they have a trustworthy brand and provide accurate information and honest opinions? In a world filled with “fake news,” consumers are looking for brands they can trust.
  5. Creativity and authenticity: What does this person bring as an ambassador? Do they have unique ideas they’ll be applying? Do they come across as authentic in their interactions?

Also, consider how you’ll compensate the individual. Will you send them new products? Can they make requests? Is there a minimum number of posts they need to do each week or events they need to attend?

As you begin to look for ambassadors, consider the many ways you can use them to expand your reach and take your business to the next level.

Create Content for Social Media

One of the most common ways to work with brand ambassadors is social media posts. This type of agreement helps you generate user generated content.

Instead of using a stock photo or product image in your Instagram post, for example, you might repost an image from your brand ambassador. The value is two-fold:

  1. You save time and money by creating less content on your own.
  2. You can post natural, relatable images of your product in use, which helps humanize your brand and higlights the benefits of your product. 

Promote New Products

Build brand ambassadors into your product launch plans. Ambassadors can help drive initial sales, especially when they’re posting on social media. For example, ship new products to all ambassadors for an Instagram live unboxing paired with a discount code for their followers. Or, ask ambassadors to facilitate a giveaway with their audience using branded hashtags.

Or, invite event ambassadors to promote the new product at industry events. With free giveaways you can drive brand equity, authenticity and take advantage of face-time with potential customers. 

Write Authentic Blog Reviews

Collective bias found that 75 percent of consumers trust product endorsements by non-celebrity bloggers, which explains why the mommy blogger industry was one of the first to explode in online influencer marketing, with moms endorsing the products they love for their families and kids.

Brands can make use of this influencer marketing by selecting ambassadors who have built a large online following. These ambassadors can include your brand in “product roundups” or holiday gift guides, or refer to them in a variety of posts, as specified in your brand ambassador contract. In many cases, you end up with a mix of blog content and social media posts, expanding your reach exponentially.

Note that many influential bloggers charge for this work, so you may need to pay a one-time fee if the relationship is not on-going.

Target Specific Regions

If you want to target or expand into specific regions, look for local ambassadors to promote your brand. These ambassadors can provide support both online and offline, at events and on social media. In this case, you’ll still want to keep all the standard qualifications in mind, in addition to looking for people who have a strong influence within that specific region, not just online.

There are many ways to use brand ambassadors to promote your products and drive trust and brand equity for your business. Keep these ideas in mind as you determine how to best use brand ambassadors for your marketing efforts.

 

Has Your Small Business Stopped Growing?

Has your small business stopped growing? I might know why.

And more importantly, if it turns out the textbook answer I give is right, the answer suggests concrete steps you can take to restart your growth.

One caution up front though. We need to use a bit of math in the discussion that follows. However, don’t worry. We are not going into the weeds on this one. The following discussion is light reading.

Small Businesses Often Grow Linearly

To start, let me propose that small businesses grow “linearly.” Or we might also say “arithmetically.”

But all that means is, you and I gain customers or clients one at a time.

Further, this arithmetic growth makes sense.

If you think about just one common element of marketing your business—your sign—it may be that every week, a hundred people drive by your business and see your sign.

Then maybe ten of those people call you. And then a subset of those callers sign on and become your customers.

Over the course of a year, this linear or arithmetic growth means you grow your business by, say, 100 customers.

Probably most of the other growth in your small business works the same way.

Web traffic and web advertising grow your business one click at a time. Cold calls you or a salesperson makes grow your business one successful sales call at a time. Conferences and trade shows, well, you get the gist of this.

Small Businesses Shrink Exponentially

Now consider this: Probably you lose customers or clients at some percentage rate. Or we might say probably you lose customers or clients “exponentially.”

Note: You’ve heard of exponential growth. What we’re talking about here is exponential decay.

In other words, if you or I have 100 clients or customers, we might lose ten of these folks. But really, the best way to express that attrition, that “exponential decay,” is as a percentage like 10 percent attrition. Or 10 percent decay.

The percentage by the way reflects the reality that attrition connects to the size of the business.

A business with 100 customers might lose ten people, and that means 10% attrition or decay.

But a similar business with 1,000 customers doesn’t lose just ten people. Probably it too loses some percentage like 10%.

This is all pretty basic. No earth-shattering insight here. No mind-numbing math, thankfully.

All we’ve really talked about is gaining customers or clients at some rate that can expressed best as a steady arithmetic increment (like 100 new customers a year). And then also we’ve talked about losing customers or clients at a steady percentage rate like 10%.

Growth and Decay Eventually Balance

And now we get to the textbook reason some small businesses stop growing.

At the point where the linear growth balances out with the exponential decay, growth stops.

The precise formula? Your or my business stops growing at the point equal to the arithmetic growth divided by the decay rate:

Maximum Customers = Arithmetic Growth / Exponential Decay

With arithmetic growth of 10 clients or customers and an attrition or decay rate of 10 percent, for example, the maximum size of the business equals 100 clients or customers (calculated as 10/.1)

With arithmetic growth of 100 clients or customers and an attrition or decay rate of 10 percent, the maximum equals 1,000 clients or customers (calculated as 100/.1)

Calculating the Theoretical Maximum Revenue

By the way, if you can express your arithmetic growth in dollars, you can use this same formula to calculate the maximum revenue potential of your business.

If your business arithmetically grows by $125,000 a year and your attrition equals 8%, the maximum equals $1,000,000 of revenue (calculated as $125,000/.08).

Key Takeaways from the Calculus of Growth

I promised this blog post would be short and sweet. So let me just throw out a handful of final comments.

First, the clean math described in the preceding paragraphs simplifies stuff a lot. The reality will be more complicated.

Second, the formula described earlier suggests that our company growth will slow over time and even stop eventually. Why? Because if we just keep growing the same way: with signage X people see a day, a website that attracts Y visitors a week, a sales guy making Z sales calls every month, eventually growth and decay balance.

Third, you and I do have a way to continue growing—and that is to grow the way we grow. In other words, more signage, more website traffic, and more sales calls.

Other Resources You Might Find Interesting

If you are interested in other resources for growing your small business, contact us today!  Our experienced consultants and business development specialists can streamline a plan to grow your business.  We offer free consultations both online and in person!