Accounting and Tax Planning

Amid the Pandemic, It’s Often Hard to See the Forest for the Trees

Review, Refocus, and Reset

By Julie Quink, CPA, CFE

Julie Quink

Julie Quink

This year has been riddled with a series of unexpected and unanticipated events for business owners and organizations, the height of which continues to be the pandemic and its continued significant impact.

With the uptick in positive cases continuing, business owners and management continue to face difficult business decisions and worries surrounding the financial and safety impacts of the COVID-19 coronavirus. With much on their minds running a business day to day, it becomes difficult for business owners, management, and even accounting professionals to ‘see the forest for the trees,’ as they say, and, as a result, they often set aside the opportunity to plan.

Using the lessons learned in 2020, there is no better time to review, refocus, and reset.

Review

Countless impacts, some quantifiable and some undocumented or unknown, exist within organizations resulting from the events thus far in 2020. Among them:

• An unprecedented amount of fraud has occurred, impacting unemployment claims, accounting systems, and data breaches, to name a few areas of concern;

• Key accounting standards that were intended to be implemented in 2019 and 2020, including the lease-accounting and revenue-recognition standards, were deferred by the standard setters to ease the strain on companies in this high-pressure economic atmosphere;

• Significant stimulus funds have been made available to the business community through the Coronavirus Aid, Relief and Economic Security (CARES) Act, including the Paycheck Protection Program, the Provider Relief Fund for hospitals and healthcare providers, and the Economic Injury Disaster Loan Program;

• Businesses that have been severely impacted by the pandemic may qualify for the Credit for Sick and Family Leave and the Employee Retention Credits;

• Remote working has become the norm out of necessity rather than convenience as businesses try to keep employees safe, while maintaining the desired level of production;

• Not-for-profit organizations are feeling the pinch of decreased donation levels at a time when their services are needed the most; and

• Interruption of business globally due to the closure of various countries, limited travel, and availability of resources has contributed to the economic challenges for businesses.

Typically, reviewing the results and events of a previous year or period is instrumental in planning for an upcoming year. For many organizations, pivoting and reframing have partially replaced planning in 2020, sometimes just to survive.

Refocus

If there is any bright spot in the current environment, it is the ability to step back and refocus. Bringing the lessons learned from 2020 thus far into clear view, organizations can’t necessarily do what they have always done and survive. Some key areas that may need a refocus include:

• Technology and security of accounting systems and sensitive data;

• The review and planning for changing accounting standards. We know there is potential for new standards or revisions of existing standards to assist in evaluating the impacts of the pandemic on financial reporting. In addition, the timeline for implementation of standards that have already been deferred may be moved even further down the road.

• The use of PPP and other stimulus funds, including employer credits, requires additional consideration from a financial-reporting and a tax-compliance perspective. Will additional stimulus funds be made available in 2021?

• Long-term remote working may encourage the movement from traditional brick-and-mortar locations going forward.

• Fundraising efforts of not-for-profit organizations may need to continue to shift and adapt to our current virtual environment, with gathering restrictions for physical events still in place. The balance of budgeting between mission and funding will seemingly continue for the next few years. Will this spur mergers of not-for-profits to allow for continued mission?

• A shift of international business perspective, including supply chain, will need to continue to occur, perhaps to source more products and services locally.

A common thread weaved in among the suggested areas of refocus is the impact they have on the financial health and well-being of an organization. Taking the time to strategize and refocus in key areas opens new opportunities to shift and reset. With many demands on business owners and management to manage day-to-day operations, this process can be easily lost but remains critical.

Reset

The resetting process is the opportunity to remove the 2020 eyeglasses and pick up a prescription with new, improved lenses for 2021. This ‘new normal’ that organizations are facing encourages outside-the-box thinking, as the original box may not exist anymore or may look entirely different than before. Resetting may continue to be critical to an organization’s success and survival. Resetting in some key areas will help the organization be agile and adaptable to change.

It is clear that business owners and management may not be able to embark on the resetting process all on their own. The reliance on IT, accounting, legal counsel, investment advisors, and business consultants, included in an organization’s team of professionals, will become increasingly important. These spokes in your professional team’s wheel are critical to maneuver through the upcoming year.

Traditionally, strategic planning has encompassed perhaps a three, five-, and 10-year plan. Internal planning — and planning externally with your accounting professionals — have moved to a shorter-term focus, including many transactional and situational planning opportunities, as a result of the continuously changing environment, additional stimulus-fund opportunities, and compliance requirements.

Business owners and management do not need to hold all the information necessary to reset and reframe, but they do need to know the appropriate people to whom they can reach out.

Takeaways

As business owners and management think about the year ahead using the 2020 rearview mirror, one thing is for sure: they should have their team of professionals on speed dial.

If they do not have the right professionals in place, now is the time to make changes. The guidance provided by the spokes on the professional wheel should not be underestimated because one thing is clear: no one of us has all the answers to navigate the new normal, but collectively the team can help provide the input needed to move the organization to the next levels.

Remember: review, refocus, and reset.

Julie Quink, CPA, CFE is the managing principal of West Springfield-based Burkhart, Pizzanelli, P.C., certified public accountants; (413) 781-5609.

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