Financial Moves You Can Make Now to Deal with COVID-19

Dear Valued Clients,
In an effort to share with our clients and community across 16 states, we’ve prepared this email to summarize our recommendation for you, as a practice owner and client of PracticeCFO. It’s important that you take the time to review this content so (1) you are aware of the various options available to help you through this period of financial hardship and (2) know how we are responding to help you.
Should I close my office? The ADA has now issued a bulletin recommending that dentists nationwide postpone elective procedures for the next three weeks. Other state Dental Associations, including California, have made similar recommendations.
How can I preserve cash in my practice: The following areas can help you preserve an adequate cash balance to get through this period of office closure and lower or negative profit:
1.      Bank Lending
       a.      Some banks are offering a Line of Credit (LOC). Though rates are generally higher than a standard loan, these lines may be helpful to add needed cash during your office closures. Lines of Credit work like a credit card – you typically only pay interest on the amount borrowed.
       b.      Additionally, the bill going through congress right now, pending Senate a and the President’s approval, may provide relief by providing support to banks to allow them to suspend loan payments and offer quick government backed loans. The bill may also offer government grants. We’ll know more soon. We’ve heard of one client already getting a 3-month deferral on her practice purchase loan.
       c.      In any event, ask your bank for a deferment on your loan payments and request that interest does not accrue. Some banks are doing a great job at lending a helping hand in a time of need.
2.      Payroll (Note: The following information is not legal or public health advice. Please consult your attorney regarding labor law issues and medical/dental boards for health guidance.)
       a.      Payroll is your largest expense. Your CFO Advisor (i.e. us) will be reviewing your cash balance, tax withholding, and 401(k) transfers. During this week, if we see an important planning opportunity, you’ll be receiving a personalized assessment from your CFO, along with their recommendations. Stay tuned for this important email. It’s likely that for many of you, we’ll temporarily be stopping all tax withholding's and possible 401(k) contributions. This will depend on the severity of your cash situation.
       b.      For California clients (with similar provisions likely in other state) the Employment Development Department (EDD) has the following options to help address your payroll costs:
                            i.     Disability Income. Infected workers can file a Disability Claim with the EDD. The one-week unpaid waiting period is waived right now, so your employees can collect DI benefits the first week they are out on disability. The EDD however will still require a few weeks after receiving the claim to process the first payment.
                           ii.     Caregiving: If your staff (or you) are unable to work because they are caring for an ill or quarantined family member with COVID-19 (certified by a medical professional), they can file a Paid Family Leave (PFL) claim.  PFL provides up to six weeks of benefit payments to eligible workers who have a full or partial loss of wages because they need time off work to care for a seriously ill family member. Benefit amounts are approximately 60-70 percent of wages (depending on income) and range from $50-$1,300 a week
                           iii.     Unemployment income (UI):
  • UI provides partial wage replacement benefit payments to workers who lose their job or have their hours reduced, through no fault of their own. Workers who are temporarily unemployed due to COVID-19 and expected to return to work with their employer within a few weeks. The one-week waiting period is also waived for UI income.
  • Your staff can claim UI if their child’s school is closed and they have no other resources for caregiving.
  • There is also a program called the Work Share Program in CA, which allows the employer to submit a UI claim for their staff as a group in one claim. Click here to learn more.
  • Keep in mind that UI is pulling from your UI account. The UI tax is paid by you, the employers, and ranges from 1.5% to 6.2% on the first $7,000 of wages. Most of our clients are around 3-4% and doing this may increase that up to 6.2%. However, it would be well worth it to help bridge this period of cash need.
                             iv.     Full details from the EDD are provided here. Also, a Q&A page is provided here.
3.      Reduce your personal spending, allowing for more cash to remain in your corporate checking account.
4.      Request a rent abatement from your landlord, letting them know that you’ve been essentially forced to close your office for a period of time. You might request two months of half rent.
When will I be meeting with my CFO Advisor (I.E. Wes, Justin, Greg, Paul, or Drew):
We have sent meeting invitations to schedule our next meeting and indeed have many scheduled over the next two months. We’ll continue to send meeting invitations to clients that are not scheduled. You can contact your CFO Advisor to schedule the meeting if necessary, but we’re attempting to reach out to you already. For the next two months, all meetings are being held virtually.
Are Insurers providing coverage for lost revenue?
Thanks to Caroline Epps with www.dentistsinsure.com, we’ve learned some important information on this subject. Generally speaking, claims for loss of business income are not triggered by a virus. In the “loss of business income” portion of the general liability/property coverage policy this is referring to perils such as fire, wind damage, lightning, theft, etc. The challenge here is that this is unprecedented, and that “virus” is not listed as a covered peril. If you used an insurance brokers, keep in mind they don’t have authority to make decisions if a claim is accepted or declined. A claims adjuster will need to determine if there is coverage or not and the insurance carriers are taking these claims on a case by case basis. Insurance carriers want the policyholders to contact them directly and speak with their claims department, and do not want these claims to go through brokers offices.
What is the government’s response to the financial market crisis?
The government is now panicking. That’s good. Markets tend to panic when the government isn’t, and then tend to calm when the government is. The Federal Reserve cut interest rates by a full percentage point yesterday and said it would buy $700 Billion in Treasuries. The Fed is determined to keep the financial markets functioning and lending flowing to businesses and consumers. There will likely be other efforts made that buoy confidence and encourage a quick economic recovery. Additionally, they are working on a bill that is current with the Senate for approval. See the next question below.
What’s included in the federal Coronavirus Relief Bill (HR 6201) and what’s its status?
In its current 110-page *draft* form, this proposed federal legislation includes provisions for two weeks of paid sick leave and up to three months of paid leave for workers affected by the virus, giving small and mid-sized businesses a tax credit to pay for the benefits. It also provides additional funding for state Medicaid programs, as well as free coronavirus testing for patients deemed in need of a test. Employers would receive a refundable tax credit for each calendar quarter. The credit is capped at $511 per day for sick employees and $200 per day for caregivers. However, the Senate is on recess and may not take up the bill until Tuesday. So, there is time for details to change. We’ll comment more as this bill gets closer to being signed, which the President has indicate he will do (we estimate this coming week).
An employee of mine just returned from domestic air travel…should I tell him/her to stay home? We recommend you consult with an employment attorney to be sure, but the CDC also has guidance in this area: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html. Because our clients are in the health field, we believe the doctor has a lot more latitude in requesting employees to stay home, but whatever policy you implement, it should be implemented consistently and fairly across employees.
PracticeCFO will continue to keep you posted on our guidance, both through general communication and personally. Stay tuned.
Wes Read, CEO
On behalf of the PracticeCFO team (https://www.practicecfo.com/about/).
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