Join us as we discuss the Current Status of the Coronavirus Crisis and it’s impact on dealers today and in the weeks and months to come. We will work through steps you should consider that you, not only survive, but thrive in these unusual times.

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As the COVID-19 pandemic progresses, manufacturing executives have been forced to consider the “new normal”. Businesses have faced notable change over the past year. Even for the many manufacturers that were considered “essential”, social distancing, mask use, and virtual meetings have replaced handshakes, trade shows, and face-to-face collaboration. As we face the one-year anniversary of COVID related changes, how will the pandemic continue to impact our operations?

Even without COVID, manufacturers should consider external forces that could affect their businesses; however, the pandemic has reemphasized the importance of this analysis. External forces are those that we cannot control, and their unpredictability can make them somewhat difficult to assess. As a result, some manufacturing executives choose to focus on areas they can control – pursuing new customers, adopting new technologies, or implementing lean processes, for instance. However, by analyzing and reacting to our external forces, we can look for ways to mitigate their impact or capitalize on them to strengthen our businesses. For example:

• Several hurricanes (or external forces we cannot control) that have affected the Gulf of Mexico area have impacted the supply and cost of certain plastic resins. To mitigate this risk, some plastic processors choose to increase their raw material inventories during peak hurricane season or dual-source these materials with suppliers in different geographies.
• The rise in dietary restrictions (an external force we cannot control) has increased the demand for certain products. Many food manufacturers have added gluten-free or dairy-free products to their offerings to satisfy those with such restrictions.
• The rapid pace of technological change (an external force we cannot control) has affected many manufacturers. By adopting additive manufacturing technologies, manufacturers can provide rapid prototypes more quickly than they can with their traditional processes.

You likely have evaluated how the pandemic has and will continue to affect your business. In addition to this key impact, consider three additional areas of external forces:

1. Customers.



Customers are a key external force: we cannot control them, but they are critical to our success. We take action to mitigate against risks, such as developing relationships with key decision-makers, but those actions may not always help us retain or grow that customers’ business, like when that decision-maker changes.

In addition, the pandemic may have changed your customers; perhaps, you manufacture a new product after entering the personal protective equipment (PPE) market, or you have lost customers who were not able to weather the economic strain of the pandemic. As you evaluate your customers, ask yourself:

• Why do your customers buy from you?
• What value do you bring to them?
• What new technologies, innovations, or trends are your customers seeing, and how can you help them? For instance, manufacturers who supply the residential construction market may consider curb appeal trends, while those supplying retail stores may consider needs for social distancing.
2. Competition.



Like your customers, your competitors are also a key external force on your business. You cannot control your competitor’s actions, but they can have a significant effect on you. You likely are already monitoring your competition. What actions can you take to ensure you remain competitive or to increase your competitiveness with these businesses? For instance:

• Who are your competitors?
• Are new competitors entering your market?
• Why do you lose business to your competitors?
• Are they offering different value to your customers?
• Should you look for ways to improve the value that you offer?
3. Other External Forces.



A popular tool for analyzing the external environment is called “PESTLE” (or PESTEL), an acronym of six key forces in an external environment: Political, Economic, Sociocultural,Technological, Legal, and Environmental.

Consider each area:
• Political: How can politics affect your business? We anticipate President Biden’s administration could invoke policy or tax changes. How can these changes affect your business?
• Economic: The COVID-19 pandemic has already impacted our economy, resulting in low-interest rates, threats to economic growth, and low levels of disposable income.
When economic fluctuations occur, how does your business react?
• Sociocultural: Do changes in the population growth rate, demographic, income distribution, or lifestyle behaviors affect your business or the products your business manufactures?
• Technological: This assessment focuses on how technology may affect your business. For instance, manufacturers may consider how automation could improve their efficiencies or how adding a different technology can support the value they bring to customers.
• Legal: How do specific laws affect your business? For instance, if you are exporting to a new country, what laws will you need to follow? If you are entering a new product line, what regulations should you consider?
• Environmental: A business’s impact on the environment can affect practices including corporate social responsibility. How do your company’s actions affect the environment? In addition, could other ecological forces, such as weather or climate, affect your business?

For support evaluating the impact of COVID-19 and other external forces on your business, contact a member of HBK Manufacturing Solutions, a team of professionals dedicated to supporting manufacturing clients and their unique needs. Team members can be reached by calling 330-758-8613 or emailing manufacturing@hbkcpa.com.

Join Dealership Solutions as Tim Parsons presents The ABC’s of Training.

• How to conduct effective training

• Tips for training millennials

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The recently enacted Covid-19 relief package titled “Consolidated Appropriations Act, 2021” has extended the Federal Energy Tax Credit (Section 45L) through December 31, 2021, and made the Energy Efficient Commercial Building Deduction (Section 179D) permanent. While both tax incentives offer significant value and the qualification process is simple, they are often overlooked by developers and homebuilders. Section 45L Section 45L is a tax credit of up to $2,000 for each new or rehabilitated energy-efficient dwelling unit that is first leased or sold by the end of 2021. If you qualified for the credit but did not take advantage of it in previous years, your tax returns can be amended for up to three past years—2017, 2018 and 2019—to get you the credits you are entitled to. Qualifying dwellings include newly constructed or rehabbed single-family homes, low-rise apartments, and other complexes of three stories or less, including condominiums, townhouses, senior living facilities, and student housing. The projected annual heating and cooling cost of the dwelling or residential unit must be at least 50% below the annual energy consumption level based on 2006 standards. Most new developments today exceed these standards simply through energy-efficient features, such as high-R value insulation and roofing, windows, doors, and/or HVAC systems. To capitalize on the 45L credits, you must engage a licensed professional to certify energy improvement standards have been met. The cost of certification is typically much less than the financial rewards gained from the tax credit. For example, consider a three-story apartment complex with 60 qualifying units that were fully leased or sold in 2020:

• Tax credit = $2,000/unit x 60 units = $120,000
• Project Certification Fees (estimated) = $400/unit x 60 units = $24,000
• Net benefit of the 45L credits = $96,000

Section 179D The 179D Energy Efficient Commercial Building Deduction of a maximum of $1.80 per sq. ft. per qualifying property is available to those who have built or renovated properties they own with energy-efficient commercial building property (EECBP). EECBP includes interior lighting, materials used on the building structure, and mechanical systems. The 179D deduction is also available to those who have designed or built government-owned buildings, such as engineers, architects, and contractors. In certain situations more than one of the companies designing and building a property will qualify for the credit, so it is important to address the issue up front in the building contracts. Both the Section 45L and 179D tax incentives have been available for years, but few developers and builders who qualify take advantage of them. If you think you might qualify for either one, call your tax advisor. It could mean a significant financial benefit to you and your company.

This webinar will assist you in creating an organizational culture, increase employee engagement, and raise productivity. Our leadership development program will challenge and enhance your leadership skills, attitudes and outlook. Featuring Dealership Solutions Manager and training expert Tim Parsons.

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The Consolidated Appropriations Act, 2021 includes several changes to the CARES Act’s Paycheck Protection Program (PPP) loan forgiveness process. The changes are reflected in new forgiveness applications issued January 19 by the Small Business Administration (SBA). The two applications can be found at: Standard Application: https://home.treasury.gov/system/files/136/PPP–Loan-Forgiveness-Application-and-Instructions–Form-3508-1192021.pdf EZ Application: https://home.treasury.gov/system/files/136/PPP–Loan-Forgiveness-Application-Instructions–Form3508EZ-1192021.pdf Criteria for using the standard application versus the EZ application remain the same. Key changes to the applications include:

• Checkboxes were added to select whether the forgiveness application is for the first draw or second draw loan.
• The Economic Industry Disaster Loan (EIDL) Advance Amount and EIDL Application Number fields were removed. Per the Act, the EIDL Advance no longer reduces the amount of PPP forgiveness.
• Lines were added to report new nonpayroll costs: covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures.

On the standard application, the safe harbors for the FTE Reduction (Safe Harbor #2, Step 4), and Salary/Hour Wage Reduction (Step 2c) were updated so that borrowers who received a loan before December 27, 2020 (the date the Consolidated Appropriations Act was passed) have until December 31, 2020, to eliminate any reduction to their forgiveness amount, while those receiving a loan after December 27, 2020, have until the last day of their covered period to take this action. In addition, an updated 3508S application was released for borrowers who received loans of $150,000 or less: https://home.treasury.gov/system/files/136/PPP–Loan-Forgiveness-Application-Instructions–Form-3508S-1192021.pdf. Borrowers using the form are required to make two certifications: 1) confirm that they complied with the rules regarding the use of the funds, the proportion of funds used for payroll costs, and their calculations regarding forgiveness, and 2) that the information they are providing in the application is “true and correct.” Borrowers who received a PPP loan between $50,000 and $150,000 and borrowers of a loan of $50,000 or less who received, together with their affiliates, loans of $2 million or more are required to complete FTE and Salary/Wage Reduction tests that may reduce forgiveness. While the borrower is not required to submit this documentation, they are required to maintain it in order to provide it to the SBA upon request. Other Guidance

• An Interim Final Rule (IFR) on PPP Loan Forgiveness was issued in conjunction with these applications. The rule combines a number of previous IFRs and explains changes associated with the Consolidated Appropriations Act, 2021 and new forgiveness applications. A copy of the IFR can be found at https://home.treasury.gov/system/files/136/PPP–IFR–Loan-Forgiveness-Requirements-Loan-Review-Procedures-Amended-Economic-Aid-Act-1192021.pdf
• Borrowers of first draw PPP loans who received those loans before December 27, 2020, are also required to disclose if the U.S. President, Vice President, head of an Executive department as defined in 5 USC 101, or a member of Congress, or the spouse of any of these individuals directly or indirectly held a controlling interest in the borrowing entity at the time the PPP application was submitted to the lender. The SBA released a Disclosure of Certain Controlling Interest Form (Form 3508D) which can be found at https://home.treasury.gov/system/files/136/PPP–Borrowers-Disclosure-Certain-Controlling-Interests-1192021.pdf. Disclosures must be made by January 26, 2021.

For questions regarding your PPP loan and related forgiveness, contact your HBK Advisor.

HBK’s SBA Loan Specialist Amy Reynallt provides dealers an update on the PPP Loan Program. Watch now to learn more about the latest guidance on applications and qualifications.

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On December 27, 2020, the Consolidated Appropriations Act 2021 (CAA), also referred to as the Economic Aid Act or Omnibus Bill, was signed into law, providing new COVID 19 relief options for individuals and small businesses, including a second round of Paycheck Protection Program (PPP) loans and an extended and expanded Employee Retention Credit. Interested borrowers have been awaiting guidance, which the SBA and Department of the Treasury have begun to release. Join Amy Reynallt, MBA and Ben DiGirolamo, CPA, JD as they discuss the new guidance which includes:

• Interim Final Rules on the First and Second PPP Draws
• First Draw and Second Draw PPP Loan Applications
• Updates on the Employee Retention Credit

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Projecting the performance of the U.S. economy has always been a difficult task, even given a relatively constant and agreed-upon set of variables. This year the exercise is even more challenging considering the unprecedented nature of the economic environment. The specter of a new presidential administration, the shifting balance of power in Congress, and how leaders in different states across the country will react to spikes in cases of COVID-19 add to the uncertainty that most businesses have felt since we became aware of the pandemic.

Will additional relief spending be authorized in Washington? Will inflation be used as a means of reducing the $27 trillion national debt thereby driving up business costs? Will freezes on evictions be extended and what will happen to the residential and commercial real estate markets when they are lifted? While we can’t yet answer many of these questions, businesses can use the information we do have to prepare for the year ahead.

Through the end of November, the construction industry recovered 80 percent of the jobs lost during the first two months of the pandemic. However, many challenges remain. The Associated General Contractors of America (AGC) conducted several surveys of construction companies throughout the last year to gauge the impact of COVID-19 on contractor operations and they provide the information we can use to analyze where we have been and plan for where we could be headed.

Due to lockdowns, many contractors had to cut back on their planned spending and find ways to ensure positive cash flow. One of the first cuts was to unnecessary improvement projects, resulting in the cancelation of planned jobs. The number of AGC survey respondents reporting they had canceled scheduled jobs grew from 32 percent in the AGC’s June survey to 60 percent in August and 75 percent in October. Meanwhile, only 23 percent of the October respondents reported winning additional project bids compared to 21 percent in June. The trend is sure to result in diminished backlogs for contractors.

Historically, smaller contract backlogs have led to increased competition on new bids, driving down contract prices. Over prolonged periods of time, this economic trend puts a strain on contractor cash flows. To guard against diminishing cash flows, contractors should ensure they have reviewed their overhead costs and included changes in those costs in their estimating and bidding strategy. Additionally, forecasting cash flows over the next 12 to 18 months is essential to planning for any lean months throughout the coming year.

The shortage of new jobs and increased cancelations has not been the only problem facing the construction industry. Many firms are finding it difficult to find the resources they need to complete jobs. Shortages in both materials and equipment were up from 25 percent in June to 42 percent in October. Meanwhile, 35 percent of contractors experienced disruptions due to the scarcity of skilled workers and/or subcontractors. These trends are troubling because not only are material costs likely to increase, but project delays create issues with scheduling, which could impact multiple jobs as well as increase the likelihood of cost overruns and liquidated damages. Project management will be more important than ever to make certain that work is completed as efficiently as possible. Contractors should invest the time to ensure their project managers understand how individual jobs impact the company’s bottom line and how they can help strengthen the company through superior performance on their projects. Additionally, a review of a contractor’s past completed projects could uncover strengths and weaknesses in their project management team that will help with staffing decisions on future jobs.

One bright spot in the industry over the last year has been residential construction. Both new home construction and renovations have seen positive gains with bid prices up over 10 percent since the start of the pandemic. Alternatively, on the commercial front, there has been less demand for retail, office, and higher education construction, a trend that could be long lasting as many operators in these spaces are transforming the way they conduct their businesses.

What was a slow trend of declining demand for a brick-and-mortar presence in retail was accelerated by COVID-19 lockdowns and social distancing guidelines. As well, many businesses have found ways to reduce the need for office space by conducting both internal and external meetings online, and numerous universities have moved to a distance-learning model to minimize physical contact between faculty, staff, and students. Even after vaccines are available en masse, a rebound in brick-and-mortar projects is likely to be sluggish if present at all.

Contract backlogs have historically delayed the impact of economic downturns on construction companies by 12 to 18 months. As contractors work through their projects under contract at the start of a recession, they may appear to be insulated from the downturn. However, as that backlog shrinks and is replaced by jobs bid in the depressed economy, they are likely to experience diminished margins. Planning ahead in these scenarios is the key to a soft landing.

Many of these trends are geographically focused, as states with the strictest lockdown measures have seen the most severe impact on local businesses. Shifting populations could soften the effect of negative trends in the states that are seeing population increases such as Arizona, Florida, Idaho, Nevada, and Texas while exacerbating the negative impact in states like Illinois and New York which saw their populations decrease by half a percent between 2018 and 2019.

Nearly all businesses have been forced to adapt on the fly to an economy in the throes of the COVID-19 pandemic. Those that continue to be nimble and innovative will put themselves in the best position to weather any storms that come their way in 2021 and beyond.

The year 2020 might be behind us, but the pandemic rages on, as does the flurry of legislation aimed at providing relief for affected businesses, including and sometimes specifically for physician practices. As we embark on what hopefully proves a year characterized by a return to some degree of operations normalcy, consider these five keys to your 2021 financial performance:

1. Strong financial position. Through a combination of government relief funds and austerity measures, physician practices generally were able to survive 2020, rebounding in terms of patient counts and strengthening their balance sheets as the year came to an end. Now, maintaining a strong financial position will be key to having the flexibility to keep your practice on solid footing for the long-term. That will include staying abreast of any reimbursement changes, any new government relief programs, and prudent provider cash flow management.


2. Revenue cycle management. At the beginning of December 2020, the Centers for Medicare and Medicaid Services (CMS) cut the CY 2021 PFS conversion factor by over 10 percent and provided significant changes in reimbursements to E&M visit codes and telemedicine services, to name a couple. Then with the passage of the Consolidated Appropriations Act (CAA) on December 27, the conversion factor was increased 3.75 percent, sequestration was suspended through March 31, 2021, the Geographic Practice Cost Index floor was reinstated through CY 2023, and implementation of the complex add-on E&M service code was delayed until CY 2024. Given the flutter of substantial changes in such a short period of time, now may be a good time to conduct a full coding review of your practice. Such a review is a good starting point for heightening your attention to detail with emphasis on your RCM operations and ensuring your coding, billing, and collection processes result in efficient and maximum reimbursement.


3. PPP: rounds one and two. Practices that received the Paycheck Protection Program (PPP) loans in 2020 and have not yet applied for loan forgiveness should work with their financial institutions to do so as soon as possible. Filing should be less cumbersome now as the thresholds for qualifying for the simplified forgiveness process have been raised to loans of up to $150,000. Most notably with the passage of the CAA, expenses incurred on forgiven amounts are now tax-deductible—with no basis consequences to shareholders or partners.
   
   To qualify for a second round Payment Protection Program loan, you have to have received and used—or will use—the funds from a first-round loan. As well, the business must have no more than 300 employees, down from 500 for the first round, and have gross receipts in any 2020 quarter of at least 25 percent less than the corresponding 2019 quarter. We still await potential further guidance on how funds received from other programs, like the Health and Human Services Provider Relief Fund, will affect your ability to qualify for a second PPP loan, but we are advising practices that may have suffered a 25 percent decrease in receipts in a 2020 quarter to reach out to your professional advisor for guidance.


4. Reporting requirements around HHS Provider Relief Funds. During 2020, most providers received an HHS Provider Relief Fund (PRF) payment through one or more of the agency’s General Distribution phases. Now, practices are required to submit a report on how those funds were used. Practices will need to substantiate how the PRF they received covered increased expenditures attributable to the coronavirus and related lost revenues during 2020. If a practice received a payment, or combined payments, in excess of $10,000, the practice must submit the initial report covering the 2020 year through the HHS portal between January 15 and February 15, 2021. Note that the funds are considered taxable income. Providers receiving the funds will be issued 1099-MISC for 2020, and a single audit will be required for providers who received more than $750,000.


5. Professional relationships. Practice leaders and administrators relied heavily on their professional advisors in 2020. You will continue to need the counsel of your financial advisors, lawyers, bankers, and others as we make our way through 2021. It is especially important that practices form and secure their relationships with advisors who have deep expertise in serving physician practices and who work with multiple practices and practice specialties and understand the complex needs of each..

We invite you to call us with your questions and concerns at 239-482-5522. Or email us at mdeluca@hbkcpa.com or jzarlenga@hbkcpa.com. HBK Healthcare Solutions is a dedicated team of healthcare provider subject matter experts within HBK CPAs & Consultants. Among more than 800 clients in the healthcare and social assistance businesses, we serve more than 300 private physician and dental practices. Our unique depth and breadth of experience in medical verticals manifests itself in a full complement of compliance and consulting services, a holistic financial solution.