PPP Loan Explained

You’ve received the PPP Loan, what are you next business steps?

Congratulations on receiving your PPP Loan…

Now, what should you do?

I’d like to share a few Strategic/Financial Management ideas that I believe will help you to navigate through your financial challenges and move forward in this time of COVID-19.  

In this article, you’ll find the necessary steps business owners should take immediately to plan for the future. Throughout this article I’ll share my perspective- that of a CFO with 15 years of experience- on the current economic uncertainties facing most businesses across country.

Where we’ve just been

We’re all aware that the current Pandemic has created the equivalent of an economic earthquake and, as a result, the ground beneath us has shifted and is no longer stable- the aftershocks continue.

The Pandemic came crashing down on us in mid-March and, I expect, many of you have taken one or several of the following steps to take control of your business:


    • Taken out a PPP Loan and are working to take full advantage of its forgiveness feature; or taken an EIDL (Economic Injury Disaster Loan)
    • Reduced staff and cut expenses
    • Negotiated with vendors and landlords on payments and terms
    • Reviewed your major contracts
    • Requested Loan Forbearance from your bank
    • Collected or tried to collect account receivables
    • Explored submitting a business interruption claim –Viruses are almost always an exclusion – Stay connected with your Broker for Litigation updates  
    • Asked your Broker to review your “Insurance Coverage Limits”  
    • Stayed in close contact with your CPA for updates on the Cares Act’s continually changing rules
    • Monitored Governmental announcements on Safety and Employment Rules for compliance and a safe re-opening
    • Watched the news for travel rules and supply-chain impact

If you’ve completed these tasks, kudos are in order. Your head, like mine, may still be spinning but we carry on. 

Where we are now

As if the Pandemic wasn’t bad enough, we’ve had several more shocks to the system with political conflicts, social unrest, and global disputes, adding greater instability. Of course, if you’re in a business or organization that provides services to these various areas, then these might be high times, and your new challenge is merely keeping up with demand.  

So, what do we know about the future?  

  1. We know we do not know when this 2020 economic upheaval is going to end
  2. We know we do not know if the situation is going to worsen and require further restrictions
  3. We do not know the impact of nearly 40 million unemployed citizens on our consumer-driven US economy and our ability and timing to reemploy them
  4. However, we do know the US Government and US Fed have been taking monumental actions to prop up the economy and seem willing to continue as needed (this is helpful)

If this article resonates with you, I invite you to contact me for a free 30-minute evaluation at EdMusmon@ineedacfo.com.

Going forward

  • A Shorter Time Horizon

It’s clear that right now, there is more that’s unknown than is known about the depth and length of the economic fallout. This means you must continue to do all the tactical, crisis management things you’ve been doing and simultaneously reevaluate your overall business strategy. Now is the time to create a continuous feedback loop with your management, staff and all contingencies as you fine-tune your strategy.  

Pre-COVID-19, Strategic Planning was done with two, three, or 5-year horizons. Budgets were done on an annual basis, and re-forecasting might be done semi-annually or quarterly. Things have changed. COVID has flipped the typical planning and analysis procedures on their head. Now, we’re forced to re-plan and report and analyze faster in order to adjust our business approach in real-time.

  • Adjust your Strategic Plan

In the last several months you’ve likely asked yourself one or several of the following questions:

  • What happened to my market?
  • Are my customers the same?
  • Do I need to deliver my service or product differently?
  • Do I require new suppliers/vendors?
  • Has my competition changed?
  • What are my competitors doing to adapt?
  • Do I need to change my pricing or distribution approach?
  • Has the sale cycle shortened, and can I meet a new timeline?
  • Has the sale cycle lengthened, what’s my cost of new business acquisition?

In order to assess these items you’ll need to bring your leadership team together to gather data and consider options. Engaging your sales, marketing, production, and other disciplines etc. is vital. Simultaneously, your finance team can help pull the information together to help assess plan options while forecasting the financial outcomes.

III. Keep your Communication Open

The remote workforce adds new challenges for you, your team, and your customers. I recommend reviewing all your processes that are normally done in your regular business setting and can no longer be done in that manner. Going through your handbook, policies & procedures, and staff roles & responsibilities should help you identify gaps or blind-spots. Be sure to ask your team for their input: not only will you no doubt get useful information, it will make them feel valued.

One casualty of working remotely is the loss of informal communication that happens in your workplace.  When you’re communicating with your team it’s important to ask yourself: Who cares about this and who will be impacted by my communication? Your answer may reveal other parties have an interest beyond the obvious. Teamwork is more difficult in a remote setting. Taking this added step will keep remote staff engaged and will often lead to additional ideas and solutions from your employees.

You should consider sending an email update to your customers to let them know of evolving changes in your service. However, there is a right way and a wrong way to do this. Before you email your customer base keep in mind many people have been flooded by automated emails from brands sharing too- frequent updates on information that is not pertinent to them- use your opportunity to reach your customers wisely. You should email them with any updates on how they should reach you (don’t forget to forward your calls to your personal phone if you haven’t already) and how you’re incorporating safety protocols into your actions upon reopening. Add this critical information to your website and social media accounts as well.

  • Spending/Financing and Investments:

Keep a close watch on your Cash and actively manage its sources and uses. Experience tells me businesses can weather financial losses, but not cash shortages. When the cash is gone, things grind to a halt.

Other things to consider: regarding your finances

  1. Employees have rights: you must have the funds to pay them and cover vacation accruals
  2. Do you need to change spending authority levels?
  3. What expenses can be foregone or delayed?
  4. Who are the critical vendors? 
  5. Can you renegotiate terms?
  6. Where do you stand on access to vendor credit and bank debt? – Can you get more?
  7. Do your investors have the ability and interest to invest further?
  8. Are you in a position to raise equity – What would you need to do?

In this article, I have outlined four ideas, which I believe will be critical to successfully navigating your business in 2020. I hope you’ve found it thought-provoking. I leave you with four key takeaways of which I’m certain:  

  1. The Time Horizon has compressed- demanding increased speed and frequency of planning & analysis
  2. You must reevaluate your Strategic Plan and make it an ongoing process
  3. Communication is key to the new work model, and approaches need to change
  4. Watch your Cash ever so carefully, conserve and have contingencies for funding

About the Author:

Ed Musmon is the Principal and Founder of I Need A CFO. I Need A CFO provides Fractional CFO services to a wide array of small-to-mid-sized businesses.

In my practice, I am helping my clients with the actions described above. If this article resonates with you, I invite you to contact me for a free 30-minute evaluation at EdMusmon@ineedacfo.com.

Featured Photo by Andrea Piacquadio from Pexels

Breaking Bad (the TV Series) and the case for Internal Controls

A friend recently got me involved in watching Breaking Bad (the TV Series) which for those who haven’t seen it, it is a captivating TV series and a guilty pleasure.   I had managed to avoid watching it for years, but once I got started, it was not able to turn it off.   As I watched it, it got me thinking.

What leads someone to go from being a good guy to go bad guy?  The main character, Walter White is a high school chemistry teacher.  A beloved figure, much like some of our favorites.   He has a love of his subject and a real passion for it.    He is a family man leading a life along the straight and narrow, seemingly a happy family man who while living a modest life is content.

Then suddenly he discovers that he has lung cancer and is facing a near-term death (less than a year to live).   What happens next is played out extraordinarily well.   We see our well-loved good guy break bad.  Over the course of 5 seasons, the series gets widespread acclaim, and Bryan Cranston wins awards for his performance as Walter.  As the story develops we get to peer into Walter’s thinking as he thinks through his choices and justifies his actions.

Breaking Bad like lots of crime dramas takes us inside the commission of a crime and the mystery that goes with it.   For most of the series Walter manages to remain unknown and undiscovered even as he is amongst the investigators.   He appears invisible in plain sight.  As we watch, we keep wondering whether he will revert to the good guy or whether he will be trapped.

Okay, Ed, I get it…it’s a great Series, but what does that have to do with Internal Controls and why should I care? Those are the right questions: Hang on, I am getting to it.

Let’s get a quick refresher on Internal Controls.    Internal Control is a general description used within business and organizations (in general) that consist of the financial/business systems and processes that are designed and implemented to protect our institutions from a variety of risks including Theft, Fraud, Reputational Risk and even our ability to continue.

As it turns out, the TV Series provides us a window into the human behavior and some circumstances that Internal Controls are intended to understand, guard and overcome.

Before starting Financial Management Consulting (www.iNeedaCFO.com), I have spent my career as an Auditor, Ethics Investigator, Sarbanes Consultant, Controller, and CFO at various organizations large and small.  In these roles, I had performed within the respective Internal Control system, been a witness to circumstances when things went wrong and worked to improve organizational Internal Controls.  This article is intended to remind us to consider our Internal Controls environment, the Risks we face, and tools in our toolbox.

Let’s face it: Breaking bad in business often occurs when good folks (not just bad guys) do bad things.  Fraud and theft (they aren’t necessarily the same) can and do happen in many cases when good folks make bad decisions or bad choices.   Situations of robbery and Fraud can directly impact an organizations ability to survive and in some instances, can cause the organization to collapse.

Anyone that has been a party to a Financial Audit knows that Management and not the Auditors are responsible for the Financials, the Results, and the Audit environment.  The Auditor expressly excludes the responsibility for detection and prevention of Theft, Fraud or Misrepresentation and places it back on the Management and indirectly on the Board of Directors (if there is one).

Let’s take a look at what happened with Walter:

He realized he didn’t have the means to care for his family after his death.  So, his thinking turned to Money and how would he (as High School teacher with limited means) provide for his family’s financial future.   Now under pressure, he started searching for Opportunities to help with his predicament.  Through his Brother-In-Law (a leading DEA agent) he was exposed to growing demand and activity around Methamphetamine, and as a Chemist, he had access to the tools and the Knowledge to produce it.   Then we have the rationalization.   Walter perceived this type of crime as a Victimless Crime.  Other people were making it, and he was only going to be putting bad guys out of business by providing a superior product.    What about his risk?  He didn’t perceive a significant risk and was confident his crime would be Undetected.  After all, no one was watching him, and no one would suspect him.  Additionally, he had unique insights into the investigations (or controls), so he could strategize on how to avoid detection.  He was highly respected, and his history of good deeds meant he was Trusted.  So, while there is a risk, the perceived threat is either low, relative to the need opportunity.    Of course, we quickly realize there is a Slippery Slope.  Once started, the crime begins to take on a life of its own, as is the likelihood of getting deeper while the opportunity to stop or reverse direction becomes increasingly difficult.

I would add to these factors, Intelligence and Ego.   In many cases, it takes an astute person to see the control weaknesses that allow for the crime.   In the case of Walter White, the ability to out-think his rivals, and his crime-fighting opponents fed his ego leading and pushing him forward.

So, we now know that criminal behavior can occur when good folks, driven by a personal need can turn to a crime of opportunity.  An opportunity is where the perceived risk of getting caught is low, and they have unique knowledge and access to an Internal Control weakness(es).   So, our job is to reduce the opportunities (i.e., increase prevention) and to increase the likelihood of being caught (i.e., increase detection).

What are the types of crimes?

Fraud might not necessarily translate into direct personal enrichment, while theft typically does.  Both are serious problems with significant potential negative consequences.

For example, Fraud might involve violating a contract for the benefit of your company.  Even though it doesn’t directly enrich those involved in the Fraud, it does present a serious risk to one’s ability to do business with governments or other clients.   Of course, there are substantial and serious penalties.

Theft might involve taking kickbacks on purchasing or stealing funds by making undetected disbursements to oneself.

These crimes can ruin an organizations reputation and put one out of business.

What is the Internal Control Environment?

We should think of the Internal Control environment as having many facets and layers.

The Control environment is a layered approach to reducing the Risk.  It is not possible or economically feasible to eliminate all risks; there are steps to reduce your risk.

The answer is lots of things.  Often the Internal Control environment can be thought of as layers of defense or Risk Management.   I am going to lay out some of the critical components and approaches to Internal Controls.

  1. Tone at the Top – This is where the leadership or ownership provide the proper behavior examples.
  2. Policies & Procedures – Clearly defined processes with associated responsibilities
  3. Good hiring practices – Proper vetting and hiring the right level of staff with the prerequisite skills
  4. Adequate Oversight – Proper levels of authority,
  5. Segregation of Duties – Separation of approvals from disbursement authority, separation of cash collection and record keeping

I have identified ten additional critical components and approaches.   If this issue resonates with you and you are interested in getting the others, please reach me directly either by phone or via the Contact page.  When registering on my website, please let me know if you want to be on my mailing list for future Thought Pieces.

What are the Lessons learned?

  1. Good people go bad
  2. You (the Leadership/Management) are responsible for your Internal Controls/Risk Management
  3. Bad can mean a variety of things
    1. Contract Fraud
    2. Purchasing Kick-backs
    3. Theft – misuse of funds or misdirected payments.
  4. The consequences can be severe
    1. Including financial loss
    2. Reputational loss
    3. Potential organizational failure

We also learned that awareness of the Risk and attention to your control environment could reduce your chances of having your own Breaking Bad situation.   As you can see, there are many elements to address and the effort to protect yourself takes time, your commitment and in some cases an investment.  As the adage goes, an ounce of prevention is worth a pound of cure.

I hope you found this article thought-provoking.

If you would like assistance addressing these needs, please contact me at EdMusmon@IneedaCFO.com or (617) 515-3942 or visit me at www.iNeedaCFO.com.

Do you want to hear Good News or Bad News?

Okay, that is a trick question, but why is it a trick question?  Read on, and I will explain.

We are all programmed to want to hear good news. I am no exception.  I love to hear positive feedback about something I did right or about a good result.  It feels good, and it reinforces how we see ourselves in a positive light or that we are achieving.  But simply hearing the Good News isn’t enough.

The real world doesn’t function with only Good Results or Good News.  Problems happen, things go wrong in many ways. It is essential that we hear and that we are open to hearing the Bad News.  More importantly, we hear it sooner rather than later.

I was recently reading Richard Clarke’s new book entitled Warnings: Finding Cassandras to Stop Catastrophes. (It is a very good read, and I recommend it.)   So, who was Cassandra and what was special about her? According to the Mythology, Cassandra was able to see the future and pending disasters. Unfortunately, she was cursed not to be believed.  As a result, disasters that could have been avoided were not.

Clarke aims to make us aware of the Cassandras amongst us, some potential disasters they see now and to trigger us into taking action before it is too late.

Circling back to my initial question; I conclude that we need to be alert, aware and listening to the Bad News.  I believe it is critically important to hear Bad News as early as possible and hopefully when action can be taken to mitigate/reduce the negative impacts.  Bad News is not like wine. It does not get better with age.

So what does this mean for you? I suggest you ask yourself the following:  Am I getting the Bad News and am I getting it when it is first known?

Reflecting back, I have worked in settings where fear ruled, where a shoot the messenger philosophy lived.  The result was predictable; information was withheld, sometimes because people hoped the situation would improve or because they hoped it would be discovered long after they were gone.  However, I have also worked in settings where the culture (from the top – the place where culture begins) allowed and in fact encouraged people to communicate bad news and to do it early. They created the expectation that problems (i.e., bad news) would be reported right away.  None of that shoot the messenger stuff.  Staff was encouraged to come forward with problems along with recommendations to correct and to request help from above if needed.

So, I ask which scenario describes your organization.  If you answered the latter, then congratulations are in order.  If you answered the former or you are not sure, then you have some work to do, and I can help.

In closing, I hope you found this brief article thought-provoking.  If you would like to discuss in greater depth, I would be happy to do so.   Are you looking for a CFO? Contact us at ineedacfo.com/contact

Ed Musmon, Principal & Founder

Financial Management Consulting Launches

Financial Management Consulting launches its new service geared toward small companies that need CFO level help at the strategic and tactical levels.  This is a flexible service designed for when you need it in the amount you need.

As a cost effective partner, I tap a robust network of professionals and service providers to bring you the guidance and resources to meet your needs and budget.

For a free consultation, call Ed at (617) 515-3942 and find out how.