In delivering organizational visibility and mission critical data on a single platform while supporting collaboration across remote workforces, enterprise resource planning (ERP) platforms help companies make quick decisions in today’s unpredictable business environment. By putting finance and accounting, customer service, procurement, inventory, supply chain management, warehouse management and order fulfillment on a single platform, ERPs unify core business operations, improve internal controls and enhance visibility into organizational performance, when compared to entry-level accounting software, spreadsheets and other point solutions. Thus, ERPs are a must for a growing business.

But although many companies may have shifted to ERPs from their more rudimentary accounting software, few have harnessed the power of cloud ERP systems. Organizations using on-premise ERP systems are paying higher annual software maintenance costs and in-house IT salaries than competitors using cloud ERP solutions — and most don’t even have access to the latest features and functionalities.

Additionally, on-premise ERPs suffer from sluggish system performance and a lack of effective collaboration tools, which leads to an overall decline in productivity. Lack of integrated solutions and difficulty penetrating departmental data silos make it harder to know what is happening in the business when companies need visibility more. Combined with added demands on IT and demand for remote access to a variety of systems, the network capacity of these organizations is strained, and new security concerns are introduced.

Cloud ERP overcomes these issues by allowing remote users to access the functionality and data anywhere with an internet connection. A cloud ERP system can help transform companies into resilient organizations that can weather any storm. Here are some reasons why cloud ERP works:

• Enables remote workforce management and collaboration. Accounting (such as closing the books) is collaborative work. Using basic accounting software or an outdated ERP system and its standard approach isn’t feasible with the entire accounting team working from home. Using cloud ERP, the accounting team can review the data, make changes and close the books remotely without having to be in the same physical location.
• Helps comply with accounting standards and regulatory requirements. Complying with changing rules and regulations has pushed many organizations to reconsider processes typically handled with spreadsheets. Cloud ERPs receive regular feature and capability updates that are automatically passed on to users.
• Gives all organizational departments a unified and accurate picture of the business. It provides accurate, real-time data that helps teams collaborate more effectively, leading to better-informed decisions, increased revenue and happier customers.
• Drives quick reaction times. As opposed to IT or finance teams gathering and producing reports pulling data from disparate systems, which are often outdated by the time leadership sees them, Cloud ERPs feature role-based dashboards that give employees immediate access to the data they need to do their jobs and the ability to drill down for further analysis.
• Reduces operational risk. Cloud ERPs help limit these risks by embedding approval workflows into procurement, accounts payable and other financial processes, as well as by controlling access to system features and data based on user roles and individual permissions.
• Tracks unit economics, customer and project profitability. Due to the visibility gaps impacting margins that exist in on-premise ERP systems, regularly evaluating revenue and cost on a per-unit basis becomes difficult unlike in cloud ERP.
• Helps companies scale and adapt. As businesses expand and add new services or products, they quickly outgrow their basic accounting solutions. With growing needs for scalability, visibility and adaptability, the need for a more robust ERP grows exponentially.

Even with all these benefits and more, some businesses running on-premise ERPs are reluctant to undertake upgrades because of disruptions caused by broken integrations and customizations being overwritten. There are clearly many measured benefits to taking such action, and, overall, the benefits outweigh the short-term costs.

CPAs’ roles are evolving from being historians and compliance police into tactical advisors who interpret stories hidden in data. As Big Data gets bigger, data visualization is becoming increasingly more important for CPAs, who need to understand large data sets and make informed decisions. 

Data visualization should be user friendly, have a purpose, provide value and use reliable data. When implementing a data visualization project, take the following considerations into account:

• Start with a plan and identify the users. A plan should define the purpose of using data visualization and take the users’ skills and time into consideration. 
• Ask how, when, what and why when beginning to observe patterns. For example, how do cost of sales change over time? When do they increase or decrease? Why does this happen and what does it mean? Using this process, the story forms, and then data visualization conveys the story to users. 
• Use bar and line charts because these methods easily show data differences. Pie charts are the least effective way to present data — because with more than five slices, the visualization becomes useless. It is also difficult to compare slices in one pie chart to slices in another pie chart.

Some common free data visualization apps are Google Charts and Microsoft Power BI. Both can manipulate data from multiple sources and make graphs quickly, but each comes with its own performance problems. Some popular paid apps are Tableau and Qlik Sense. These apps can present complex data in simple ways and are good for financial reporting. However, these apps require some technical knowledge and can be slow.

These are just a few of many data visualization apps available. When choosing an app, it’s best to focus on a pleasing user experience, an easy-to-read dashboard, simple visuals and contrasting colors. Also, consider performance before complexity, because sometimes less can be more. 

In March 2021, the Employee Retention Credit (ERC) was extended through Dec. 31, 2021, and expanded as part of the American Rescue Plan Act of 2021. But there are many nuances and complexities CPAs need to be aware of to fully educate their clients.

Here are 10 misunderstandings about the ERC to keep in mind:

1. My client can’t claim ERC if they’ve already claimed Paycheck Protection Program (PPP) loans or gotten their PPP loans forgiven. Now you can claim both! Congress, in the Consolidated Appropriations Act (CAA) of 2021, removed the limitation on only claiming one or the other. PPP will only account for 2.5 times monthly payroll expenses and is meant to be spread out over six months. This leaves plenty of uncovered wage expenses for claiming the ERC.
2. My client’s business did not have a drop in gross receipts of 50 percent or more. The CAA has changed the qualifications so that a reduction of 20 percent now qualifies. BUT remember there is also another way to qualify for the ERC — if a business has been subject to a partial or full suspension due to a government order... see the next point.
3. My client’s business was not shut down during the pandemic. Even a partial suspension order by the government (federal, state or local) of a client’s business could potentially qualify. For instance, a partial shutdown; a disruption in their business; inability to access equipment; having limited capacity; shutdowns of their supply chain or vendors; reduction in services offered; reduction of hours to accommodate sanitation; shut down of some locations and not others; and shutdowns of some members of a business are all scenarios that still potentially qualify for the ERC. The key considerations are: due to the government-ordered partial (or full) suspension, is/was your client’s business not able to continue its activities in a comparable manner, and did that result in a more-than-nominal impact on their business operations? Remember, the partial or full suspension is an alternative way to qualify for the ERC, separate from the reduction in gross receipts test.
4. My client’s company was deemed an essential business, so they do not qualify because of business suspension. Even if your client’s business is deemed essential, an impact or change in their business may still qualify them. For example, even if they were open but their vendors were closed down or they couldn’t go to their client’s job site, they may still qualify. Or, alternatively, if part of their business was considered non- essential and was impacted by a government-ordered suspension, they may also qualify. The scenarios discussed above in item 3 could apply here as well.
5. My client’s company has grown during quarantine. The ERC isn’t something they should take. That’s great news! But even if your client’s company has grown during quarantine, there are expenses that may qualify if they experienced a full or partial suspension.
6. Sales have rebounded for my client in Q1 of 2021; they cannot qualify for this credit. With the introduction of the CAA, you have the option to look at one quarter prior to determine qualification. This means we can determine eligibility based on lost revenue in 2020. Also, if your client was subject to a full or partial suspension, they may qualify regardless.
7. My client was in losses, or they do not have any tax liability. This is a refundable credit. In practice, this means that any credit overage above tax liability is sent to the taxpayer/business owner as a refund.
8. My client’s company has grown to more than 500 employees, so they are not eligible for the ERC. The employee count restriction is based on full-time equivalent (FTE) employees, which is a more involved calculation than just counting everyone in the office. We helped a business with 640 employees, and the FTE calculation put them at under 500. Furthermore, if your client paid any employees to NOT work, or to work less than the hours for which they were paid, then the employee count restriction would not apply for those employees.
9. My client is a charity and the ERC is only for businesses. The ERC also may provide significant benefit to charities — churches, nonprofit hospitals, museums, etc. Charities can be particularly good candidates.
10. We don’t need to document everything. There are still many tax advisors who think that they can just create their own simple form. They check a few boxes, provide a few sentence explanation and expect the IRS to hand over thousands and thousands of dollars on a silver platter and then play audit lottery? Guess again. To avoid headaches and heartaches down the road, clients need to properly and fully document how their business qualifies for the ERC.

Professors can shape a student’s experiences, influencing whether students take a course or pursue a career because the person at the front of the classroom looks like them. The first Black CPA Ph.D.s have played an important role in attracting generations of future Black CPAs.

Having diversity in the front of the classroom benefits all students, especially the students of color who may not be used to seeing people like themselves in that position, said Mark Dawkins, CPA, Ph.D., professor of accounting at the University of North Florida and the first Black CPA Ph.D. president-elect of the American Accounting Association.

Among other things, the person teaching the class can have a significant impact on whether students decide to try a course in that subject — and ultimately make it a career — because they see it is being taught by someone who likely embodies similar life experiences. For that reason, the first Black CPA Ph.D.s, and the professors they mentored or inspired, have played an important role in attracting generations of ambitious Black students to the profession.

Overcoming Barriers

The earliest Black people to earn Ph.D.s in accounting faced numerous barriers. In fact, the first five “had no chance at full-time positions in majority-white institutions” when they got their start in the 1950s and 1960s, according to Theresa A. Hammond, Ph.D., accounting professor at San Francisco State University’s Lam Family College of Business and author of A White-Collar Profession: African American Certified Public Accountants Since 1921.

That was the case for William Louis Campfield (1912-1993), who in 1951 became the first Black CPA Ph.D. He was also the first Black CPA in North Carolina and the first Black person inducted into the Beta Alpha Psi organization. His parents, graduates of the Tuskegee Institute and students of Booker T. Washington, were teachers, according to research by Dereck Barr-Pulliam, CPA, Ph.D., assistant professor of accountancy at the University of Louisville. Campfield and his eight siblings attended a school on the Institute’s campus and then he was sent to live with relatives in Pittsburgh so he could attend a college preparatory high school. He enrolled in New York University, supporting himself by working at a bowling alley, then returned to teach at Tuskegee in 1933.

When it hired Campfield in 1951, the University of San Francisco had the distinction of being the first majority-white institution in the country to hire a Black Ph.D. in accounting, according to Hammond. However, he was hired as a lecturer, not a professor, even though no other faculty member, including the dean, had a Ph.D. A year later, Campfield returned to working in accounting in a government position and created a practitioner-in-residence program that allowed him and numerous other government accountants to take leave and teach accounting. He retired in 1972 as associate director of what was then called the U.S. General Accounting Office, now known as the Government Accountability Office, and in 2019 became the first Black accountant to be inducted (posthumously) into the American Accounting Association’s Hall of Fame.

Succeeding Through Persistence

Another pioneer, Larzette Hale (1920-2015), showed similar determination. Sent to an orphanage at age 11 after her father’s death and when her mother could no longer care for her, she learned bookkeeping when the business office’s accountant took an interest in her. She went on to study business in college, where an accounting professor became her mentor. “Thanks to her, I fell in love with balancing the books and knew I wanted to study accounting in college,” Hale told the Journal of Accountancy in 2009.

She faced a number of forms of discrimination. Although a resident of Oklahoma, Hale was barred from attending its two state universities because of her race, so she attended Langston University, the state’s only historically Black college. The state of Oklahoma would later pay her tuition to attend the University of Wisconsin for her master’s degree, according to Hammond. While teaching at Clark College in Atlanta, she decided to get her CPA at the urging of her mentor, Jesse Blayton, an influential early Black accounting professor. When Hale took the CPA Exam, she was asked to sit in the back of the room and wasn’t allowed to use the lunchroom. In 1955, she became the nation’s first female Black CPA Ph.D. She ran a solo practice for a decade but was drawn to teaching. Hale ultimately became the head of Utah State University’s school of accountancy and also taught at Langston and Brigham Young. She was appointed a regent of the Utah Board of Higher Education, the first Black person in that role.  

A First for a New Generation

Dawkins, who met Hale early in his career, set out to follow the lead of these early pioneers. “There are a lot of prominent and impactful faculty of color who may not have had an opportunity to serve in this role, so I stand on the shoulders of giants,” he said. He said he’s grateful for the chance to highlight issues and concerns related to diversity at a time when attention is being focused on racial injustice and economic inequity.

Dawkins promotes the advancement of future Black accountants through his involvement in the PhD Project, which aims to diversify corporate America by increasing the number of business professors from underrepresented minority communities and attract more minority students to college business courses. He was in graduate school before the PhD Project started, but he began attending the project’s annual conference as soon as it began. Currently, he co-mentors four junior faculty members involved in the project, discussing questions they may have about research or teaching and helping them build the success they need to gain tenure. When the project began, Dawkins recalled that there were so few faculty of color that they would refer to each other by number based on the order in which they had become Ph.D.s. “Today, we have 1,500,” he said.

Expanding Students’ Knowledge Base

To keep the momentum going, efforts are underway to nurture a new generation of diverse CPA Ph.D.s and provide them with the learning and tools they need to succeed. For example, Dawkins served on a task force for CPA Evolution, a joint initiative of the National Association of State Boards of Accountancy and the AICPA to transform the CPA licensure model to encompass the rapidly changing skills and competencies that accountants need now and in the future. That will include changing what is being taught. “I believe accounting schools do a good job of giving students the basic toolkit they need,” he said. “But we will need a combination of schools better preparing students and firms enhancing employee training.” Speaking of his work with the learning process and the PhD Project, Dawkins concluded, “for me, it’s a lifelong commitment.”

This blog post was originally published by the Illinois CPA Society (ICPAS) and was reprinted with permission. The Black CPA Centennial is a yearlong effort to honor, celebrate and build upon the progress Black CPAs have made in shaping the accounting profession. The celebration is a collaborative effort of the AICPA, Diverse Organization of Firms, Illinois CPA Society, National Association of Black Accountants and National Society of Black CPAs.

When cash flow problems emerge, the business owner probably didn’t accurately estimate anticipated revenue versus anticipated expenses. The estimate of startup costs was too conservative. Clients aren’t paying as quickly as they hoped or sales didn’t follow the anticipated trajectory.

There are several reasons business clients run into cash flow problems or just simply need more money in a hurry. It’s better to get in front of this problem sooner than later and as their accountant, you need to be able to ask the tough questions. Business owners, especially startups, can be excessively optimistic and not properly plan for the aforementioned scenarios. They are simply convinced their idea will take off.

Here are seven questions to ask clients in order to better understand their finance needs: 

1. Why is your business going to succeed? Answering this question requires a robust business plan. Ask your client the following questions:
2. How much money will you (realistically) need? This should be followed by “How did you arrive at that number?” You want them to walk you through their business plan. They often need exponentially more money as the business ramps up operations. Where will this money come from? Is it from product sales? How have they matched projected sales revenue with the more predictable outflow for expenses? Remind them of the timeless advice people are given when going on vacation: “Bring twice as much money as you think you will need.” That was back when people carried cash. Today the advice would be “Be prepared to spend twice as much as you anticipated in out-of-pocket costs.”
3. Are you prepared for contingencies? How will they be addressed? When you embark on a construction project such as building a new home, the architect typically builds in a cushion of 10 percent (or more) into the project budget. Why? Because they don’t know what problems they will encounter along the way. If construction is halted, rent still must be paid on equipment. The mortgage needs to be paid. When renovating an older home, contractors usually protect themselves by saying: “We don’t know what we'll find when we open up the walls.” Assume everything will not go according to plan. What cushion has the business owner built in?
4. Are you borrowing or taking on investors who will own equity? The answer might be “yes” to both options. If the client is borrowing, they'll need that robust business plan that will persuade the bank their venture is a good risk. If they are bringing on investors who will pay to own a slice of the equity, they need to be confident the projected return on investment is sufficient to balance the risk they are accepting. Their investment will likely be illiquid for a long time. What can they expect as a return on investment? When should they be starting to see a return? Regardless, if it’s a loan or equity, the client will need that good business plan.
5. How much equity are you prepared to give away? It’s been said early money is the most expensive money. If investors are willing to put money into a startup, they are buying into a vision and the business owner who promises to deliver. They are taking a major risk. They want to be adequately compensated. The client wants to retain control of their business, but they must be prepared to part with enough equity to make the risk worthwhile to the investor.
6. How much of your own money are you putting at risk? How much are immediate family members investing in the business? The client needs to understand that if a bank lends them money, they want to be lending alongside the client. They want them to have “skin in the game.” If a business runs into serious financial trouble, lenders have standing ahead of equity investors. They want the client to have a substantial amount of their own money at risk, so that they are motivated to see their business succeed.
7. How much are you prepared to pay to borrow money? The return on equity must far exceed the cost of borrowing money. Ask your client to imagine the following scenario: You are confident your business can return 20 percent, yet the only lender you can find wants 35 percent interest and your personal guarantee of the loan. In this scenario, the client shouldn’t be starting or expanding their business at this time. They need to bear in mind that there are costs besides the posted interest rate. Origination fees are a good example. The interest rate will likely be variable, which is dangerous in a rising interest rate environment.

Ideas can look great on paper. Things get complicated once loans are negotiated and your client signs documents. They need to be aware of the risks they are assuming along with costs and consequences.

This blog was originally published as a column on AccountingWeb and can be read in its entirety here.

The COVID-19 pandemic forced thousands of organizations around the world to become entirely remote seemingly overnight. Many businesses had some experience with mobility and remote access to work from home, but few, if any, were equipped to operate 100-percent remote. Cyber criminals and opportunistic attackers wasted no time targeting insecure home networks and household smart devices like doorbells, thermostats and yes, even fish tanks.

From credential theft, to email phishing scams to social engineering, cybercriminals sought to exploit any and every aspect of the remote transition of our workforce. Cyber criminals don’t discriminate. They feverishly work to find any and all security vulnerabilities that will allow them to access to the networks of large, small, global, regional and local businesses.

Small and Midsize Businesses

These mounting cybersecurity threats are particularly troublesome for small and midsize businesses (SMB). Even before the pandemic, SMBs and their chief information security officers (CISOs), if they had one, faced challenges when it came to limited budgets, complex cyber solution and services offerings, and the challenges and costs of hiring skilled staff. As the pandemic continues to take its toll on the broader economy, tighter budgets, higher prices and greater risks have increased the complexity and cost of securing your business. As SMBs find their footing in the post-quarantine world, they must embrace the critical importance of cybersecurity and scale appropriately.

The "2021 Survey of CISOs with Small Security Teams," from Cynet finds that companies with small security teams are facing a number of unique challenges, placing these organizations at greater risk than their larger enterprise counterparts. Here are some key findings that SMBs and their CPAs should be aware of:

• 63 percent of these SMBs’ CISOs feel their risk of attack is higher compared to enterprises, despite enterprises having a larger target on their backs.
• 57 percent of companies indicated they do not have enough skill and experience to protect against cyberattacks.
• Almost all small security teams are looking to outsource security mitigation to an external provider with over half focused on outsourcing managed detection and response (MDR).

SMBs can and should increase their cybersecurity resilience to boost their chances of success. A crucial first step is for owners of SMBs to lead by example and pay attention to their employees’ online habits. They can demonstrate good cyber hygiene and educate their employees.

Here are some considerations:

• Identify business-critical assets and data to prioritize their protection.
• Be proactive, rather than reactive, when protecting against cyberattacks.
• Access online resources to boost cybersecurity awareness and education. For example, the Small Business Administration offers free access to planning tools, business assessments, cyber hygiene vulnerability scanning and best practices on their website.

This is the third post in a three-part series documenting the weakness and risks of existing payment options for the cannabis industry, and how it can potentially benefit from a blockchain and cryptoasset payment system. 

In any new and emerging industry, there are bound to be opportunities and challenges alike, and, in that sense, the crypto and cannabis industries have a lot in common. They are both still somewhat controversial and are still developing means of integration with wider economic actors.

Even though recent legislation has proven beneficial to the cannabis industry, federal and state law disparities still exist (these differences are discussed at length in part one and part two of this blog series). And despite progress being made, there is still ambiguity as to how legalization will impact the integration of cannabis into the banking system. 

Blockchain and crypto may be uniquely positioned to offer a critical bridge to banking alternatives for what is currently a predominantly cash-based industry. Here are some practical considerations that any organization seeking to implement a blockchain and crypto payment system should take into account:

• Decide which crypto to accept. Before doing anything else, an organization that is planning on beginning to accept cryptocurrencies as a form of payment needs to decide which crypto it will accept. Similarly, it must decide how it will store the crypto and what service it will use to facilitate the payment. This requires extensive due diligence in the vendor selection process as well as the underlying technology relied on by this vendor. It is important that competent professionals who understand the technology are involved in this process. 
• Develop a crypto strategy. Like every major implementation, remember the six Ps of planning: prior proper planning prevents poor performance. A company must determine how and where to store their currency just as they would with fiat currency. They may run into issues opening accounts with major exchanges due to mirrored federal banking concerns and limitations. They must develop standard operating procedures which dictate whether these crypto-denominated payments are going to be held by the organization (and if yes, how) or if they will immediately be converted back into fiat currency. Any conversion process requires clearing the traditional banking hurdle. 
• Don’t reinvent the wheel. Blockchain and crypto might still seem like an amorphous topic that can be confusing, but no organization interested in implementation of a crypto-based solution needs to begin from scratch. Accepting crypto as a payment option is not an impossible idea; multiple vendors have been offering these exact services for years at this point. Again, proper due diligence is key to understand and mitigate third-party risk.

There are other issues and benefits to bear in mind when determining whether a crypto-based payment infrastructure is right for your business. They include:

• Cybersecurity and interoperability. Going cashless and being able to access the banking system through stablecoins and other crypto payments might be a solution for certain firms, but that does not reduce the importance of cybersecurity. As prices and interest in crypto continue to increase, practitioners need ensure that the controls in place are up to the task. It is also important to understand how the technology you onboard will cooperate with other parts of your business and with those who you wish to do business.
• Reduction in cash dependence. Cryptocurrencies, specifically stable coins that maintain value against a certain benchmark such as the U.S. dollar, can act as an alternative to dealing in fiat currency for these organizations. Less cash dependence means lower risk of theft, embezzlement and security around organizational finances.
• Lower fees. Even if the march toward legalization continues unabated, a crypto and blockchain-based payment structure could result in lower fees per transaction than the traditional third-party payment processing solutions that are available to the cannabis industry. Cash is risky and comes with the added costs of security and astronomical banking fees. Credit cards (which are currently not available to the industry) come with a “baked-in” fee of approximately 3 percent per transaction. Similar fees will be incurred to make use of third-party ACH services or cashless ATMs. Service providers generally understand the limitations imposed on the industry and are taking advantage to meet the demand at high costs. A crypto-based payment system could reduce these fees and add back some of these amounts to the bottom-line.
• Better traceability. Even with substantial progress toward legalization well underway, a highly regulated industry will bring immense operations requirements such as product tracking. New Jersey law requires a uniform state-mandated tracking requirement and an underlying requirement that businesses maintain their own inventory tracking records. A blockchain and crypto payment system enables specific transactions to be followed, in real time, to their points of origin. Blockchain also may offer the benefits of immutable records due to decentralized authority. Compliance will remain a top priority for cannabis organizations; transparent and traceable records must be maintained with ease. 
• Other Applications. Another viable application of blockchain-based technology is the smart contract, which exists on the blockchain and is essentially a set of instructions that allows for an array of practical applications. Many bullish on the technology believe that the security offered by the immutable, decentralized nature of the public blockchain, paired with the enterprise-wide applicability introduced by smart contracts, will revolutionize the modern business environment. Processes that can be migrated to the blockchain include record keeping, validating transactions, tracking transactions, assets and company history, payment facilitation and virtually any other task that involves exchanging information.

Lawrence Peter Berra is famous for two things: his abundance of World Series titles as a member of the New York Yankees and his “Yogiisms.” Montclair, New Jersey’s favorite famously told us “nobody goes there anymore. It’s too crowded” and “when you come to the fork in the road, take it.” And he really mystified us when he said, “baseball is 90 percent mental and the other half physical.”

Business owners, and the CPAs who serve them, feel the same much of the time. Owning a business often feels 90 percent mental, and only about half the time is it satisfying.

Yogi was right. “The future ain’t what it used to be,” especially when “we make too many wrong mistakes” when it comes to selling a business and expecting satisfaction. Did you know only three out 100 business owners getting ready to sell were satisfied with the process?

To make sure it’s not “déjà vu all over again,” business owners need a great coach to ensure better results. It all begins by having defendable equity value in your business, and that requires a high level of confidence in three areas:

• Past and future revenues. Demonstrate the last five years of your financials and what’s ahead. You must show how the company will continue to grow and why you are confident in your forecasts.
• A trading multiple you can demand (if applicable). You must know how an outside buyer will view your company from a risk standpoint. Have you eliminated any causes for concern so you can demand a higher value?
• Ability to successfully realize equity value. There is no real value in your business if you are not able to monetize that equity through a transaction.

To build confidence that a business has a defendable equity value, the business owner, along with their CPA, must address the key value drivers of growth and equity value, which include the following:

1. Company overview/business profile. Can you tell a compelling story of your company’s past and future? And is it documented?
2. Financial performance/audit. Are you able to show the quality of your earnings to a potential buyer?
3. Legal considerations. Do you have contractually committed revenue in the years ahead? Are key employees locked in to stay? Have you eliminated any legal issues?
4. Documented growth. Can you document you are driving growth faster than the competition?
5. Market share. Are you able to show that you are the big dog in your niche?
6. Customer diversification. Have you been able to diversify your customer base? Do you have strong customer retention?
7. Barriers to entry. Do you have a defensible market where competition is blocked using financial, legal and other means?
8. Good branding. Can you deliver proof that your brand helps drive sales and marketing success?

Like a great coach once told me, “it ain’t over till it’s over.” It’s all about controlling what you can control so business owners can always get the most from their business — and CPAs can provide the best advice.

Yogi is right, “you can observe a lot just by watching.”

When it comes to applying for the CPA Exam, it's easy to get confused with the number of organizations involved in the process. At the NJCPA, we field lots of calls. Remember, we’re not a regulatory board, and therefore, our insight is opinion-based only. But we can help answer general questions about the education or work experience requirements to become a CPA.

So, who are some key players and what are their roles?

• The National Association of the State Board of Accountancy (NASBA) governs the state boards of accountancy nationwide and determines whether a candidate meets the requirements to sit for the exam based on the requirements set by individual state boards. CPA Exam Services or CPAES, a division of NASBA, will evaluate a candidate's academic transcripts and issue the Notice to Schedule (NTS) once all requirements have been met. The first step in a candidate's journey to becoming a CPA should be to create an account at CPA Central, NASBA's exam portal. NASBA is also responsible for releasing CPA exam scores. Contact the NJ state coordinator at NASBA at 1-800-272-3926 or cpaes-nj@nasba.org for questions pertaining to:
  • Specific academic courses and whether or not they will count towards the 24-credit education requirement for business and accounting coursesAccreditation of a college or university
  • Notice to Schedule (NTS)
  • Changing your jurisdiction
  • Transferring passing exam scores from one state to another
  • The process for international candidates sitting for the exam
  International candidates should visit NASBA's International Evaluation Services for further instruction before submitting a first-time application.
• Prometric operates test centers. Once NASBA issues the Notice to Schedule (NTS), a candidate will need to schedule the first section of the CPA Exam. Exams are taken in-person at various Prometric testing centers, but the exams can be scheduled online. Prometric will send exams to the AICPA for scoring.

  Contact Prometric for questions about:

  • Scheduling your exam
  • Locating a nearby testing center
  • Arranging testing accommodations
  • What you can/cannot bring to the testing center
• The American Institute of Certified Public Accountants (AICPA) sets standards for the accounting profession as well as develops content found on the CPA Exam. While not directly involved in the evaluation of a candidate's first-time application, they will announce any changes affecting the content of the exam and are responsible for scoring the exams received by Prometric before results are released to NASBA. The AICPA publishes several helpful resources, including the CPA Exam Blueprints and mock exams, to help with exam preparation.
• New Jersey State Board of Accountancy is a regulatory board responsible for granting licensure and ensuring that licensed CPAs are practicing according to the law. Once a candidate passes all four sections of the exam, NASBA's CPA Exam Services will forward a candidate's file with exam scores to the NJ State Board of Accountancy, who will issue a congratulatory letter along with an application and further instructions for becoming a licensed CPA in New Jersey.

  Contact the New Jersey State Board of Accountancy at 973-504-6380 if you have questions about:

  • The status of your application for licensure
  • The one-year work experience requirement

Let us know if you need help with becoming a CPA. Find out more at NJCPA.

Cryptocurrency continues to develop and evolve at an accelerating rate, and it can be difficult for even the most motivated practitioner or business professional to keep pace. No single article, no matter how comprehensive or well-written, is going to be able to encapsulate all the changes in this fast-moving sector. That said, there are a few big-picture trends and developments that every CPA should know. Clients, both now and in the future, are increasingly going to expect practitioners and advisors to be well informed on these issues, so let’s look at some of these trends:

• Crypto has gone mainstream. Cryptocurrency and blockchain might still seem like an abstract or conceptual idea for many practitioners, but that is rapidly changing across the economy. Major institutions, notably Tesla, have invested billions in Bitcoin, but that is only part of the story. The announcements by major payment processors and credit card providers, such as Visa, Mastercard, Square and PayPal, mean that crypto payments and the utilization of crypto as a legitimate alternative to fiat option is a trend that every practitioner will have to stay on top of. Specifically, what will the audit, compliance, tax and reporting implications of this increase in crypto payments be?
• New applications are here. There are many new applications that have been developed in the blockchain and crypto asset space just during the past year. Ideas and concepts like decentralized finance (DeFi) and non-fungible tokens (NFTs) were definitely not in the mainstream financial conversation before the last several months. With DeFi attempting to replicate banking services without banks, and NFTs seeking to monetize digital and physical assets via a blockchain connection, these concepts are certain to generate numerous accounting questions in 2021 and beyond. These are just two of the highest-profile applications of blockchain technology, and it will be critical for the profession to stay up to date on these fast-changing trends.
• Regulation is catching up. Perhaps most refreshing is the progress that seems to be being made from a regulatory perspective, especially in the United States, which had been lagging behind some other jurisdictions in developing proactive and innovative approaches to help support this rapidly growing sector. Specifically, the updates from the Office of the Comptroller of the Currency (OCC), which enable federally chartered financial institutions to participate in the buying, selling and confirmation of certain crypto transactions; the potential appointment of an SEC chair well versed in crypto specifics; or the pronouncements by the Federal Reserve pertaining to significant interest in a crypto-dollar project, are emerging trends.

Blockchain and crypto assets are, without a doubt, quickly becoming part of the mainstream financial conversation and are topics that all companies need to be well versed in as these trends continue. For more information and content on blockchain, crypto and other emerging technology trends, tune into the NJCPA TechTalk Podcast and join the NJCPA Emerging Technologies Interest Group.

This is the second in a three-part series on how the cannabis industry can potentially benefit from a blockchain and cryptoasset payment system.  

In part one of this series, we discussed in detail the challenges associated with processing customer payments for cannabis businesses. In this second post, we delve into the weaknesses and risks of existing payment options and how blockchain and cryptocurrency can assist.

Banking and Financing Challenges

Even though Governor Murphy signed the adult-use cannabis reform bill into law on Feb. 22, which is welcome news for New Jersey, the federal illegality of cannabis still poses problems in sourcing banking and financing solutions. Absent the benefit of business banking, cannabis operations take on immense risk handling and safeguarding proceeds in a cash-based payment system. Yet many financial institutions are not willing to accept the risk of servicing these clients, and those that are willing charge fees commensurate with the additional risk and compliance burden. 

Financing has presented similar challenges for cannabis companies in weighing the pros and cons of their options. Traditional business loans are generally unavailable due to banks’ concern with Federal Deposit Insurance Corporation (FDIC) insurability. Similarly, there are concerns that taking an interest in collateral for loans issued to cannabis businesses could be subject to forfeiture due to the federal illegality. There are providers that have emerged willing to service small business loans for cannabis companies, however these tend to be short-term financing options with higher-than-market interest rates.

Tracking and Reporting Challenges

Cannabis businesses must also deal with complexities related to business-to-business (B2B) transactions.

• Supply chain concerns. A state’s regulations largely dictate what the supply chain will look like. Points in the chain include cultivation, extraction of active compounds from the plants, manufacturing other cannabis products, testing the product for adherence to various regulations, B2B and business-to-customer (B2C) transportation and finally, wholesale and retail sales. Operators’ roles in the space largely depend upon the type of licenses offered by their state and the type of license(s) they obtained. Licensees that own all levels of the supply chain are known as “vertically integrated” businesses.  
• Tracking and reporting. For vertically integrated businesses, software can help create a “seed-to-sale” experience. Tracking and reporting requirements will vary by state. There are services on the market that are equipped to handle reporting, tracking and transacting through various points in the supply chain. However, businesses that are not vertically integrated may face challenges related to incompatible software. Consequently, they may incur more data input and processing time and risk errors in the process when transacting B2B.  
• Payment terms and trade credit. Under traditional circumstances, the standard use of payment terms and trade credit aids in administrative functions and allows businesses to better manage their cash flow. These practices are generally not available to cannabis operations. While a few commercial solutions exist, we may see more service providers emerge to service the industry by providing outsourced B2B management.  

How Blockchain and Cryptocurrency Can Assist

Bitcoin is still largely at the center of attention and discussion when it comes to cryptocurrencies, but the sector has matured immensely in recent years. In order to understand crypto’s potential as a solution for cannabis companies, we should first discuss the categoric makeup of the industry:

• Decentralized cryptocurrencies, including Bitcoin, are not issued or governed by any single entity or small group of organizations. They are commonly associated with price volatility and speculation, as well as significant tax, accounting and reporting uncertainty. 
• Stablecoins were developed in response to the aforementioned price volatility commonly associated with Bitcoin. Stablecoins are cryptocurrencies, but with two major differences: Stablecoins are issued, governed and managed by either a single entity or small group of organizations; and they are connected, tethered or pegged to an underlying asset, with a large percentage of these stablecoins being connected to the U.S. dollar. Lower price volatility, which will enable more products and services to be offered, illustrates the business case for stablecoin-based products. Yet with complexity in implementation and uncertainty surrounding the role of various blockchain-based technologies in the future business landscape, it might be a while before we see crypto-based payment systems in the majority of organizations.

Accounting for cryptocurrencies continues to be an ongoing issue for even the largest and most sophisticated organizations. Stablecoins, in theory, are to be used as a currency alternative, but under current U.S. regulation are still treated as property. In other words, whenever a stablecoin changes ownership, there is a taxable event. This complicates the accounting, recordkeeping and tax compliance processes, but also creates a bevy of opportunities for forward-thinking practitioners and organizations.

Looking out at the regulatory landscape, there are distinct updates that might resolve some of these hurdles to wider adoption:

• The Biden administration’s selection of Gary Gensler to head up the Securities and Exchange Commission (SEC) should be viewed as a positive step forward for blockchain and crypto regulation. This is not to say amenable legislation is guaranteed, but it is always preferable to have regulations proposed and enacted by individuals who are knowledgeable about the subject matter. 
• The Office of the Comptroller of the Currency (OCC) issued two recent updates that should be of interest to both practitioners and cannabis entrepreneurs. The September 2020 update clarified that federally chartered banking institutions could hold on deposit, reserve dollars for privately issued stablecoins. This enables stablecoin issuers to fully access the services and support of the commercial banking system and clarifies what specific products and services those same banking institutions can offer stablecoin issuers. The January 2021 update is potentially even more significant. It says that, going forward, federally chartered banking institutions under the jurisdiction of the OCC will be able to join permissionless blockchains (referred to as independent node verification networks) and validate transactions.

These updates are important since it means the banks will have full transparency and accountability with regard to stablecoin transactions on their books. In addition, those same institutions will also be able to buy, sell and process transactions that are taking place in the form of stablecoins backed by the U.S. dollar. Translating these updates into non-technical language means that federally chartered U.S. banking institutions can join blockchains and process transactions that are taking place via dollar-backed stablecoins. 

“Accountants are fun.” That’s how Dr. Adrian L. Mayse, CPA, chair and associate professor in the Department of Accounting at Howard University and fellow member of the National Association of Black Accountants (NABA), starts out his book, When I Grow Up I Want to Be … An Accountant.

How true that sentiment is. After all, it’s a creative and colorful children’s book that encourages students — especially minority children — and their families to discover the world of accounting.

As I leafed through the book’s vibrant illustrations, I imagined myself encircled by a group of first or second grade students, sharing with them the enthusiasm that I felt when I embarked on my CPA journey. When I Grow Up I Want to Be … An Accountant reveals to children that accountants work almost everywhere — sports, movies, the arts, even schools — and anyone can be an accountant, no matter your race or gender. “Accountants look like me. They look like you,” the book encourages. One page even includes space to place a photo so the reader can see themselves as an accountant.

I applaud Dr. Mayse for addressing the challenges associated with attracting minorities into the CPA profession. Even though accounting has been consistently ranked as one of the leading majors for students, minority students are still not considering it a viable option, tending to opt for other majors or professions where they see more diversity.

But there is some good news. Mentoring programs — an effort that I’m a big believer in — are tremendously successful in nurturing the next generation of accounting graduates. Seventy-eight percent of black accounting professionals said that their career had benefited from a fruitful mentoring relationship in their current work environment in a recent Howard University survey.

Mayse ends the book by urging students to “Keep studying and learning.” A simple message that even we seasoned professionals should take to heart. The book also includes a foreword from Frank K. Ross, CPA, MBA, one of the founders and the first president of NABA and the current director for the Center for Accounting Education at Howard University.

The COVID-19 pandemic subjugated the world in just a few months. This novel coronavirus altered the lives of people around the world and brought on many challenges for students and professors alike. Faculty who conducted traditional in-person classes were forced to change to asynchronous learning using a learning management system (LMS) such as Canvas or Blackboard (BB) or synchronous learning using a video technology such as Zoom. Regardless of their choice, faculty had to learn to deliver course content in a totally different way.

As COVID-19 started to spread rapidly across New Jersey, colleges started to close last March. Upon returning from spring break, I used Zoom to welcome back the students saying, we will get through this class together. Most importantly, I also prioritized their health over school by emphasizing patience and understanding of each other. I told the students to call, text or email if they had any questions.

Here are some strategies that helped me during the early days of the pandemic and could assist CPAs and others who are teaching classes now:

• Provide detailed chapter outlines.
• Reintroduce all the support associated with the course material.
• Use Zoom or other video conferencing software for office hours.
• Create a discussion board on Blackboard where students can post questions.
• Require students to read emails at least once a day.

Lessons Learned

Using Zoom was different then standing in a classroom. I could not see if students were engaged or if they were even viewing their monitors, so I created poll questions that were built into the Zoom program. To keep it interesting, I created a magic word, where students needed to listen and then upload the magic word. Both activities helped monitor student attendance and engagement.

With virtual teaching, it’s important to make sure students are engaged and learning the course content. However, I am confident that one day we will return to the classroom.

This is the first in a three-part series describing the impact of blockchain and cryptoasset payment systems on the cannabis industry.

To date, 17 states and territories have legalized adult-use cannabis including New Jersey, whose residents voted in favor of legalization via a ballot initiative in the November 2020 election. Yet, due to the classification of cannabis as a Schedule 1 controlled substance under the Controlled Substances Act (CSA), a disparity exists between federal and state law which precludes cannabis companies from typical operations, including ease of banking and payment processing solutions. That said, any business or industry requires a fully functioning payment infrastructure to grow efficiently and successfully. Despite more political acceptance and a large growth potential for this market in New Jersey, cannabis organizations continue to be hamstrung by the slowly evolving payments landscape. 

Challenges Exist

Cash is a leading form of payment in the cannabis sector. Accepting cash is an option for these enterprises, but it presents a security issue, may limit customer sales and provides a logistical headache particularly when considering the banking limitations imposed on the industry. Cash may be convenient on a retail basis, but when it comes to business-to-business (B2B) transactions, the feasibility of a cash-basis environment quickly diminishes. Resorting to paper checks may be a solution, however these businesses must hurdle federal banks’ hesitation to service cannabis businesses. 

Similarly, opening a credit card may not be possible for a cannabis business or its employees for day-to-day purchases. This simply exacerbates many of the existing issues with B2B payments and deprives cannabis organizations of the benefits associated with digital solutions. 

The cannabis industry also faces an additional hurdle: the inability to accurately and consistently provide trade credit. Granting credit to suppliers and wholesalers is a common industry practice. An influx of U.S. medicinal market advocates emerged in the 1990s, culminating in the passage of the Compassionate Use Act of 1996 in California. Since then, 41 states and territories have enacted a legal medicinal market, most of which are highly regulated with extreme barriers to entry. Therefore, those with the benefit of early access to the market are at an immense advantage. 

Payment Options and Risks

There are several non-cash solutions that have entered the marketplace to serve the payment processing needs of cannabis businesses, but none of them are a perfect solution and each has its own risks. These include the following:

• Debit card payments should be able to integrate with the company’s point of sale (POS) system to rule out the risk of error in the sale process. The organization will also need to source a bank willing to service their needs, although this challenge exists regardless of payment processing solutions.
• ACH payments use third-party solutions to facilitate customer payments, which incurs fees on the organizational side. Similar to debit card payments, these solutions should be able to integrate with the POS to rule out risk of error in the sales process, which raises compliance and regulatory ambiguity. 
• Cashless ATM payments and credit cards via third party are other options. While some businesses have assumed the risk of accepting credit or cashless ATM transactions as a form of payment, perhaps using a third-party to process the payments as a perceived workaround, this is a risk to the business. If found to be acting out of compliance, merchants may refuse revenues the business has earned but which have not yet been deposited, and providers may refuse services in the future. State regulators may also probe into any non-compliance, which could risk the company’s license to operate.  

Framed in this context, typical operational and accounting challenges are exacerbated for cannabis businesses. But hope is on the horizon. With companies like Microsoft and EY backing blockchain and cryptocurrency solutions for payment processing and B2B payments, we know they are not a mere conceptual idea or fringe item. The potential for blockchain and cryptoassets to form the basis of a payment system is a realistic solution for practitioners and entrepreneurs to consider. 

Read part two in this series: How Blockchain and Cryptoasset Banking Developments Could Enhance the Cannabis Marketplace

New Jersey Senate Resolution No. 183, which proposes the constitutional amendment to legalize cannabis for personal, non-medical use by adults, has ambiguous language relating specifically to cannabis only being subject to the Sales and Use Tax Act or any other subsequent law of similar effect. This speculation was validated upon the passage of S21 on Dec. 17 which, as of the date of this writing, was passed in the Senate and Assembly and is sitting on Governor Murphy’s desk pending additional changes that he has requested of lawmakers. Regarding the taxation of cannabis purchases, S21 provides the imposition of several consumption-based taxes, such as the following:

• Sales Tax — The standard New Jersey sales tax rate will apply to the sale of cannabis but will not apply to the points in the supply chain that are subject to the local cannabis transfer and user tax, discussed below. The bill provides that at least 70 percent of tax revenues from retail sales shall be appropriated to investments in impact zones, or municipalities that have been most adversely affected by criminal cannabis enterprises (e.g., law enforcement activity, unemployment, poverty or any combination thereof).
• Local cannabis transfer tax and user tax — This optional tax will be imposed on a municipality-by-municipality basis and can take place at various points in the supply chain including cultivator to cultivator, establishment to establishment, retailer to consumer, or any combination thereof. The municipality has the discretion to set the rate, but it may not exceed 2 percent at the cultivation, manufacturer and retailer levels, and 1 percent at the wholesaler level. If enacted at each point in the supply chain, it can be discerned that this may amount to an additional 7-percent tax.
• Social justice excise tax — The Cannabis Regulatory Commission has the authority to exercise a social justice excise tax, which will apply to sales at the cultivation level to adult-use sales only. While this tax will take the place of the sales tax at the cultivation level, the amount of excise fee to be charged is determined based on an inverse relationship to the price of the product; meaning as the cost of cannabis goes down, the tax goes up. Unlike the sales, transfer and user taxes, these funds are to be exclusively earmarked for investing in social equity programs.
• Stamp fee — As part of the Cannabis Regulatory Commission’s responsibility to develop and maintain a system for tracking the product from seed to sale, the Legislature has called for the use of stamps to affix to the product. The stamps will be available for purchase to those at the various points in the supply chain — cultivators, manufacturers, wholesalers, distributors, retailers and delivery services — and could, in effect, be viewed as a tax. While the bill does not provide the price of the stamps, it states that the price “shall be reasonable and commensurate with the cost of producing the stamp.”

The language in S21 provides that New Jersey cannabis sales are not only subject to the standard sales and use tax, and that it is the intention to enact “other subsequent law of similar effect.” It is also clear that the goal of the Legislature is to ensure revenues generated from these sales will primarily be invested into communities that have been adversely affected by the historic prohibition on cannabis. 

On Dec. 21, 2020, Congress passed the latest COVID-19 relief bill which was subsequently signed into law by President Trump on Dec. 27, 2020. There are several components of the bill including economic impact payments of $600 for eligible individuals (barring an increase to $2,000 per individual as requested by President Trump) and an extension of the Pandemic Unemployment Assistance (PUA) supplement in the amount of $300 per week. However, many business leaders have been eagerly awaiting the clarification surrounding PPP loan forgiveness and news of an additional round of PPP funding available to some businesses.

First, for existing PPP borrowers, the new bill creates a simplified loan forgiveness application process for loans of $150,000 or less. The application will be one page in length and will request:

• The number of employees the borrower was able to retain as a result of the loan
• The amount of the loan spent on payroll costs
• The total amount of the loan

No additional schedules will be required to be submitted (although borrowers must retain records for four years in the event of a Small Business Administration (SBA) audit).

Another big gift that the new bill bears is the tax deductibility of business expenses paid with forgiven PPP loans. This reverses the IRS’ position (Rev. Rul 2020-27, November 2020) that a taxpayer could not deduct eligible expenses in its 2020 tax year if, at the end of the tax year, the taxpayer had reasonable expectations of loan forgiveness.

Secondly, a new round of PPP loans (creatively called PPP2) will be funded with the new bill. PPP2 funds are available to the following first-time qualified borrowers:

• Businesses with 500 or fewer employees
• Sole proprietors, independent contractors, self-employed and not for profits — including churches and some 501(c)(6) business leagues

PPP2 funds are also available to borrowers who have previously received PPP loans provided they:

• Have 300 or fewer employees, and
• Have already or will use the full amount of their first PPP loan, and
• Can demonstrate a 25-percent decline in gross revenue in any 2020 quarter compared with the same quarter in 2019

The PPP2 loan amounts will be 2.5 times average monthly payroll costs, to a maximum of $2 million. Certain hotels and restaurants can apply for up to 3.5 times their average monthly payroll costs. The costs eligible for loan forgiveness with the PPP2 are the same as before — payroll, rent, covered mortgage interest and utilities — but this time add:

• Personal protective equipment (PPE)
• Expenditures to suppliers that are essential to the business’ ongoing operations
• Software and cloud computing services
• Accounting services

The year 2020 was like no other, and as this year comes to an end, it is important that we all take stock of where we are and try to get a better handle on where we might be going. Setting aside the health, societal and economic effects of the COVID-19 pandemic — difficult as that may be — there was quite a bit of activity and development in the blockchain and cryptoasset sectors that is worth noting.

Let’s take a look at several of the big-picture trends and directions that CPAs should be keeping an eye on as the calendar flips to 2021:

Stablecoins are the new bitcoin. Even as bitcoin fluctuates and trades above its previous all-time high set in 2017, the stablecoin sector of the cryptocurrency space continues to grow and accelerate. In addition to being worth tens of billions of dollars on its own, stablecoins are also at the center of the very same efforts that drive headlines at organizations like Visa. It could be argued that stablecoins are now the driving force behind further investment and development versus simply watching bitcoin prices.

This is not even touching on the rise of central bank digital currencies (CBDC) under development across the globe and, in some cases, already in the marketplace. Not only are cryptocurrencies evolving, but so are the players involved.

Institutions are driving the trends. Cryptocurrencies may have originated as a method by which individuals could access a financial payments infrastructure and as part of a system that was disconnected from incumbent players, but that narrative has turned around completely. At the end of 2020, the institutions that have launched blockchain and/or crypto projects include J.P. Morgan, PayPal, Visa, Mastercard, BlackRock and Fidelity. It is still too early to tell what the influence of these large incumbents will be, but it certainly has increased the attention of investors and regulators.

Although not exactly capturing the idealized vision of early bitcoin developers, large institutions — with the people and capital brought to the conversation — are going to play a critical role moving forward.

Regulation is catching up. Dozens of blockchain- and cryptoasset-related bills were put forward for debate in 2020. While none were passed, this increased focus — on top of actions by regulators such as the SEC and IRS — seems to indicate that regulations are on the way. These are not normally greeted with cheers, but to continue encouraging wider adoption and utilization it seems reasonable that more clear-cut rules will be necessary.

In December, the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act was introduced for debate in Congress, which, according to some market participants, could lead to unnecessary costs, complexity and obstacles to further development. Regardless of the specific legislation or individuals involved, regulation and compliance are playing an increasingly larger role in these sectors.

As the calendar flips to 2021, be sure to join and remain engaged with the NJCPA Emerging Technologies Interest Group and subscribe to the NJCPA Tech Talk Podcast  to keep up to date on everything technology related.

On Nov. 5, 2020, the NJCPA released a statement proposing the State of New Jersey decouple from Internal Revenue Code Section 280E for certain small businesses. Section 280E disallows legal cannabis businesses from taking ordinary and necessary business deductions as an offset to taxable income and is a costly compliance burden for regulated cannabis companies. The National Cannabis Industry Association estimates that cannabis businesses are typically subject to effective tax rates of 70 percent or higher after considering 280E disallowed deductions.

The NJCPA’s original proposal, which was issued in 2019, called for complete decoupling from 280E. This was a non-starter for legislators due to the state’s budgetary concerns. The current proposal calls for the enactment of a revenue threshold to determine eligibility for decoupling on a business-by-business basis. The suggested revenue threshold is $25 million. This stems from IRC §448, which was thrust into relevance upon ratification of the Tax Cuts and Jobs Act (TCJA) in 2017. The lower threshold also gives a leg up to small businesses looking to enter New Jersey’s cannabis marketplace which could otherwise become dominated by large, already-established companies.

Further, the Society has recommended that the state rely on the complete provisions of §448 for the purpose of making the “small business” determination. Of most notable value, §448 calls for related entities to aggregate their gross receipts for the purpose of the revenue threshold and precludes businesses that meet the definition of a tax shelter from obtaining the relevant tax benefit.

Keep up to date on the progress of the Society’s proposal and other cannabis-related news at njcpa.org/cannabis. And NJCPA members are invited to join the Cannabis Interest Group at njcpa.org/groups.

CPAs advising small business clients have a lot to discuss in light of COVID-19. Businesses that have reduced headcount, cut costs and implemented other strategic changes will want to evaluate their business model ahead of full business reopenings.

To help small business owners assess their options moving forward, here is a checklist that CPAs can use to discuss with them:

• Prepare a revised budget.
• Form an idea of when they can bring back their employees and service offerings and when additional investments in the business are warranted.
• Reach out to customers and vendors to assess any issues that may have cropped up over the last two months.
• Make sure you have a cash cushion or access to liquidity over the next few months. We are operating in a changed business landscape, and we should be cautious in how we deploy capital and resources moving forward.

Challenges Abound

Few small businesses in the U.S. have been unscathed by the pandemic. In our inaugural survey of 250 small businesses in the U.S. conducted in September in conjunction with Sapio Research, more than 80 percent lost revenue because of the pandemic at about 30 percent on average. To make up for this loss, they cut spending: 37 percent either furloughed or laid off staff. Sadly, 9 percent closed up shop for good and 5 percent plan to do so in the coming months.

In addition, more than 60 percent of those surveyed applied for a Paycheck Protection Program (PPP) loan of which 26 percent received one (including 41 percent of those in companies with 100 to 499 employees and just 17 percent of companies with less than 25 employees). These numbers imply that the Federal government could have done a much better job at communicating the rules, which changed and relaxed over time. Some small businesses didn’t apply because they weren’t sure if they’d even be allowed to reopen or whether they could meet the Federal government’s criteria. Others didn’t get funding because of capacity issues on the side of the lender. Some lenders were so overwhelmed they couldn't even answer small business questions related to lending and the application, while others felt that they were not being compensated appropriately and that they spent more on administering the loans than they made.

More than 60 percent of survey respondents recently attempted to renew a line of credit, of which half said they received stricter application criteria and/or an increase in interest rates or fees. In some cases, banks are denying them credit because they took out a PPP loan. In one anecdote, a bank told a client that if they were so concerned about the future of their business that they applied for a PPP loan, how could the bank feel confident to lend to them further?

While not advisable, more than 20 percent of those surveyed tapped into their personal savings; 8 percent borrowed from their retirement accounts; and 7 percent took out a personal loan. This is startling for a number of reasons. Tapping one’s retirement account is likely a measure of last resort for small business owners and demonstrates just how dire the situation is for many that they’d risk their own retirement for a business that could potentially fail. 

As the coronavirus pandemic rages on, many people are not able or open to connecting to do business in person. Take it from someone who thrives on planning live events, that’s okay. See it as an opportunity to master your virtual game.

CPAs need to continue finding innovative ways to virtually connect with colleagues, targets and clients. Consider some new-age virtual connection approaches to keep your contacts interested. Would a cooking demo, bingo, grilling 101, digital fortune telling or photography be of interest for your audience? While some of these may require calling in an outside expert or moderator, the end result of producing a memorable event and continuing to build upon meaningful relationships will be worth the investment. 

If your specific meeting purpose is more about delivering content or training, you’ll want to ensure your audience is provided with a valuable experience and walks away ready to sign up for your next session.

Focus on these key areas to boost your virtual presentation or training:

• Platform. As selecting the best venue is an important part of live event planning, make this an equal priority when deciding which virtual platform is most suitable to accommodating an impactful delivery. Will you need to share slides? Have two-way video functionality? Have attendees speak? Consider all of these factors before going too deep into agenda planning.
• Communication. Communicating before and after your event are equally important. Send a “save the date” early on. Create an informative invitation that covers meeting objectives, speakers/presenters, a high-level attendee summary and program length. A day-of confirmation reiterating how to log in is recommended since your attendees are likely participating in multiple virtual engagements daily. At the end of the event, send attendees a thank you message including a summary of any event polls or Q&A and offer a chance for them to submit feedback through an event survey. And keep the line of communication flowing with those who couldn’t attend by sharing presentation slides, thought leadership or Q&A if appropriate. 
• Audience engagement. You’ve decided on a platform and sent out the invitation, now what? How are you going to keep them attentive through a two-hour CPE session or overview of your tax report? Integrate simple, yet powerful, elements such as music upon log on, opening videos, ice breakers, polling questions or whiteboarding exercises. When planning your content sequence, make it a priority to gain your audience’s attention early on and keep their engagement level up.
• Visual. Keep your slides simple, and be mindful of font size and color. Attendees may differ in their sight, hearing or cognitive abilities. Make sure your speaker lifts their computer camera to eye level. When possible, position the speaker in front of natural light for a clear picture, and ensure backgrounds are minimal to reduce distractions.
• Audio. Using a headset or ear bud connection can ensure clear audio and that nearby noise is not heard by attendees. Mute all attendees except the speaker. Remember, leading a virtual meeting can bring unforeseen technological challenges or hiccups. That’s why having a rehearsal with speakers on your event platform a few days prior is so important.

It’s best to continue to build upon virtual event best practices and refine ways to hit the virtual bullseye. Why? Because mastering virtual events can have a significant impact on long-term growth, facilitating important connections and bringing prospects back for more.