COVID-19 financial focus: Veterinary practice financial FAQs and 8 action items for managing the pandemic
I’m writing this post on the morning of March 19th. It is almost certain that by the time you read this, additional initiatives will be in place. Things are changing rapidly and we know the news services are struggling to make sense of information disseminated at news conferences with no written documentation to back it up.
Visit the COVID-19 page for more resources and an interactive Veterinary Industry Impact Tracker.
COVID-19 Financial FAQs
As of 3/23/2020
Yes. The IRS issued Notice 2020-18 that postpones the April 15, 2020 filing and payment deadlines to July 15, 2020. The new notice supersedes the previously issued Notice 2020-17 which provided a limited three-month deferral for tax payments due on April 15, 2020. Under the new notice, the date for affected taxpayers to file Federal income tax returns and make Federal income tax payments due on April 15, 2020 is postponed to July 15, 2020. An “affected taxpayer” includes an individual, trust, estate, partnership, association, company or corporation. The notice also specifically provides that taxpayers are not required to request an extension of time to file on Form 4868 or Form 7004 in order to take advantage of the postponement.
Congress passed and the president signed a new law that contains additional paid leave and employer tax credits. The law creates a new benefit called “emergency paid leave.” The benefit is very specific and in all cases is only available if you are directly affected by the COVID-19 virus. The most lenient part of the definition allows for leave if the employee has to care for a child whose school or child care facility has closed due to the virus. Explanation of the details are complicated, so check with your accountant as the details of the law become available. The law provides authority to the Secretary of Labor to grant an exemption for employers with 50 or fewer employees if implementing the rules would jeopardize the viability of the business. We expect most veterinary hospitals will not be mandated to provide the additional leave if they are unable to comply.
There are some states proactively deferring due dates and payment dates on everything from license renewal to filing state payroll tax returns. Check with your local and state jurisdictions for updates.
Maybe. As of today, there is just talk. The Treasury Secretary has said openly the Trump administration plans to send checks to individual Americans. There are no details and Congress would have to approve any disbursement, so stay tuned.
8 financial action items veterinary practices can take today
- Minimize expenditures
This seems simple, but now is the time to take a hard look at expenses. Look at your budget (now might be a good time to create that budget!) and adjust as needed.
- Watch your numbers
Align the cash leaving the practice with the revenue coming in. Knowing your income and expense numbers is more important now than ever! Understand what is happening with patient visits, revenue per patient, and cancellations, and try to find relevant benchmarks to see how you’re doing.
- Defer principal payments
Contact your bank and ask if you can switch to interest-only payments for some period of time.
- Change doctor payroll
Suspending the doctor’s payroll and only taking necessary draws will conserve cash and save the payroll taxes. Deferred payroll and retirement contributions can be made up at a later date when the dust settles.
- Offer payment options
Now is not the time to extend credit to clients if you can avoid it. There are many options available to help clients with extended terms, take advantage of them.
- Consider alternate delivery methods
Vet-sponsored home delivery not only preserves your inventory, it also allows the client to order from the convenience of their home. The recent hype surrounding telemedicine doesn’t seem so far fetched today. Take a look at the telemedicine options available to veterinarians today.
- Maintain stock
We are not encouraging hoarding, but take a look at your medication and supplies inventory. Shortages are becoming more and more common as the crisis unfolds.
- Negotiate with suppliers
If cash flow becomes an issue, talk with your distributors about extending terms on amounts due. Be proactive! Don’t wait until the bills are due and you are out of money.
Keep an eye on small business loans
The Small Business Administration (SBA) is working to provide targeted, low-interest loans up to $2 million to small businesses in designated areas. The SBA disaster loans are just one piece of their focus. Watch for news as different programs unfold.
Keep calm and conserve cash
Conserving cash flow should be top of mind for the near term. Monitor this situation for changes daily and consult your accounting team for information and assistance.
Glenn Hanner is the tax and consulting partner in charge of the veterinary medicine practice at Whitley Penn, LLP. He has over 30 years experience helping veterinarians navigate the complex world of accounting. In addition to being a CPA, Glenn is a Certified Information Technology Professional and a Certified Valuation Analyst. As part of the VetBooks team, he is committed to helping veterinarians create long term value for their practices and to achieve their professional goals.