Skip to Main Content

insightsarticles

Segmenting accounts receivable reports: How to use your reports to understand where you are

11.28.17

In a previous blog post, “Six Steps to Gain Speed on Collections”, we discussed the importance of regular reviews of long-term care facility financial performance indicators and benchmarks, and suggestions to speed up collections. We also noted that knowledge of your facility’s current payer mix is critical to understanding days in accounts receivable (A/R).

The purpose of a regular A/R review is to facilitate prompt and complete collections by identifying trends and potential system issues and then implementing an action plan. Additionally, an A/R review is used to report on certain regulatory compliance requirements, and could help management identify staff training and development needs. Here are some tips on how to make your review both effective and efficient.

  • Practice professional skepticism. Generate your own A/R reports. While your staff may be competent and trustworthy, it is a good habit to get information directly from your billing system.
     
  • Understand your revenue cycle calendar. A common approach is to generate A/R reports at the end of each month. While you can generate reports at any time, always ask your staff whether all recent cash receipts and adjustments have been posted.
     
  • Know your software. Billing software usually has a few pre-set A/R reports available, and you can customize some of them to simplify your review and analysis. Consult with your IT department or software vendor to gain a better understanding of available report types, parameters, options and limitations. Three frequently-used reports are:

    A/R Transaction Report: This report shows selected transaction details (date, payer, account, transaction type) and can help you understand changes in those parameters. Start with a “summary by type” then drill down to further detail if needed. Run and review this report monthly to identify any unexpected write-offs or adjustments in the prior period.

    A/R Aging Report: This report breaks A/R data into aging buckets (current, 30, 60, 90, etc.). It is used to fine-tune collection efforts and evaluate a bad debt allowance (as older balances are less likely to be collected). Using a higher number of buckets will provide more detailed information, and replacing “age” of accounts with a “month” label will make it easier to see trends in month-to-month changes. Your facility’s payer mix will determine a reasonable “Days in A/R” benchmark. Generally, you should see the most dramatic drop in open accounts within 30 days for Medicare, Medicaid and private payers; and within 60-90 days for other payers. Focus your staff’s attention on balances nearing 300 days, as many insurers have a claim filing limit of one year from the service date. Develop an action plan to follow up within two to three weeks.

    Unbilled Claims Report: This report shows un-submitted claims. Discuss unbilled claims with your staff, understand why they are unbilled to reduce the number of un-submitted claims, and develop an action plan for submission to responsible parties.
     
  • Understand available report formats. Billing software usually offers the option to run reports in different file formats (web, PDF, Excel, etc.). Know your options and select the one you are most comfortable with. We recommend Excel for easy data analysis and trending.
     
  • Segment, segment, segment — and look for trends! Data segmentation and filtering is the best approach to effective and efficient A/R review. At a minimum, you should be separating Medicare A, Medicare B, Medicare Advantage, Medicaid, private pay, pending/presumed Medicaid and any other payers with a particularly high volume of claims. The differences in timing of billing, complexity, compliance requirements, benchmarking and submission of claim methods warrant a separate, more-detailed review of claims. Here are some examples of what to look for.

    Medicare: An open claim will hold payments for all following claims within that stay. Instruct your billing team to ensure claim submission, and review any rejected or suspended claims. Carefully analyze any Medicare credits. Small credit and debit balances may indicate errors in the rate-setting module of your software. Review for rate changes, contractual adjustments and sequestration set up. Review any credit balances over $25 for potential overpayment. These credits have to be corrected in that quarter or listed on your quarterly credit balance report to Medicare. Balances of $160 or more may indicate incorrectly calculated co-pay days, while balances over $200 may indicate billing for an incorrect number of days. Medicare has a one-year limit on submitting claims so act promptly to resolve any balances over 300 days.

    Medicaid: Open balances may indicate eligibility gaps, changes in coverage levels, rate set-up errors or incorrect classification as primary or secondary payer. This payer also has a one-year limit on submitting claims. Again, act promptly to resolve any balances over 300 days.

    Pending/Presumed Medicaid: Medicaid application processing times vary by state. Normally eligibility is determined within a few months at the most. Open claims older than 120 days should be investigated promptly.
     
  • Filter data for the highest and lowest balances. Focus on your five to ten highest balances and work with staff to resolve. Discuss reasons for any credit balances with staff, as regulations often require a prompt refund or claim adjustment. Credit balances could also indicate incorrectly posted payments (to the wrong patient account or service date). Instruct staff to routinely review and resolve credits to prevent collection activities on paid-off accounts. 

Ask questions, follow up and recognize good work. If you notice an improvement in your facility’s A/R report, make sure you recognize team and individual efforts. If improvements are slow to come, discuss obstacles with staff, refine your A/R reporting, and review the plan as needed.

Related Services

Consulting

Business Advisory

Follow these six steps to help your senior living organization improve cash flow, decrease days in accounts receivable, and reduce write offs.

From regulatory and reimbursement rule changes to new software and staff turnover, senior living facilities deal with a variety of issues that can result in eroding margins. Monitoring days in accounts receivable and creeping increases in bad debt should be part of a regular review of your facility’s financial indicators.

Here are six steps you and your organization can take to make your review more efficient and potentially improve your bottom line:

Step 1: Understand your facility’s current payer mix.

Understanding your payer mix and various billing requirements and reimbursement schedules will help you set reasonable goals and make an accurate cash flow forecast. For example, government payers often have a two-week reimbursement turn-around for a clean claim, while commercial insurance reimbursement may take up to 90 days. Discovering what actions you can take to keep the payment process as short as possible can lessen your average days in accounts receivable and improve cash flow.

Step 2: Gain clarity on your facility’s billing calendar.

Using data from Step 1, review (or develop) your team’s billing calendar. The faster you send a complete and accurate bill, the sooner you will receive payment.

Have a candid discussion with your billers and work on removing (or at least reducing) existing or perceived barriers to producing timely and accurate bills. Facilities frequently find opportunities for cash flow optimization by communicating their expectations for vendors and care partners. For example, some facilities rely on their vendors to provide billing logs for therapy and ancillary services in order to finalize Resource Utilization Groups (RUGs) and bill Medicare and advantage plans. Delayed medical supply and pharmacy invoices frequently hold up private pay billing. Working with vendors to shorten turnaround time is critical to receiving faster payments.

Interdependencies and areas outside the billers’ control can also negatively influence revenue cycle and contribute to payment delays. Nursing and therapy department schedules, documentation, and the clinical team’s understanding of the principles of reimbursement all play significant roles in timeliness and accuracy of Minimum Data Sets (MDSs) — a key component of Medicare and Medicaid billing. Review these interdependencies for internal holdups and shorten time to get claims produced.

Step 3: Review billing practices.

Observe your staff and monitor the billing logs and insurance claim acceptance reports to locate and review rejected invoices. Since rejected claims are not accepted into the insurer’s system, they will never be reflected as denied on remittance advice documents. Review of submitted claims for rejections is also important as frequently billing software marks claims as billed after a claim is generated. Instruct billers to review rejections immediately after submitting the bill, so rework, resubmission, and payment are timely.

Encourage your billers to generate pull communications (using available reporting tools on insurance portals) to review claim status and resolve any unpaid or suspended claims. This is usually a quicker process than waiting for a push communication (remittance advice) to identify unpaid claims.

Step 4: Review how your facility receives payments.

Challenge any delays in depositing money. Many insurance companies offer payment via ACH transfer. Discuss remote check deposit solutions with your financial institution to eliminate delays. If the facility acts as a representative payee for residents, make sure social security checks are directly deposited to the appropriate account. If you use a separate non-operating account to receive residents’ pensions, consider same day bill pay transfer to the operating account.

Step 5: Review industry benchmarks.

This is critical to understanding where your facility stands and seeing where you can make improvements. BerryDunn’s database of SNF Medicare cost reports filed for FY 2015 - 2018 shows:

Skilled Nursing Facilities: Days in Accounts Receivable

Step 6: Celebrate successes!

Clearly some facilities are doing it very well, while some need to take corrective action. This information can also help you set reasonable goals overall (see Step 1) as well as payer-specific reimbursement goals that make sense for your facility. Review them with the revenue cycle team and question any significant variances; challenge staff to both identify reasons for variances and propose remedial action. Helping your staff see the big picture and understanding how they play a role in achieving department and company goals are critical to sustaining lasting change AND constant improvement.

Change, even if it brings intrinsic rewards (like decreased days in accounts receivable, increased margin to facilitate growth), can be difficult. Acknowledge that changing processes can be tough and people may have to do things differently or learn new skills to meet the facility’s goal. By celebrating the improvements — even little ones — like putting new processes in place, you encourage and engage people to take ownership of the process. Celebrating the wins helps create advocates and lets your team know you appreciate their work. 

To learn more, contact one of our revenue cycle specialists.

Article
Six steps to gain speed on collections

Cost increases and labor issues have contributed to the rise of outsourcing as an option for senior living and health care providers.  While outsourcing of all types is a growing trend — from the C-suite to food service, it is a decision that should be considered carefully, as lack of planning could result in significant long-lasting financial, public relations and personnel losses. Let’s examine the outsourcing of billing services and collections.

If you are concerned with efficiencies and focusing on your core business needs — nursing care and rehabilitation — then your facility owners and management may have or are currently considering outsourcing one or both end stages of the revenue cycle.

There are some compelling reasons to outsource.

When choosing to outsource, your facility can reduce or even eliminate the challenge of keeping up with increasing complexities of medical billing, staff development and retraining, software costs, and workforce challenges. Smaller facilities can mitigate billing office resource shortages caused by staff vacations, medical leaves and turnover via outsourcing portions of their revenue cycle processes.

Because of a variety of software options, extensive coding and evolving reimbursement policies, professional billing and collection companies may be more efficient, delivering a stronger cash flow by reducing the rate of denied or rejected claims and assuring accurate coding. As facilities normally pay either a “per claim” fee or a percentage of their patient service revenue for this service, the facility’s cost fluctuates with changes in census or payer mix. Facilities may serve their customers better by decreasing insurance denials and reducing balance transfers to patients.

Outsourcing may help organizations to focus on their core business: senior living services.

Your facility should assess your organization’s readiness, fit and contract limitations prior to outsourcing. Here are some things to consider.

1. Be accountable. It is your facility’s ultimate responsibility to comply with all applicable rules and regulations, including HIPAA. And while signing a business associate agreement is a step in right direction, it may not guarantee peace of mind.

  • Ask a potential vendor about data transmission, storage, sharing, access and destruction policies, as well as processes designed to monitor compliance. Question any recent breaches or unauthorized access incidents — how were they handled? As HIPAA non-compliance and unauthorized access to protected health information (PHI) may result in financial penalties and bad publicity, you should evaluate the need to consult with an expert.
  • Ensure the vendor knows your state’s facility licensing regulations. For example, some states prohibit charging patients or residents any collection fees. Some states or payers require refunds for any overpayments to within certain defined periods. A good vendor will meet your state’s regulations. Ask to review their standard collection forms and collection procedures and protect your organization from unexpected non-compliance tags. 

2. Communicate. Discuss what information they require, when, in what format, and how they will make corrections. In-house billing staff can normally access a resident’s medical file, whether electronic or paper, or inquire with the facility operations team regarding a particular claim. This is not the case with an external vendor. 

  • To outsource effectively, you need to designate an in-house position to respond to missing information requests promptly. Facilities operating on web-based medical records software should evaluate the risks of granting a billing vendor even limited access to residents’ electronic medical files.
  • Review contract terms for any up charges assessed by the vendor if your facility can’t respond to information requests in a timely fashion. 

3. Understand and agree upon the scope of the contract. Contract scope misunderstanding can have long-lasting financial implications for the facility, and result in increased bad debt. Your management team should compile a list of assumptions and agreement terms not stated clearly in the contract, and address them in a meeting before accepting the terms. At a minimum, get answers to these questions:

  • Is the vendor submitting bills for all types of payers, levels of care and billing forms, including private, private long-term care insurance, adult day and outpatient, or only certain electronic claims?
  • Is the vendor responsible for notifying your organization of any delays with claim processing, payer requests for supporting medical records and any other identified administrative requests and rejections? If so, how fast and in what format?
  • Is the vendor responsible for assisting with regulatory compliance reporting, such as required data for a cost report preparation, audit, etc.?
  • What minimum quality assurance steps does the vendor apply when generating and processing claims, and how do they remedy identified issues?
  • Is the vendor only submitting bills or are they also working on collections?
  • Is the facility or a vendor responding to resident requests for additional information or questions about the billing statements?

4. Maintain alignment with the organization’s philosophy and vision. As with any other area of operations you consider outsourcing, outsourcing billing and collections requires careful examination of its impact on customer service and community relations. If a vendor produces co-pay and private pay invoices or statements, will you have control over the format and presentation of these mailings? If a vendor is engaged to perform collections follow up, your management team needs to understand collections procedures and methods used and ensure they are a good fit with your mission.

5. Set goals and benchmarks. Your management should analyze days in accounts receivable, accounts receivable aging trends, and cash as a percent of net revenue monthly, and then meet with the vendor promptly to understand the causes of any undesired trends and work on remedial plan. 

6. Understand your organization’s reasons for outsourcing. If your facility struggles with completing resident pre-admission screening, obtaining prior authorizations, or staying on top of Medicaid applications and recertifications — stop. Outsourcing is very unlikely to remedy these situations and could even make them worse. We recommend seeking the assistance of an experienced revenue cycle or process improvement consultant before outsourcing any portion of the billing and collections process.

The BerryDunn Senior Living team welcomes your feedback, and is always one phone call or email away, should your organization need to take a deeper look at revenue cycle and process improvement opportunities.

Article
Can outsourcing increase revenues and reduce cycle time? Yes, if it's the right fit

Read this if you administer a 401(k) plan.

On December 20, 2019, the Setting Every Community up for Retirement Enhancement (SECURE) Act was signed into law. The SECURE Act makes several changes to 401(k) plan requirements. Among those changes is a change to the permissible minimum service requirements.  
 
Many 401(k) retirement plan sponsors have elected to set up minimum service requirements for their plan. Such requirements help eliminate administrative burden of offering participation to part-time employees who may then participate in the plan for a short period of time and then keep their balance within the plan. Although plan sponsors do have the ability to process force-out distributions for smaller account balances, a minimum service requirement, such as one year of service, can help eliminate this situation altogether.  

Long-term part-time employees now eligible

The SECURE Act will now require that long-term part-time employees be offered participation in 401(k) plans if they are over the age of 21. The idea behind the requirement is that 401(k) plans are responsible for an increasingly larger amount of employees’ retirement income. Therefore, it is essential that part-time employees, some of which may not have a full-time job, have the ability to save for retirement.  
 
Long-term is defined as any employee who works three consecutive years with 500 or more hours worked each year. This new secondary service requirement becomes effective January 1, 2021. Previous employment will not count towards the three-year requirement. Therefore, the earliest a long-term part-time employee may become eligible to participate in a plan under the secondary service requirement is January 1, 2024.  

403(b) plans not affected 

Please note this provision is only applicable for 401(k) plans and does not impact 403(b) plans, which are subject to universal availability. Furthermore, although long-term part-time employees will be allowed to make elective deferrals into 401(k) plans, management may choose whether to provide non-elective or matching contributions to such participants. These participants also may be excluded from nondiscrimination and top-heavy requirements.  
 
This requirement will create unique tracking challenges as plans will need to track hours worked for recurring part-time employees over multiple years. For instance, seasonal employees who elect to work multiple seasons may inadvertently become eligible. We recommend plans work with their record keepers and/or third-party administrators to implement a tracking system to ensure participation is offered to those who meet this new secondary service requirement. If a feasible tracking solution does not exist, or plans do not want to deal with the burden of tracking such information, plans may also consider amending their minimum service requirements by reducing the hours of service requirement from 1,000 hours to 500 hours or less. However, this may allow more employees to participate than under the three-year, 500-hour requirement and may increase the employer contributions each year. 

If you have questions regarding your particular situation, please contact our Employee Benefit Audits team. We’re here to help.

Article
New permissible minimum service requirements for 401(k) plans

Read this if you are a Maine business or organization that has been affected by COVID-19. 

The State of Maine has released a $200 million Maine Economic Recovery Grant Program for companies and organizations affected by the COVID-19 pandemic. Here is a brief outline of the program from the state, and a list of eligibility requirements. 

“The State of Maine plans to use CARES Act relief funding to help our economy recover from the impacts of the global pandemic by supporting Maine-based businesses and non-profit organizations through an Economic Recovery Grant Program. The funding originates from the federal Coronavirus Relief Fund and will be awarded in the form of grants to directly alleviate the disruption of operations suffered by Maine’s small businesses and non-profits as a result of the COVID-19 pandemic. The Maine Department of Economic & Community Development has been working closely with affected Maine organizations since the beginning of this crisis and has gathered feedback from all sectors on the current challenges.”

Eligibility requirements for the program from the state

To qualify for a Maine Economic Recovery Grant your business/organization must: 

  • Demonstrate a need for financial relief based on lost revenues minus expenses incurred since March 1, 2020 due to COVID-19 impacts or related public health response; 
  • Employ a combined total of 50 or fewer employees and contract employees;
  • Have significant operations in Maine (business/organization headquartered in Maine or have a minimum of 50% of employees and contract employees based in Maine); 
  • Have been in operation for at least one year before August 1, 2020; 
  • Be in good standing with the Maine Department of Labor; 
  • Be current and in good standing with all Maine state payroll taxes, sales taxes, and state income taxes (as applicable) through July 31, 2020;
  • Not be in bankruptcy; 
  • Not have permanently ceased all operations; 
  • Be in consistent compliance and not be under any current or past enforcement action with COVID-19 Prevention Checklist Requirements; and 
  • Be a for-profit business or non-profit organization, except
    • Professional services 
    • 501(c)(4), 501(c)(6) organizations that lobby 
    • K-12 schools, including charter, public and private
    • Municipalities, municipal subdivisions, and other government agencies 
    • Assisted living and retirement communities 
    • Nursing homes
    • Foundations and charitable trusts 
    • Trade associations 
    • Credit unions
    • Insurance trusts
    • Scholarship funds and programs 
    • Gambling 
    • Adult entertainment 
    • Country clubs, golf clubs, other private clubs 
    • Cemetery trusts and associations 
    • Fraternal orders 
    • Hospitals, nursing facilities, institutions of higher education, and child care organizations (Alternate funding available through the Department of Education and Department of Health and Human Services for hospitals, nursing facilities, child care organizations, and institutions of higher education.)

For more information

If you feel you qualify, you can find more details and the application here. If you have questions about your eligibility, please contact us. We’re here to help. 

Article
$200 Million Maine Economic Recovery Grant Program released

Read this if your organization, business, or institution is receiving financial assistance as a direct result of the COVID-19 pandemic.

Updated: September 8, 2020

We expect to receive guidance on how to determine what qualifies as lost revenue sometime in the fall, and will post additional information when that becomes available. If you would like the information sent to you directly, please contact Grant Ballantyne.

New information continues to surface about the reporting requirements of the CARES Act Provider Relief Funds (PRFs). The most recent news published by the Health Resources and Services Administration (HRSA) states the funds will be subject to the Single Audit Act requirements. What does this mean and how does it impact your organization? Here’s a brief synopsis. 

A Single Audit (often referred to as a Uniform Guidance audit) is required when total federal grant expenditures for an organization exceed $750,000 in a fiscal year. It is important to note that while an organization may have received funds exceeding the threshold, it is the expenditure of these funds that counts toward the Single Audit threshold.  

PRFs help with healthcare-related expenses or lost revenue attributable to COVID-19. Guidance on what qualifies as a healthcare-related expense or lost revenue is still in process, and regular updates are posted on the FAQs of the US Department of Health & Human Services website.

You may remember, there were originally quarterly reporting requirements related to PRFs. On June 13, 2020 HHS updated their FAQ document to reflect a change in quarterly reporting requirements related to PRFs. According to the updated language, “Recipients of Provider Relief Fund payments do not need to submit a separate quarterly report to HHS or the Pandemic Response Accountability Committee. HHS will develop a report containing all information necessary for recipients of Provider Relief Fund payments to comply with this provision.”

Organizations that receive more than $150,000 in PRFs must still submit reports to ensure compliance with the conditions of the relief funds, but the content of the reports and dates on which these are due is yet to be determined (as of August 4, 2020). The key distinction to remember here is that this limit is based on total funds received, regardless of whether or not expenditures have been made. 

As more information comes out, we will update our website. At the moment the main takeaways are:

  • Expending $750,000 of combined relief funds and other federal awards will trigger a Single Audit
  • Receiving $150,000 of PRFs will cause reporting requirements, on a to-be-determined basis
  • Tracking PRF expenditures throughout the fiscal year will be essential for the dual purpose of reporting expenditures and accumulating any potential Single Audit support

If you would like to speak with a BerryDunn professional about reporting under the Single Audit Act, please contact a member of our Single Audit Team.

Article
Provider Relief Funds Single Audit

Read this if your organization, business, or institution is receiving financial assistance as a direct result of the COVID-19 pandemic.

Updated: August 5, 2020

Many for-profit and not-for-profit organizations are receiving financial assistance as a direct result of the COVID-19 pandemic. While there has been some guidance, there are still many unanswered questions. One unanswered question has been whether or not any of this financial assistance will be subject to the Single Audit Act. Good news―there’s finally some guidance:

  • For organizations receiving financial assistance through the Small Business Administration (SBA) Payroll Protection Program (PPP), the SBA made the determination that financial assistance is not subject to the Single Audit.
  • The other common type of financial assistance through the SBA is the Emergency Injury Disaster Loan (EIDL) program. The SBA has made the determination that as these are direct loans with the federal government, they will be subject to the Single Audit. 

It is unlikely there will be guidance within the 2020 Office of Management and Budget (OMB) Compliance Supplement related to testing the EIDL program, as the Compliance Supplement anticipated in June 2020 will not have any specific information relative to COVID-19. The OMB announced they will likely be issuing an addendum to the June supplement information specific to COVID-19 by September 2020.

Small- and medium-sized for-profit organizations, and now not-for-profit organizations, are able to access funds through the Main Street Lending Program, which is comprised of the Main Street New Loan Facility, the Main Street Priority Loan Facility, the Main Street Expanded Loan Facility, the Nonprofit Organization New Loan Facility, and the Nonprofit Organization Expanded Loan Facility. We do not currently know how, or if, the Single Audit Act will apply to these loans. Term sheets and frequently asked questions can be accessed on the Federal Reserve web page for the Main Street Lending Program.

Not-for-profits have also received additional financial assistance to help during the COVID-19 pandemic, through Medicare and Medicaid, and through the Higher Education Emergency Relief Fund (HEERF). While no definitive guidance has been received, HEERF funds, which are distributed through the Department of Education’s Education Stabilization Fund, have been assigned numbers in the Catalog of Federal Domestic Assistance, which seems to indicate they will be subject to audit. We are currently awaiting guidance if these programs will be subject to the Single Audit Act and will update this blog as that information becomes available.

Healthcare providers are able to access Provider Relief Funds (PRF) through the US Department of Health & Human Services. PRF help with healthcare-related expenses or lost revenue attributable to COVID-19. Guidance on what qualifies as a healthcare-related expense or lost revenue is still in process, and regular updates are posted on the FAQs of the US Department of Health & Human Services website. According to the Health Resources and Services Administration (HRSA), PRF funds will be subject to the Single Audit Act requirements. It is important to note that while an organization may have received funds exceeding the threshold, it is the expenditure of these funds that counts toward the Single Audit threshold.

If you have questions about accounting for, or reporting on, funds that you have received as a result of the COVID-19 pandemic, please contact a member of our Single Audit Team. We’re here to help.

Article
COVID-19: Single audit and uniform guidance clarifications

Read this if your company is considering outsourced information technology services.

For management, it’s the perennial question: Keep things in-house or outsource?

For management, it’s the perennial question: Keep things in-house or outsource? Most companies or organizations have outsourcing opportunities, from revenue cycle to payment processing to IT security. When deciding whether to outsource, you weigh the trade-offs and benefits by considering variables such as cost, internal expertise, cross coverage, and organizational risk.

In IT services, outsourcing may win out as technology becomes more complex. Maintaining expertise and depth for all the IT components in an environment can be resource-intensive.

Outsourced solutions allow IT teams to shift some of their focus from maintaining infrastructure to getting more value out of existing systems, increasing data analytics, and better linking technology to business objectives. The same can be applied to revenue cycle outsourcing, shifting the focus from getting clean bills out and cash coming in, to looking at the financial health of the organization, analyzing service lines, patient experience, or advancing projects.  

Once you’ve decided, there’s another question you need to ask
Lost sometimes in the discussion of whether to use outsourced services is how. Even after you’ve done your due diligence and chosen a great vendor, you need to stay involved. It can be easy to think, “Vendor XYZ is monitoring our servers or our days in AR, so we should be all set. I can stop worrying at night about our system reliability or our cash flow.” Not true.

You may be outsourcing a component of your technology environment or collections, but you are not outsourcing the accountability for it—from an internal administrative standpoint or (in many cases) from a legal standpoint.

Beware of a false state of confidence
No matter how clear the expectations and rules of engagement with your vendor at the onset of a partnership, circumstances can change—regulatory updates, technology advancements, and old-fashioned vendor neglect. In hiring the vendor, you are accountable for oversight of the partnership. Be actively engaged in the ongoing execution of the services. Also, periodically revisit the contract, make sure the vendor is following all terms, and confirm (with an outside audit, when appropriate) that you are getting the services you need.

Take, for example, server monitoring, which applies to every organization or company, large or small, with data on a server. When a managed service vendor wants to contract with you to provide monitoring services, the vendor’s salesperson will likely assure you that you need not worry about the stability of your server infrastructure, that the monitoring will catch issues before they occur, and that any issues that do arise will be resolved before the end user is impacted. Ideally, this is true, but you need to confirm.

Here’s how to stay involved with your vendor
Ask lots of questions. There’s never a question too small. Here are samples of how precisely you should drill down:

  • What metrics will be monitored, specifically?
  • Why do the metrics being monitored matter to our own business objectives?
  • What thresholds must be met to notify us or produce an alert?
  • What does exceeding a threshold mean to our business?
  • Who on our team will be notified if an alert is warranted?
  • What corrective action will be taken?

Ask uncomfortable questions
Being willing to ask challenging questions of your vendors, even when you are not an expert, is critical. You may feel uncomfortable but asking vendors to explain something to you in terms you understand is very reasonable. They’re the experts; you’re not expected to already understand every detail or you wouldn’t have needed to hire them. It’s their job to explain it to you. Without asking these questions, you may end up with a fairly generic solution that does produce a service or monitor something, but not necessarily all the things you need.

Ask obvious questions
You don’t want anything to slip by simply because you or the vendor took it for granted. It is common to assume that more is being done by a vendor than actually is. By asking even obvious questions, you can avoid this trap. All too often we conduct an IT assessment and are told that a vendor is providing a service, only to discover that the tasks are not happening as expected.

You are accountable for your whole team—in-house and outsourced members
An outsourced solution is an extension of your team. Taking an active and engaged role in an outsourcing partnership remains consistent with your management responsibilities. At the end of the day, management is responsible for achieving business objectives and mission. Regularly check in to make sure that the vendor stays focused on that same mission.

Article
Oxymoron of the month: Outsourced accountability

Read this if your company is seeking assistance under the PPP.

The rules surrounding PPP continue to rapidly evolve. As of June 22, 2020, we are anticipating some additional clarifications in the form of an interim final rule (or IFR) and additional answers to frequently asked questions (FAQ). The FAQs were last updated on May 27, 2020. For the latest information, please be sure to check our website or the Treasury website.

A few important changes:

  1. The loan forgiveness application, and instructions, have been updated.
  2. There is a new EZ form, designed to streamline the forgiveness process, if borrowers meet certain criteria.
  3. Changes now allow for businesses to use 60% of the PPP loan proceeds on payroll costs, down from 75%.
  4. Businesses now have 24 weeks to use the loan proceeds, rather than the original eight-week period (or by December 31, 2020, whichever comes earlier).
  5. The rules around what is a full-time equivalent (FTE) employee and the safe harbors with respect to employment levels and forgiveness have been clarified.
  6. Entities can defer payroll taxes through the ERC program, even if forgiveness is granted.

These changes are designed to make it easier to qualify for loan forgiveness. In the event you do not qualify for loan forgiveness, you may be able to extend the loan to five years, as opposed to the original two years.

The relaxation on FTE reductions is significant. The reductions will NOT count against you when calculating forgiveness, even if you haven’t restored the same employment level, if you can document that:

  • you offered employment to people and they refused to come back, or
  • HHS, CDC, OSHA or other government intervention causes an inability to “return to the same level of business activity” as of 2/15/2020.

As of June 20, 2020, there was still an additional $128 billion in available funds. The program is intended to fund new loans through June 30, 2020. 

We’re here to help.
If you have questions about the PPP, contact a BerryDunn professional.

Article
PPP loan forgiveness: Updates