Dentists: Should you layoff your employees OR take the forgivable loan (PPP)?

The CARES Act will be evolving over the next few weeks. As new guidelines are provided, we will update this article and continue to publish information to help small business owners make educated discussions for their practices. Here is our understanding of this new bill at this time.

Trying to determine what to do with your practice or business during this uncertain time can be overwhelming and confusing. 

Many dental and medical practices have been ordered to close except for emergencies. Other businesses are trying to work from home to adhere to the social distancing guidelines set forth by the Center for Disease Control and Prevention (CDC), essentially reducing your revenue severely during this time.

Everyone wants to do right by their employees but doing so could potentially put you out of business, especially since there is not a clear end date to this epidemic. 

Business Options (Payroll)

Since payroll is your biggest expense and the stimulus is focusing on small businesses being able to keep their employees on the payroll, we are going to look at what your options are regarding payroll. 

1.  Layoff (Furlough) Everyone: This will allow your employees to file for unemployment and bring your payroll to $0.

2. Reduce Employee Hours: Depending on your state ---- your employees may still apply for unemployment for a reduction of hours, allowing your employees to still have enough income to meet their family needs while you still employ them to meet emergency demand.

3. Apply for the PPP (Forgivable) Loan: The CARES Act creates an SBA 7(A) forgivable loan to support businesses keeping their payroll the same but turns the loan to a potential grant that is tax-free. This is potentially money that you will not have to pay back, based on expenses over an 8-week period during the covered period.

Should you layoff your employees now while you are temporarily closed or only available for emergencies?

The SBA 7(a) loan timeline is still unknown. My assumption is due to the volume of businesses applying.  The distribution of these loans may take a couple of weeks. Therefore, if you are only open for emergencies it may be better to “layoff” your employees, so they can get on unemployment for now.

This immediately reduces your biggest expense, helps alleviate the pressure of your cashflow and helps your employees have income.

How busy you are will be based on the number of “emergency” patients. It may help you determine whether you need to stay open or need staff.  

You have already laid off everyone, should you apply for the new SBA (PPP) Forgivable Loan or leave them on unemployment?

If you apply for the PPP forgivable Loan and have already laid off everyone, you will need to rehire them.  The loan is meant to keep your employees from not being unemployed.   You can rehire them once you are approved and get the loan.  

This loan can be forgiven turning it into a tax-free grant.  In order to qualify for forgiveness without a reduction, you need to:

• Keep the same number of employees as you had in the prior periods.

• And keep the same pay as before (on average) for employees under $100k

Some Dentists are just keeping their employees on unemployment until they can reopen.  Although this can be a good option, rehiring them and getting loan forgiveness may prove better.  

Why is the forgivable loan a better solution than closing and leaving everyone on unemployment?

1. The PPP forgivable loan will likely also cover you.

   •  Most Dentists and Optometrists are running their business as S-Corps, which means you are an employee as well. The act allows you to cover all payroll (Up to $100k of pay), which will include your pay as an employee.

2. The PPP forgivable loan covers group healthcare premiums.  If everyone is laid off then they may lose their health coverage.  

3. The PPP Forgivable loan also covers your employer retirement contributions. 

4. The PPP forgivable loan also covers some fixed expenses outside of payroll that still needs to be paid when closed, including 

   • Mortgage Interest or Rent

   • Utilities (i.e electric)

   • Telephone / Internet

   • Transportation

What is the best plan if your business has limited cashflow?

It depends on your practice. With limited cashflow, it may be better to

• Layoff your employees for the time being.

  • They can collect unemployment now. 

  • If you have cashflow and can afford to pay them while you wait on the loan and have work for them to do, then keeping them employed is an option.

• Apply for the SBA 7(a) PPP loan, and rehire them upon getting approved.

  •  On top of  putting you into a better financial position, it also gives you the ability to have working staff.

Due to the volume of businesses seeking this loan, we recommend doing this as soon as you can.  Even if you haven't fully committed, you can always pay it back or elect not to take it.  A major concern is that the number of businesses that will be applying will well exceed the available money.  If the loan money runs out then you have the option to leave your employees on unemployment. 

What can your employees do if you are not seeing patients?

Have you ever thought, if I could restart my practice I would do it differently? Or I don’t have time to work on my business instead of in my business?

Now is the time to work on these items. 

We will get through this and you will reopen. Use this time for you and your staff to work on your business when you are not seeing emergency patients.

Examples of big picture projects to work on include

• Develop a marketing plan.

  • Break it down as much as possible and have clear steps on how to implement it.

  • Create an Emergency Dental Service page on your website so your patients or new patients know what that process will look like amid this crisis.

  • Work on your website, Google My Business, FaceBook page, review sites, and other local marketing efforts.

• Update your systems and processes.

  • Create checklists to ensure your staff is following consistent procedures

  • Edit your operations manual.

• Go Digital.

• Update your Software.
  • Are you thinking of changing your practice management system? One dentist is making the change to Open Dental during this time.
    
    
• Work on your patient experience.
  • The patient experience starts when they call your office to how and when they pay their bill.  Write down each step from the they take in between and create an elevated and consistent process. 

• Dive into your books to understand your numbers.

• Review your accounts receivable or AR process

• Take some online ce's to increase your skills.

• Create a plan for when you reopen
  • Plan for the best way to reach out to patients to get them back on the schedule.
  • How to schedule patients as there will be many more that are due for care
  • Plan for patients losing their dental insurance and how you can still accommodate them

This will end, but the work you put in now can help position your practice to hit the ground running as things settle down. If you need help navigating all of this, reach out to us today. DeLucia CPA is here to help you succeed.