COVID-19 Webinars: Supporting Businesses in a Time of Crisis | Webinar #4

Financial Assistance and Planning During the Covid-19 Pandemic BERMAN FISHER LIMITED CHAMBER OF COMMERCE

Lauren Christie ACA, CFA, CPI Head of Accounting & Advisory Berman Fisher Limited Visit: Email: Call:

www.bermanfisher.com lauren@bermanfisher.com +1 345 928 4751

Contents 

CICBD Programs



Financial Analysis



Cash Flow Forecasting



Accounting & Operational Efficiencies



Breathe



Weather The Storm?



Employee Leave, Severance & Pay



Cayman Islands Government Assistance



Useful Websites/Contacts

Cayman Islands Centre of Business Development (“CICBD”) Program

The CICBD response is the initial government response – is not the only assistance the government is going to provide.

The CICBD is offering Four Assistance Programs:

1. Low Interest Loan Program (“Loan”): Available to 100% Caymanian owned companies provided through the Cayman Islands Development Bank (“CIDB”) Loan is up to CI$50,000 for small and CI$20,000 for micro businesses 20% Security is required - Security can be house, other physical assets, BUT may also be other assets e.g. receivables (reliable). CIDB will assess the available security on a case-by-case basis Companies need to be older than 12 months to apply Once the correct application documents are submitted, the CICBD estimates that the loan will take 4 weeks to process

2. Technical Assistance Program: Requirement of taking part in the Low Interest Loan Program FREE ASSISTANCE – up to 20 hours for each business for a period of one year Carried out by various qualified professionals working with the CICBD (“Technical Assistant”)

3. Micro and Small Business Grant (“Grant”): CI$1,000 per month available for three months paid directly to a company’s VENDOR(S) (not to the company) - The grant is to help with working capital only Micro business = 4 or less employees ( not including owner) AND less than CI$250K revenue per year Small business = 12 or less employees (not including owner) AND less than CI$750K revenue per year

Once the correct application documents are submitted, the CICBD estimates that the grant will take 2 weeks to process.

Businesses DO NOT have to be 100% Caymanian owned.

4. Training: Training available on various business topics. Your Technical Assistant may suggest certain topics which may be helpful to you.

Note: Businesses can apply for both the loan and the grant

Financial Requirements for CICBD Loan/Grant Program 12 months of bookkeeping records required to qualify for the Grant; • Evidence of business transactions • Does not have to be 12 consecutive months 2 years financial statements required to qualify for the Loan .

If you do not have accounting records, the Technical Assistant allocated to you in the Technical Assistance Program will assist you to put together the correct accounting records.

Financial Preparation In the meantime, the following financial preparation is recommended: • Gather all of your receipts you have available • Ask your main vendors/suppliers for an “activity report” for the last two years • Download two years of bank AND credit card statements into excel and perform a preliminary financial analysis by: • Sorting bank statement by description; • Allocating each transaction with a revenue or expense code (e.g. utilities, repairs & maintenance, revenue); and • Summarising revenue and cost categories by year to create basic financial statements Your Technical Assistant can help you with this.

See next slide for a basic example

Downloaded from Bank Statement in csv/excel

To be completed

Date

Amount Bank Description

Financial Account

Jan 01 Jan 02 Jan 02 Jan 05 Jan 07 Jan 07 Jan 07 Jan 07 Jan 08 Jan 08 Jan 08 Jan 08 Jan 09

$200 $500 $50 $-75 $-80 $-20 $2000 $-500 $10,000 $500 $-2000 $-10 $-2500

Revenue Revenue Revenue Repairs & Maintenance Water Bank Charge Revenue Electricity - CUC Loan from Owner Revenue Repairs & Maintenance Bank Charges Salaries & Wages

CHQ Deposit Online Transfer Client #1 Cash Deposit John Doe Electrical Repairs Cayman Water Co Service Charges CHQ Deposit Chq#0001 Trs from Owner Online Transfer – Client #2 Professional Painters Maintenance Fees Salaries Employee 1

Financial Analysis It is important to analyse your financial situation.

Here are some simple ways to do this: • Cash is King: Once it leaves your bank account you cannot get it back

• Cut back on all non-essential spending. Go through your accounts on a line by line basis and ask yourself if that expense is necessary or whether can it be reduced • Go through your credit cards – are there any monthly amounts coming out which you don’t use/need • Reach out to service providers – can they give you a discount and/or deferred payment on current debt

Financial Analysis (continued) Chasing Accounts Receivables – as people are being conscious of cash flows, you may have to chase more than usual to be paid

Have a separate line item to record additional expenses incurred due to the pandemic Check your insurance policies: • Business Disruption Insurance; • Exclusion clause for pandemics

Cash Flow Forecasting Prepare a cash flow for the next 12 to 18 months.

Hope for the best, prepare for the worst; • Curfew’s to remain in place through end June • Cayman borders to remain closed for the rest of the year • Local market and associated demand will contract significantly e.g. >15% of residents will not return in 2020 and disposable income reduction will reduce demand in all but most basic products

• Pay particular attention to when larger amounts of monies are due: e.g.

• Work Permits • Insurance Renewal dates • Do not forget to take into account current payable

Cash Flow Forecasting (Continued) Be realistic about your cash flow situation. If you are predicting to be in a negative cash flow position, you will require an injection of cash from somewhere: • • • • •

Current Owner(s) New Investors (through a private loan or equity) Government (through CICBD or other measures to be announced) Bank Loan Agree Overdraft facility with your bank in advance

See Basic Cash Flow Forecast example on next slide

Basic Cash Flow Forecast Example Item

May

June

July

Aug

Sep

Oct

Cash Inflows Revenue

-

-

-

$10,000

$20,000

$20,000

Total Cash Inflows

-

-

-

$10,000

$20,000

$20,000

Cash Outflows Bank Charges Salaries & Wages Health Insurance Utilities Professional Fees Work Permit Renewal

-$50 -$5,000 -$1,000 -$2,000 -$1,000 -

-$50 -$4,000 -$1,000 -$1,000 -

-$50 -$3,000 -$1,000 -$50 -

-$50 -$5,000 -$1,000 -$2,000 -

-$50 -$5,000 -$1,000 -$2,000 -$5,000

-$50 -$5,000 -$1,000 -$2,000 -$1,000 -

Total Cash Outflows

-$9,050

-$6,050

-$4,100

-$8,500

-$13,050

-$9,050

Net Cash Inflow/(Outflow) -$9,050 Opening Cash Balance 12,000 Closing Cash Balance $2,950

-$6,050 $2,950 -$3,100

-$4,100 -$3,100 -$7,200

$1,500 -$7,200 -$5,700

$6,950 -$5,700 -$1,250

$10,950 -$1,250 $9,700

Accounting and Operational Efficiencies Take stock of your current accounting and operational practices: This is the time to make efficiencies: Accounting Perspective: • Are your accounts up to date?

• Have you been analysing your accounts to make the best decisions for your company?

• Do you have the most efficient accounting practices?

• Are you using the right financial software? Online vs. Desktop Operational Perspective: • Develop a Business Continuity Plan • Do you have the right people in the right positions?

• Is your operational workflow as efficient as it should be?

• Are you appropriately automated?

Breathe – Develop a mid term business plan For those of you who are experiencing slower times, take advantage of the extra time: • Re-focus: What is the mission statement of your business? Have you drifted from its focus and should you return? (Maybe/maybe not) • Key Employees: Who are the key players in your business? Who do you want to be there with you when your business returns to “normal”?

• What will the new “normal” look like? How can you position your business to thrive in the new normal?

• Consider whether your business functions are better served by full time employees, part time employees, or by way of outsourcing

Should my business weather this crisis at all?

At times like this, it is easy to assume that the “best” or “right” thing to do is to continue with your business for as long as you can.

That is not necessarily the case.

If you prepare a cash flow forecast, and the outlook does not look feasible, you do not have an obligation to carry on your business.

Other options: • Join forces with a competitor: This could help to reduce fixed costs and make economies of scale • Sell to a competitor (although may be a difficult time to do this) • Hibernate your business, until such time as the market improves • Close your business

Employee Leave, Severance and Pay Make sure you are still adhering to the Cayman Laws and also the employment contracts: http://www.gov.ky/portal/page/portal/dlphome/publications/dlp-covid-19-faqs/DLP-COVID-19FAQs.pdf

Employers should be mindful that they must remit employees’ wages within one month of the wages being earned to avoid incurring an offense.

Employees are also entitled to any earned vacation leave, sales commission owed, and/or gratuities earned.

Severance Severance is one weeks pay for each year of completed service; Severance is to be paid to employees being laid off, unless the employees are to be brought back to work within 30 days (in most industries or fields), or 6 months if in the construction and agriculture industries. Once 30 days, or 6 months, has passed the termination is no longer considered to be temporary, and severance becomes payable.

Employees being terminated by the employer are required to be paid any earned wages, gratuities, commission, vacation, and notice pay.

Notice pay is separate to severance pay and is based on contract. If the contract is silent, notice is the interval between pay day.

Health Insurance Employer must continue to provide health insurance at the employees own expense for three months following termination

Monies to pay the premium can be withheld from monies due to employee The obligation to maintain health insurance ends within 3 months if: • The employee becomes employed elsewhere; • The employee becomes otherwise insured; or • The employee leaves island

Reduction in Salaries or Wages Employers must ensure compliance with the Minimum Wage Order (2016) as it relates to any agreement to lower employee wages/salaries. http://www.gov.ky/portal/pls/portal/docs/1/12612378.PDF The National Minimum Basic Wage is CI$6.00 (gross) per hourly rate for most employees.

The gross hourly minimum wage rate for service employees of an employer that has a registered gratuities scheme is CI$4.50.

There are also special calculations for live-in household domestics and employees who work on a commission basis.

For Questions Related to Leave, Severance and Pay: http://www.gov.ky/portal/page/portal/dlphome/publications/dlp-covid-19-faqs/DLP-COVID-19FAQs.pdf

Cayman Islands Government (“CIG�) Assistance Announced so far: Trade & Business License: Late fees from 1st March to 31st July 2020 will also be waived for all applicants.

Payment of trade & business licensing application fees from 1st May to 31st July 2020 have been waived.

Information on the Trade & Business Licensing (Temporary Reduction in Fee) Regulations, 2020 can be found at the following link: http://www.gov.ky/portal/pls/portal/docs/1/12946497.PDF

Immigration Work Permits: Employers are to file work-permit renewal applications online, without the need for new police clearance and medical certificates and make payment online There will be a 30-day grace period for people whose permits expired in the last month while the new process was being established Government has created a new online jobs portal where employers will be legally required to advertise any vacant positions and work-permit renewals The portal replaces an existing requirement to advertise vacancies in the local newspaper and will facilitate closer government monitoring of the process. Advertising in the paper is still optional

Permanent Residency Fees: Permanent Residency holders whose right to work fees become due during this period may also continue to work under the same terms and submit the requisite payment using Electronic Funds Transfer (EFT) with their bank. Visit www.worc.ky for funds transfer instructions

For Questions on Immigration: https://www.worc.ky/images/WORCFAQonCOVID19ImmigrationrelatedquestionsApril15.pdf

Pension Pension Contribution Holiday: 6 month pension ‘holiday’ which would operate retroactively from April 1 2020. This means that pension contributions paid by both the employer and employee would be suspended during the six month period

Withdrawal of pension contributions: For everyone who has an active pension account (i.e. still paying into account) (not pensioners) eligible allowed to withdraw: • a single lump sum up to 100% of balance up to CI$10,000; AND • up to 25% of balance which exceeds $10K e.g. $100K balance $10K plus 25% of $90K = total $32,500 Pension not accessible to those who left Cayman before Feb 01, 2020

Mortgages A repayment holiday enables you to defer your usual residential mortgage payments for up to 3 months.

Mortgage repayment holidays are available where you hold a mortgage for your home and • Your income has been adversely affected by the COVID-19 / Coronavirus pandemic • You are not currently in arrears with your mortgage payments • For joint mortgage loans, all borrowers must agree to the request Interest will continue to accrue on your mortgage.

A Word of Warning In your cash flow forecasts, do not forget that, when restrictions within Cayman are lifted, you will be required to pay the overdue fees Government have not yet announced when these will become payable, so plan on saving this money as soon as you can.

Useful Websites/Contacts For CICBD Loan applications email: loan.cicbd@gov.ky For CICBD Grant applications email: grant.cicbd@gov.ky CIG Government Covid-19 Information Page: https://www.exploregov.ky/coronavirus CIG Government Covid-19 Information Page specifically for businesses: https://www.exploregov.ky/coronavirus-business-guidance For Questions on Immigration: https://www.worc.ky/images/WORCFAQonCOVID19ImmigrationrelatedquestionsApril15.pdf For Questions Related to Leave, Severance and Pay: http://www.gov.ky/portal/page/portal/dlphome/publications/dlp-covid-19-faqs/DLP-COVID-19FAQs.pdf For other questions relating to the Labour Law or Employment call 945-8960 or by email dlp@gov.ky

And Finally‌ We are all in this together, everyone is suffering in one degree or another. Do not try and take advantage of people during this time, where you are financially fortunate, consider helping those who are less fortunate by giving them longer to pay, or provide discounts on your services.

Stay Safe

Stay Kind

Thank you for joining. For more information: Visit: Email: Call:

www.bermanfisher.com lauren@bermanfisher.com +1 345 928 4751

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