Updates for the qualification of COVID-19 Government Financial Support Wage Subsidy of 75% – April 7th.
Problem #1: COVID-19 did not really hit us hard until mid-March, so even bricks and mortar businesses that were forced to close up only did so in the second half of the month. So a 30% drop in business would not mean that the entire month experienced a 30% drop.
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Fix: When comparing March 2020 to March 2019 you now only need to demonstrate a 15% drop (not a 30% drop) in revenues. This was to address the fact that the COVID-19 impact really hit mid-March. April and May threshold remains at 30%.
Problem #2: Successful growth-oriented businesses and start-ups were likely growing revenues throughout 2019 and may have actually grown by 30% throughout the year. In that scenario comparing revenues to a full year ago could show no drop at all when in fact a near immediate drop of 30% was felt.
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Fix: To address this the government is now allowing organizations to compare March, April and May revenues to an average of revenue earned in January and February 2020.
Problem #3: Some companies recognize revenue when customers pay at the register (at transaction). Some companies recognize revenue at 1/12th of a license fee starting when the deal is inked. As we all appreciate, sending an invoice does not mean said invoice will be paid. So revenue recognition using an organizations normal method wasn’t necessarily able to reflect the urgent COVID-19 impact felt by a substantial drop in cash receipts.
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Fix: Companies can now choose between cash and accrual accounting to measure revenue decline. This means you can actually compare the amount of cash received in the period if that better reflects the impact. This allows companies to continue to issue invoices (to maintain the integrity of their contracts) and still qualify if said invoices are not paid in a timely fashion.
With these changes I know a lot more of our clients will be able to access these crucially needed funds to ensure more jobs are saved. I am feeling very thankful to our public servants, government leaders and community champions that are working cohesively during these unprecedented times.
