Risk Management and Cash Reserves

Risk Management and Cash Reserves

Written by Jim Skiera

This pandemic reminded me of the childhood story, The Grasshopper, and the Ant. As the story goes the grasshopper was the free spirit who was never concerned about what tomorrow will bring and lived in the moment. The ant to the contrary was busy preparing for the onset of winter storing food and supplies to get him through tougher times. Winter comes and the ant survives because he was prepared for the worst, and the grasshopper goes hungry and dies. The moral of the story as we were taught, those who do not plan for the long term will not succeed in the long term.

The pandemic has, as I am sure you have witnessed, caused unprepared businesses to fail. A key difference of businesses that have survived rather than failed is the practice of building and maintaining a cash reserve for times like these. Just like your safety program, company policies and procedures, training, hiring practices, workers compensation and other insurance, a cash reserve should be an integral part of your company’s risk management plan. If you have a reserve in place great; if this article will help you start one immediately.

Expenses – This sounds simple, however to accurately establish the amount of reserve needed for your company, you will need to spend time determining your on-going expenses. Your accounting system should allow you to look at your expenses for the past 6-12 months. As the tree care industry tends to be somewhat seasonal in many parts of the country, pay attention to how your expenses fluctuate month to month. If you have a significant difference, for example in the spring when expenses are high gearing up for the busy season, factor that into your planning. The purpose of the exercise is to make you aware of your financial needs throughout the year.

Risk Tolerance – With a firm understanding of your expenses, then determine your level of risk tolerance. It is recommended that companies have between three and six months of cash reserves available to cover expenses for unplanned downturns, other emergencies and or growth opportunities. This may seem like an unrealistic number; however, the last three months should now make you aware it is not out of line with the current reality. The true impact COVID-19 has on the economy and your business is likely not to be known for years to come.

Next sit down with your CPA and or financial consultant to determine the right reserve amount for your business. Speak to them about setting up a plan for your company to build the reserve over time, as it will impact your short-term cash flow. If you have a reserve that has been depleted, it’s time to structure a come-back plan. Based on the severity of this crisis you may want to revisit your risk tolerance level. Consider the impacts of possible future downturns in revenue and look for unnecessary expenses that can be shed until better times return so your reserve outlasts the crisis.

Financing Options – If you are like many businesses with little to no reserve, you may need to use financing to assist you with expenses for the short term. Your banker is another important adviser to help guide you. Ask about any financing options they have available to meet your immediate needs including Small Business Administration (SBA) loans and or lines of credit. A line of credit can be more difficult to set up, as it requires your company to meet the qualification minimums established by your bank, based on their lending level of risk.

Typical requirements include:
– A list of company assets and values
– At least two years of profitable operations
– Sufficient cash flow to cover financing
– Owners who have assets to put up as collateral themselves

SBA loans are an alternative for companies that cannot meet bank loan requirements. In response to this crisis, the government has established several additional new loan programs administered by the SBA. It is likely there will be more, so having a relationship with your banker to keep you abreast of these opportunities is critical. These loans are provided by banks in partnership with the SBA. Information about applying for SBA loans can be found on-line or provided by participating partner banks.

Now is a time to think like an ant. 

To learn more about how strategic planning can enhance your organization, take a look at our Thrive Risk Management Strategic Planning Package. In just 4 short weeks we can help you identify who you are as a company, what you want to become, and what strategic milestones will be needed to achieve your goals.

Tips to Maximize Online Learning

Tips to Maximize Online Learning

Tips to MAximize Online Learning

In this time of Social Distancing, you may be contemplating how to obtain your CEUs. There are many organizations offering Webinar training. Your ISA Chapters, green industry associations, and other training companies are offering classes online.
Webinars are a great way to educate yourself and earn CEUs.

They are usually done with a power point and a chatroom for you to ask questions. There is an instructor that you listen to but do not see. Usually the attendees are muted so as not to interrupt the speaker and disrupt the flow of the webinar. These classes usually are finished in one to two hours.

Meetings, as compared to Webinars, are much more interactive. The instructor has a Power Point presentation and you can see the instructor also. These presentations usually last three to five hours. The attendees are muted, but at certain points in the presentation, the attendees can either ask questions through typing them in the chat room, or unmute their microphone to verbally ask questions. This type of learning is more interactive and social – you are attending with your industry peers and can see all the attendees.

There are benefits to online training: you are in your own home or office setting, you can get a drink when needed, you can stretch your legs by walking around and, the best, you can even attend the workshop in your PJs if you want to. Other benefits include being able to select from a wide range of topics, not having to travel, getting to interact with arborists around the country, and reduced cost since the presenters aren’t having to travel, either!
Here are some rules for being courteous when attending an online meeting:

1)Show up on time. You may not disrupt the presentation by logging in late, but you may miss important information.

2)Keep your microphone muted unless asking a question. In most formats, the person running the meeting has the control to mute all mics and will do so since even the slightest background noise causes significant distraction.

3)Turn off your webcam during the presentation. Nothing is more likely to illicit giggles than to have the presenter turn off their PowerPoint presentation and the software defaults to someone watching (or worse – not watching), unaware that his or her webcam running.

4)Wait your turn. In a live setting, you can see who has a question or when a presenter is ready for an interruption. In webinar, especially when not everyone is on webcam, you may need to rely on cues such as hand-raising icons or questions posted in chats. Some presenters will let you know that there will be breaks for questions.

5)Ask questions concisely. Webinars are focused; be sure your questions are, too. Avoid wasting time in lengthy introductions, and don’t self-promote or spend a lot of time sharing your opinion before asking a question. If you have comments, ask yourself if they will help others before commenting.

6)Don’t use the chat room as your personal water cooler. Just like you would not stand in the back of the room gossiping with someone while a presenter was lecturing, refrain from using the chat room just to socialize.

Even after social distancing restrictions are lifted, online webinars and meetings will continue to be an excellent and affordable way for arborists to learn and to earn CEUs. Check out StreamsideGreen.com for upcoming online training opportunities through a partnership with Victorian Gardens, ArboRisk, and Bandit.

Written by: Margaret Hebert

Written by: Dawn Thierbach

Cash Flow Tips for your Work Comp Policy

Cash Flow Tips for Your Work Comp Policy

Even though the majority of states have recognized arboriculture as an essential service, an obvious concern as to what the future of our economy will look like is growing. According to some of the roundtable discussions mentioned in the TCIA monthly magazine, along with numerous conversations with our clients, we have heard that many tree services are starting to catch up on their work backlogs and have started to experience a decrease in new business calls.

With a decrease in workload, particularly for tree services focused on residential work, managing your cash flow can be a make or break proposition during tough times. Every dollar in and every dollar out should be analyzed. One way to improve cash flow is by really focusing on your worker’s compensation policy.

As most of you know, worker’s compensation companies ask for an estimate of how much payroll you think your company will have throughout the policy period and multiply that estimate by the rate. At the end of the policy year the insurance company will have you complete an audit to verify what the figure actually was. It is difficult to estimate that number exactly, which is why most tree services will either end up owing more premium or being refunded some.

“Pay As You Go” – A “Pay As You Go” plan allows you to pay your worker’s compensation premium based off of your actual payroll for the month prior. Because of the economic impact of COVID-19, many tree services may see lower payroll figures than originally anticipated and you may be paying higher monthly payments than what your actual exposure is for the month.

Lower Payroll – If your worker’s compensation company doesn’t offer “Pay As You Go” and you are experiencing lower payroll, have your insurance agent adjust your overall estimate to lower your monthly payments. Just be careful as payroll may spike due to a large storm season and you could end up owing a large chunk at the final audit.

Verify Most Recent Audit – If you do experience a large audit, make sure to verify everything is correct with your agent. Just last week, I experienced an audit where the worker’s compensation company accidentally counted two employees as officers, leading to a significant increase in payroll. They weren’t trying to overcharge at all, but there was a miscommunication on the way the two employee’s payroll was reported. The mistake led to a $7,000 increase in premium. If everything is correct and you experienced much more payroll than anticipated, ask your insurance company if they will let you break out the amount due into multiple payments. Most companies will work with you, especially in times like these.

Policy Deposit Premium – Another thing to watch out for on your worker’s compensation policy, is the deposit required by the insurance company. Some companies will require a 5-15% deposit that doesn’t go towards your final premium. They do this to ensure there aren’t any issues with the audit at the end of the year as insureds will sometimes not return necessary information. Make sure you ask how big of a deposit your worker’s compensation carrier requires, and check to see if it is required every year or if it is just a one-time deposit required when you first start your policy.

Furloughed Employees and New Class Code – I’ve also heard of several tree services having to temporarily lay off or furlough employees due to their state’s work restrictions or from a slowdown in jobs. The National Council of Compensation Insurance (NCCI) has recognized that the downtime in which employees are not working should not be counted towards your premium based on your tree care operations class code(s). To solve this, NCCI has created a new class code 0012-Paid Furloughed Workers During a Governmental Emergency Order Impacting Employment.

According to the Wisconsin Compensation Rating Bureau, “If an employer continues to pay furloughed employees their normal wages and keeps separate, accurate and verifiable records, the payroll will not be included for the basis of premium.” Be careful with this as an employee cannot be furloughed for part of the day. If any duties are performed in a day, no division of payroll is acceptable. Also, this class code is only applicable while an emergency order is in effect (I.E. until May 26th, 2020 in Wisconsin). Check with your state’s stay at home order and your insurance agent on how to utilize class codes to help with your worker’s compensation cash flow.

Feel free to reach out to Eric or myself if you have any questions moving forward. As always, stay safe and stay healthy!

Written by: Malcolm Jeffris, CTSP

Bringing Employees Back to Work After COVID-19

Bringing Employees BAck to Work After Covid-19

Anyone else ready to go back to life the way it was before the Coronavirus pandemic? Me too, but as you’ve heard from so many other people, please be smart about reopening your business.

Here are a few things tree services need to consider when bringing back their employees to full duty.

OSHA General Duty Clause – No, this isn’t new, but it is extremely important when bringing your employees back to work. As a refresher, OSHA’s General Duty Clause states: Each employer shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees. Obviously this clause was designed to ensure that all employers do what they can to create a safe workplace for their employees. A safe workplace in the post-COVID-19 world looks a little different than it did before. Each tree care company will need to look at their individual situation and facilities when reopening their business. The CDC’ guidelines and OSHA recommendations will be helpful in making your decisions. We also have created a Tree Care Owners Guide to Bringing Back Employees to Work here.

Infectious Disease Response Plan – This is new. OSHA will be requiring all businesses to have an Infectious Disease Response Plan in place in order to curtail the spread of any illness throughout your company. This plan should address prompt identification of infection source, communication standards to your employees, restriction of activities after infection identification, decontamination and recovery methods.

OSHA Recordable/Reportable – If an employee is showing the symptoms of COVID-19 and you sent that employee home for the day. Make note of it as this will become a recordable incident if they test positive for COVID-19. If the employee is hospitalized overnight, then this should be considered a reportable incident to OSHA.

Families First Coronavirus Recovery Act – FFCRA – All employers under 500 employees must provide 2 weeks of paid sick leave for employees who are sick or caring for a family member that is sick. There are also provisions within the act to provide additional 10 weeks of unpaid leave if their children’s school or daycare is closed. Read the Act here for more specific details.
Even though we are all excited to get back to life as normal, as the leader of your organization, please make sure you are taking the proper steps to prevent an infection hotspot from occurring within your company and that you have a general understanding of the additional responsibilities that you as the employer now have.

Because the landscape of regulation is changing so rapidly, we are hosting a COVID-19 Recovery Webinar on Wednesday, April 29th at 12pm CT. To register for the webinar, click here.

Written by: Eric Petersen

Marketing During a Pandemic

Marketing During a PAndemic

One of the great American business stories came from a time of widespread uncertainty like we are facing right now. During the Great Depression, Kellog’s, the famous cereal company, doubled their marketing efforts despite the grave financial situation they found themselves in. Most companies at the time were drastically shrinking their marketing budgets to stay afloat, but Kellog’s took the risk to be different and stand out. This strategic move propelled them to record profit increases and positioned themselves at the top of the pre-packaged cereal world where they remain today.

There is no doubt, we are in uncharted territory and in the thick of something that will forever be talked about in history books with today’s pandemic. The reach of the COVID-19 touches every corner of the Earth, and no industry has been spared from its impact, however, now is the time to adjust your messaging to position the company as the go-to tree service in your community.

Here are 3 tips for marketing your business during the COVID-19 pandemic:

Update Customers and Prospects on Your Change in Operations: Share with customers and potential customers that you are still open for business and how you are taking all of the necessary precautions to ensure their safety, as well as the safety of your employees. Email everyone directly, as well as making this message known across your social media platforms and on your website. Inform your current customers how you will be handling proposals and customer contacts going forward. Communicate these safety precautions across other platforms such as Google My Business, Yelp, Angie’s List, etc.

PRO TIP: Making sure your team is sharing the same messaging regarding your updated policies and procedures is essential. Appoint a communications director to relay your message to your crew to ensure they are on the same page. Have this communications director relay exact images and text to be shared.

Don’t Forget Your Social Media: With all that is happening in the world right now, it is understandable if social media is not your company’s top priority. While it may be easy to push it off to the side, remain consistent with your posts. If you have scheduled content for social media, take time to re-evaluate and create content that is relevant to the situation. Make this content easily shareable so your message can be spread. Be aware of heightened emotions and consider the images and language you are using. For example, be cautious when posting photos with large groups and other acts that defy the current regulations. If you are sharing a photo from the past that does display this, such as from a conference you attended or a kid’s climb, make it known in your caption. Remember, if you are sharing any information relating to the COVID-19 pandemic, ensure all of your sources are credible. The last thing you want to do during this time is spread misinformation.

Here are 5 quick and easy posts you can share on your social media accounts.
a. Share how your company is adjusting its policies and procedures as discussed earlier in the article.
b. Take a photo of the essential service your team is providing during this time
c. Highlight a team member with a short video! Introduce them, ask their role at the company and touch on some of the reasons why they became an arborist.
d. Provide quick video updates of behind the scenes fun, creative things that your business and team are doing in quarantine.
e. Keep it light and share the good things happening this month. Good examples of this include Earth Day and Arbor Day.

In this together – Focus on Your Community: The impact the pandemic has is taking tolls on the pillars of our communities. Make a strong effort to help your local restaurants, charitable foundations and other small businesses within your community. Consider hosting a giveaway on social media by teaming up with a local restaurant and purchasing gift cards for the winners. Grabbing take-out from your favorite local restaurant? Highlight them by sharing on your social media platforms. Reach out to the small businesses in your area, what are their immediate concerns and how can your company alleviate some of those fears? Food banks and other local charities are in desperate need of our support. Now more than ever is a great time to make a charitable donation or host a food drive for your local food bank or Feeding America (Of course, make sure that you comply with your current regulations if hosting a food drive). The demand for blood donors is also at an all time high. If you are in a situation where you are able to make a blood donation, check The Red Cross for local blood drives to donate.

Now is not the time to cut back on your marketing efforts. If people do not know that you are still open to do business, will they be calling you for tree work that they need? Of course not. Be like Kellog’s and get creative with more marketing during this time.

If you want specific help with marketing ideas for your company, reach out to an ArboRisk team member today. Together, we can get through this!

Written by: Amanda Eicher