Cash Is King: Hang Onto It In These Times Of COVID-19

Goosmann Law Firm : 0:01

Do complex legal issues. Hold you back. Let's get energized and bring clarity to your top legal questions. This is Law Talk With The Flock by Goosmann Law Firm.

Jeana Goosmann: 0:30

Hi, this is Jeana Goosman, your host of Law Talk With The Flock. I am a CEO, business owner, attorney and author here to help navigate you and your way through your life as a business leader, a leader in general, as well as some of the law. And I'm really excited to have with me a special guest today. I have with me CPA, Heath Kooiman and Heath as a partner and CPA for the Woltman Group in Sioux Falls, South Dakota. And today we're going to be talking about COVID-19 and the impact that we've seen it have on business and he is a partner, of one of the preeminent CPA firms so he has got a lot of great insight to share with us on this topic. So welcome Heath.

Heath Kooiman: 1:09

Well, thank you very much, Jeana. I appreciate the invitation.

Jeana Goosmann: 1:12

Yeah, I'm looking forward to having this discussion with you. You know, we talked about all these other places that we could be having this podcast right now, but we're doing it virtually because we're social distancing and being, you know, good citizens in that regard. But after this is over, we can have a second followup one and maybe have that one in the beer locker that we talked about.

Heath Kooiman: 1:32

Absolutely. Yeah. It's been crazy with kids with no school and no daycare and working moms struggling through it all. Grandparents isolated from their families worried about their 401ks. It's, it's been an interesting a few months.

Jeana Goosmann: 1:46

Yes it has. And you didn't have your normal busy season?

Heath Kooiman: 1:49

No. No. Which was, which was a bit of a blessing really. We're really used to being done or mostly done by April 15th and now we got delayed to July but we can usually get done in eight weeks. Now we've got an extra eight or 12 weeks to really focus. So it's, it's been good and it really has, it's taken the pressure off a little bit.

Jeana Goosmann: 2:10

Well, I know you got your vacation in at the early, early January time frame to gear up for the busy season. So at least you have that memory to hold on to.

Heath Kooiman: 2:20

Yeah, St. Martin was beautiful. My wife and I go away the first week of every year because most people aren't that organized and we can, we can get lost for a little while.

Jeana Goosmann: 2:30

Well someday I'm sure we'll get to return to those vacation days. But for now we're just trying to make it through to the other side.

Heath Kooiman: 2:36

Isn't that the truth.

Jeana Goosmann: 2:36

So what k ind of things are you seeing from your lens t hat you think as far as what clients you're talking to and what are some of the hot issues and hot industries

Heath Kooiman: 2:49

In all reality the, the obvious ones, the businesses that are suffering terribly are the hospitality industry, everybody knows about, and the event ticket resellers that had so many events canceled. Other things that people wouldn't necessarily consider is things that are a part of the suffering is international businesses and their foreign currency translation challenges that they have. Normally they hedge those things. But you can't hedge for everything, especially when you're fighting both ends in the middle. The farmers, agriculture commodities are really, really weak. In January of 2020 the July board for corn was at$4 and it's down 30% when we used to have a near zero basis.

Jeana Goosmann: 3:31

As a farmer's daughter. Yeah. As a farmer's daughter, I can relate to this discussion for sure. And with our clients, you know, the price of corn is everything in that world.

Heath Kooiman: 3:41

It is, it is. And it's being down 30% not only on the inventory that you have unsold, but the stuff that you haven't even planted yet. You know, the December board was the same way. It was nearly four bucks and it's 30 cents off of that or 30% off of that is, is a lot that adds up to a lot of money and that translates right into the hogs and the cattle producers. Packers are all closed and, the producers are getting less product through their doors and the consumers pay more because there's still the inventory demands. So it's been difficult in that industry too.

Jeana Goosmann: 4:18

I think that's something that's hard for people to understand because you go to the grocery store and the price of meat is through the roof and yet we hear that, you know, the prices are down and the farmers are suffering. So there definitely is a disconnect in that supply chain.

Heath Kooiman: 4:31

In fact, cattle used to be a$1.30 a hundred weight, they're down to 85 90 cents. I mean that's a huge swing and it doesn't necessarily translate for the grocery store shelves, unfortunately.

Jeana Goosmann: 4:44

Well thanks for those insights. Any other troubled waters that you see for businesses? As you look at it from Sioux Falls, South Dakota?

Heath Kooiman: 4:53

Rental and real estate. I think that might be a lagging indicator. The PPP loans probably helped out a lot of the tenants pay the landlord through the, the early months. What really happens, how fast we rebound on a lot of this stuff is going to be a telltale sign. I don't think we're really g oing t o know a lot t ill two, three, maybe two, four early 2021, somewhere in there. We're really g oing t o see it. But y eah. The industries of printing, reproduction, advertising. You know those, those budgets naturally are going to get squeezed a t a t ime time like this. They affect real people a nd real businesses. That's their industry.

Jeana Goosmann: 5:31

You bet. You bet. You mentioned advertising. I know some folks, it's hard to decide to, you know, do you amp it up because you want to take advantage of potential that you have more of an audience, but at the same time you want to conserve your cash. So those are tough business calls for people to make.

Heath Kooiman: 5:47

They are, and there is no wrong answer. It's a business decision. Right?

Jeana Goosmann: 5:50

Right, right. How about on the flip side who are you seeing that's actually doing really well as a result of some of what's going on with COVID-19?

Heath Kooiman: 5:59

A lot of your manufacturing and construction industries are still doing well because they have things already in the pipeline. They already had PO'S that are for manufacturing or they already had buildings that they were building, whether it be commercial or residential or whatever else. But, what we've really seen that's very interesting based off of the a g production is that the local l ockers, people that can, that can process a live h og or live cow, are really a long ways behind. There's a lot of demand because there's inventory out there that the packers aren't a processing. So the local producers are reaching out to people saying, Hey, if you want something, let me know. We'll sell them right off the yard rather than, you know, off the grocery store s helf. So the local lockers are backed up really deep into 2021.

Jeana Goosmann: 6:46

I think I mentioned that you can't buy your freezer right now if you'd like to buy one and it's for that very reason. I mean, I got it from call from my cousin. Do you want half a hog? And I got another one. They called me. I got a lead on some cattle. My husband's laughing. He's like, we live in farm country, Jeana. We know a lot of people that are going to be able to get us some product if we really need more, bacon. But yeah, it's a real issue,

Heath Kooiman: 7:11

Right? Well, in your online retailers when it comes to the nonperishable goods have been doing very well because your local stores are closed. Mom and dad are home, do more online shopping, which translates into more of the FedEx contractors with more packages. So that's, that's good for that industry. In the food business the agg market is really, really strong. It's a really good source of protein. They're inexpensive and with having less work in beef and chicken and things like that in the,

Jeana Goosmann: 7:40

And I know how to make an egg when I might not know how to make a, you know, some of those other items. That impacts it too. Right?

Heath Kooiman: 7:50

It does. The wholesale fruits and vegetables. You know, maybe people are sitting at home, thinking they're going to eat, eat better. We have a client of ours that's in that business and they're just doing very, very well in a, in a downtime because there's a higher demand for those things at the grocery stores and you know, the things that we all use. It's important. It's important that you eat healthy. So, um, another industry we found a lot of movement in is the off sale, beer, wine, liquor. Just because the on-premise locations are closed and you can't go to the bar or the restaurant. Well, people still enjoy a glass of wine at home and they buy it at the store and maybe they've got a little extra inventory at home that they're not using and that's where they see the spike in the sales. But, that's what we've seen a lot of our clients run into in this time.

Jeana Goosmann: 8:40

Yeah. The beverage industry has not suffered throughout this whole experience. Even though the bars are closed, people are still purchasing their beverages.

Heath Kooiman: 8:48

Yes, they are. Yes they are.

Jeana Goosmann: 8:50

Have you heard of this app called house party? I had never heard of it until this COVID thing happened and I got invited to a house party. And it's a virtual app where you can get together with friends and play trivia games. Just another, another tip. Maybe we'll have a house party at one of these times.

Heath Kooiman: 9:06

Yeah, I was, I even learned last week when we were out in the black Hills that I learned how to play Mexican checkers so I can even be taught and we learned how to play five crowns. So people are finding other ways of entertainment rather than going out or going to concerts or being out on vacation more family time and spending time in quality ways and playing games.

Jeana Goosmann: 9:31

Chutes and ladders is the big one in my house. So that tells you the age of my children, but it gets really competitive. How dare the sister, shoot ahead and the other one or climb ahead and the other one falls down the ladder. I don't know.

Heath Kooiman: 9:48

I'm still a little old school. My family and I grew up playing Peanuckle so that's, that's a game that not many young people know how to play anymore.

Jeana Goosmann: 9:56

Well, yeah, you'd have to do a little lesson on that one I think.

Heath Kooiman: 10:00

Yeah.

Jeana Goosmann: 10:01

Now how about what kind of advice are you giving for business owners in general as they try and navigate their way through these cloudy time?

Heath Kooiman: 10:11

Yeah, so it's the businesses that are suffering here, you know, and late Q1 they were really worried about the accounts receivable collectability it was really a major concern and layoffs and things of that nature. Congress came around and started the EIDL or the Economic Impact Disaster Loan and the PPP, which is the Paycheck Protection Plan and it really made a big impact. I think, if I remember correctly, that the SBA approved$349 billion in loans in 12 days, which is more than 12 years, right? Yeah. Crazy stuff.

Jeana Goosmann: 10:46

People that never heard of the SBA or get loans through the SBA all of a sudden.

Heath Kooiman: 10:51

Right, right. And that's been an interesting thing when you talk with the bankers. The interesting part of the whole PPP is that the banker gets the paperwork from the client of the taxpayer of the loan, and they go through about a 10 minute process online and they immediately get an approval. The number comes across their email and they get an approval and then the bank actually goes through a normal loan process. You know, it's all guaranteed by the SBA. So there's likely not much for personal guarantees and things of that nature. It's also on the banker to certify how much is going to be forgiven as well. So the lion's share of the clarification of that. It hasn't been brought to us yet, so there's a lot of need there yet, but it's the banker that's going to be able to certify the percentage or all of it was forgiven. And then they physically apply for reimbursement from the US treasury. So that's kind of how that deal works. But a lot of people have been preserving cash, absolutely the best they can, making sure that their line of credits are up to date with their banker and their banker isn't going to squeeze them in any way so that they can ensure their liquidity. Unfortunately, some people are going to have to extend their accounts payable out a little further than they otherwise would just because they have to from a cashflow perspective. But hopefully,

Jeana Goosmann: 12:12

Right. I mean at the end of the day cash is still king.

Heath Kooiman: 12:14

Always is. Yup. Yup. So, well, hopefully the PPP and the EIDM hopefully that helps a lot. The, the other thing we saw in particularly in the hospitality industry is that they had to make moves quicker than anybody else because they literally got shut off and doors closed or people really concerned about social distancing not going out and having dinner. So they had to preserve cash and they put a lot of people on unemployment before the PPP money actually funded. And now what we're finding out is that with the extra$600 a week spiff from the government, they're not real excited about coming back to work. Right. They want to, but you know, it's just one of those deals. Right? So that's a struggle, to get people back to work again to get back to a sense of normalcy where we're at, the level of volume that we're used to that we've always had where we have those workers back, particularly in the hospitality industry, working full time at the levels that they were running in January.

Jeana Goosmann: 13:19

Because we like to go out to eat.

Heath Kooiman: 13:20

Absolutely. Absolutely. I can't cook that good. I mean I c an cook okay but I can't cook that good.

Jeana Goosmann: 13:27

I'm a horrible cook. So my household can't wait to go back out to eat and my husband can grill but you know.

Heath Kooiman: 13:38

Well there's always take takeout.

Jeana Goosmann: 13:39

There is. We've been doing a lot of takeout. We continue to support the hospitality industry. If they are signed up with food dudes or they have an easy online, a takeout, we continue to support that in full force. So,

Heath Kooiman: 13:52

Yeah, we have a client of ours that, that has a nice little quaint place downtown Sioux Falls. And I always order as I'm going there because then I can stand social distance properly and we can stand and have a glass of wine and chat about the week or whatever's happened since and then I take my, I went to go order home.

Jeana Goosmann: 14:11

And those of us that are social, I think this is probably the hardest part of going through this whole experience.

Heath Kooiman: 14:17

It's difficult. It really is. When you're a social butterfly and you like to be out and about and around people and you know that particular proprietor said it best when you're in the business of bringing people together and you can't do that. It really hurts you all the way to your soul. It's hard. But for those of us on the flip side of that, that didn't enjoy going out and being around people and socializing and interacting and us not being able to do that, you can only do so much socializing at home and then he just gets third crazy. You got to go do something.

Jeana Goosmann: 14:46

Absolutely. Well, it sounds like you made it out to the Hills. That was a good place to go.

Heath Kooiman: 14:50

Oh, it's a great place to go. Yeah. We went out and rode four wheelers, took all the kids to Deadwood because even though it was closed, they got to see it, you know, when it's quiet and, and taking some of the history went to, I can't remember the name of the cemetery where Wild Bill and Calamity Jane are buried so we got to see that little walk through history there. I went and drove through the Custer State Park and Iron Horse Mountain Road and Needles Highway and I went up to Mount Rushmore. So yeah.

Jeana Goosmann: 15:24

Awesome.

Heath Kooiman: 15:25

We go around long enough to make them go to sleep.

Jeana Goosmann: 15:28

Oh, that's a win. I saw a great sign. That reminds me what you're talking about. It was a picture of a dirt road in the middle of South Dakota and it said social distancing since 1881.

Heath Kooiman: 15:40

Yeah, exactly. Yeah, exactly.

Jeana Goosmann: 15:44

That's great.

Heath Kooiman: 15:44

There's a lot of distance between here and there and it's pretty natural. Social distancing here in South Dakota because you know it's a pretty sparse population.

Jeana Goosmann: 15:54

Well, thank you so much for being with me today and to help share some of your insights. Anything else that you have for tips for people before we wrap this up, Pete?

Heath Kooiman: 16:03

Cash is king, hang onto it.

Jeana Goosmann: 16:06

Very good. Great closing words. Thank you so much and I appreciate everybody for listening today and go make it worth it!

Heath Kooiman: 16:13

Have a great day, Gina. Thanks you too.

Goosmann Law Firm : 16:17

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