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Regulatory changes at the SEC and demands from large enterprise customers are requiring many small and midsized businesses (SMBs) to report the volume of their greenhouse gas emissions. Some customers are also requiring that these reports are then verified by independent third parties. The following are matters to consider during the process of greenhouse gas emissions (GHG) reporting and verification.

Selecting a GHG Reporting Framework

Similar to the decision a company makes on whether to report their finances on a cash or accrual basis or a US GAAP or IFRS basis, companies need to choose a framework for GHG reporting. The framework may be set by the regulator or enterprise customer requiring the reporting. Where a framework mandate does not exist, a company can choose its method.

The GHG Protocol, developed in the early 2000s by the World Resources Institute and the World Business Council for Sustainable Development, has become the prevalent reporting framework. ISO 14064 builds on the GHG Protocol and provides additional standards related to measuring and reporting emissions reductions, along with establishing a process for verification of GHG reporting.

Identifying a GHG Disclosure System

Also established in the early 2000s, CDP is a not-for-profit operating a global GHG disclosure system. Here, companies can post their GHG results, which investors, customers, and other stakeholders can then view. This system provides a convenient and well-known method for posting results. CDP also shares a host of resources to better understand the reported data and other aspects of sustainability.

Analyzing Your Company

Once the framework and disclosure systems have been identified, a company needs to analyze its organizational structure and determine which entities to include in its reporting. Generally, this analysis can follow a similar approach to deciding which subsidiaries to include in a company’s financial statements – via voting rights or by receiving a majority of the subsidiary’s financial benefits. By using this approach there is consistency in GHG and financial reporting, and the company is reporting for entities where it can also drive positive change in GHG emissions.

Determining Which Elements of the Framework to Analyze

Analyzed elements are often driven by customer-specific requirements. Some typical examples may include:

  • Scope 1: company generated emissions. For example, through use of natural gas, heating fuel oil, company-owned fleets and planes, and refrigerants
  • Scope 2: electricity used by the company
  • Scope 3 Category 1: purchased goods and services
  • Scope 3 Category 6: business travel
  • Scope 3 Category 7: employee commuting

Once this process has been followed, the company will be ready to start gathering appropriate data and factors to calculate their GHG emissions. We will cover more information about these data and factors in an upcoming release.

Clark Nuber can help your company meet the third-party verification requirements requested by larger enterprise companies. Contact us to start a conversation about your GHG needs.

© Clark Nuber PS and Developing News, 2022. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Clark Nuber PS and Developing News with appropriate and specific direction to the original content.


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Fighting Inflation and Supply Chains: Lowering Your Cash Conversion Cycle

Rising inflation and unpredictable supply chains are putting the squeeze on companies’ cashflows. The following article will cover how to calculate your cash conversion cycle, the benefits of lowering it, and how your company can do so.

What is the Cash Conversion Cycle?

The Cash Conversion Cycle (CCC) is the length of time, in days, that it takes for a company to convert cash outflows into cash returned to the company. This metric takes into account the amount of time a company needs to sell its inventory, collect its receivables, and pay its bills without incurring penalties. Practically speaking, CCC can be calculated by adding and subtracting the following ratios (calculated in days): Accounts Receivable Turnover + Inventory Turnover – Accounts Payable Turnover = CCC

External Events Impacting the Cash Conversion Cycle

The supply chain disruption resulting from the pandemic lengthened companies’ CCCs as they struggled to source raw materials and get products to market. Many companies also saw their CCCs stretch to keep up with inflation, a side-effect of adjusting prices to offset increasing costs. Now, just as companies have begun adjusting to this new world, supply chains are returning to their pre-pandemic reality, causing an increase in inventory levels. With interest rate hikes becoming the norm, holding this inventory is more expensive than it’s been in a decade, leading to a liquidity crunch for many companies. This lack of available cash decreases companies' capacity to fund the expansion of business into new product lines and markets.

Lowering Your Cash Conversion Cycle

Before the pandemic flipped the table, efficient supply chain management was a strong strategy for reducing a company’s CCC. Now, with uncertainty roiling the supply chain, some companies have renewed their focus on Accounts Receivable collections and Accounts Payable cycles to offset the increase to the inventory cycle. The simplified example below shows how Company X is handling the liquidity crunch and shortening their CCC. The inventory cycle for Company X increased 25 days during the pandemic. In this example, Company X was able to focus on payment collection, reduce A/R balances, and stretch out payables a few days to offset the reduction in inventory turnover. [table id=40 /]

Other Tips for Lowering Your Cash Conversion Cycle

Outside of persistence and offering discounts, other tactics that may lower your CCC include:
  • Speeding up your invoicing process
  • Digitizing customer payments and signing customers up for automatic payments, when possible
  • Sending additional follow-up and payment reminders and revaluate payments terms
  • Managing payables by not early paying suppliers
  • Asking customers for additional advance deposits
  • Reducing shipping times

In Conclusion

While the inventory cycle usually provides the largest impact to the CCC, it will take some time for companies to reduce this cycle. However, even improving the CCC a day or two can have a significant impact on cashflow. Follow the tips above for lowering your CCC and send me an email if you have any questions.
©2022 Clark Nuber PS. All rights reserved.

Five Things to do After You Receive Your Restaurant Revitalization Fund Grant

Update: The first RRF receipt report was due no later than December 31, 2021. The SBA anticipated that the majority of recipients would use all their funds prior to that date. If you did not spend all funds by December 31, 2021, you must file another report no later than December 31, 2022. If you do not spend all funds by December 31, 2022, the final report is due no later than April 30, 2023. If you were one of the fortunate few to receive a Restaurant Revitalization Fund (RRF) grant, here are the top five post-award things to do:

1. Plan Your Spending

The funds can be used on the following eligible expenses incurred between February 15, 2020 and March 11, 2023:
  1. Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums. Reminder – do not include compensation for employees earning over $100,000.
  2. Payments on any business mortgage obligation (both principal and interest; excludes prepayment of principal).
  3. Business rent payments, including rent under a lease agreement (excludes prepayment of rent).
  4. Business debt service (both principal and interest; excludes prepayment of principal or interest).
  5. Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
  6. Business maintenance expenses, including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment.
  7. Construction of outdoor seating.
  8. Business supplies, including protective equipment and cleaning materials.
  9. Business food and beverage expenses, including raw materials for beer, wine, or spirits.
  10. Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that are essential to the operations of the entity at the time at which the expenditure is made and is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of RRF funds; or, with respect to perishable goods, a contract, order, or purchase order in effect before, or at any time during, the covered period.
  11. Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g., rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.

2. Track Expenses and Reporting

It is important you retain and track your receipts for all expenses that were utilized by the RRF funds, since you’ll need to report on them at each year-end beginning December 31, 2021, until all the funds are utilized. To complete the reporting, log into your SBA account. You can download a helpful expense tracking tool here.

3. Understand the Relationship Between RRF and Other Funding

If you took advantage of other COVID relief programs (Paycheck Protection Program, Employee Retention Credit, etc.), review the requirements to ensure compliance with overlapping programs, including the ability to double dip with the Employee Retention Credit. See additional information on double dipping opportunities here.

4. Learn How RRF Funds Will be Treated for Tax Filings

RRF grants are not subject to federal income tax, and ordinary federal tax deductions are preserved; however, many states do not automatically conform to the federal code. Make a point to learn how your state will treat the RRF for tax purposes.

5. Document, Document, Document

Any payments made with grant funds that are not authorized by RRF rules may require the recipient to repay the funds or become subject to federal fraud investigation. For this reason, it’s vital to document any expenses charged to the RRF and to ensure you’re complying with the rules. If you’re asked to prove any expenses, you’ll want to have the paperwork readily on hand.


If you have any questions about handling your RRF grant, please do not hesitate to contact our Hospitality Services Group. ©2021 Clark Nuber PS. All rights reserved.

Key Takeaways from Clark Nuber’s 2022 Real Estate + Hospitality Event

Our 2022 Real Estate and Hospitality event, featuring a panel with Douglas Dreher, CEO of The Hotel Group – Hotel Equities and Kevin Wallace, President of Wallace Properties, was held on November 8. This event featured a discussion with panelists on finance considerations during times of change and top challenges and opportunities facing the industry, along with an update from the Clark Nuber team on topics including the new lease accounting standard, cybersecurity, and several tax updates. Clark Nuber Shareholder Amber Busch and Principals Christie Streit, Katy Al-Khalidi, and Steve Vasconcellos provided valuable insight and facilitation for this year’s event. Here are the key takeaways from the event:

Challenges & Opportunities in Times of Change

Development Financing

Currently, multiples and values are based on lower interest rates, fundamentals have not adjusted, and there is a greater need for equity. Should we expect this to be the new normal? There are many factors to consider when evaluating the current challenges of the hospitality and real estate sectors, especially in obtaining new hotel loans. Financing cost for new hotels has nearly doubled compared to last year, and trends show the hotel industry often attempts to build at unsuitable times. While these increasing financing costs may cause slowdowns in new builds, this could still be a positive change for current supply. Overall, there are signs of significant ADR growth. In the future, it is estimated that core office markets will shift to have spaces filled by in-person heavy companies, like biotech and life science organizations, that require more advanced, technology-focused buildings. However, this may cause old office space concepts to struggle in keeping up with new feature demands. This evolving model highlights the pros and cons of new builds versus acquisitions. With new builds, the latest and greatest in technology and infrastructure can be applied, and there is often less competition from out-of-town developers who want a quick deal. However, building costs can be higher and take longer due to government-regulated permitting and navigating coding restrictions. With acquisition, there is less financial risk to consider, but not as much flexibility in building customization. Lenders are sitting on significant funds, and for the developers that require these funds to complete deals and keep projects moving, the market needs to come to an equilibrium on rates.

Current Challenges & Opportunities

Additional pain points impacting the real estate and hospitality industry are labor and government regulation. Some organizations believe immigration reform is needed, as current demographics are making hiring and retention extremely challenging. Sufficient labor supply was becoming increasingly challenging before COVID-19 but has since become a top concern coming out of the pandemic for all industries. These organizations are now needing to find creative ways to bridge gaps in workforce demands. Further, government regulation surrounding environmental sustainability poses more challenges in operating and developing within the real estate and hospitality industries. While there is a push for aggressive carbon footprint reduction in Washington state that requires moving away from coal and natural gas use, there is not a supporting increase in available and reasonably priced clean energy replacements. Demand for electricity is only going to increase with the move away from natural gases. With the need to address these current challenges, there is opportunity for greater engagement and collaboration between cities and major companies in creatively resolving key issues impacting communities. Companies have the agency to proactively create resolutions for any negative impacts they expect to have on a community. For example, Amazon is working to help plan and develop infrastructure for transportation and human services in response to the Company’s impact on population density.

ASC 842 Lease Accounting

ASC 842 is replacing the previous ASC 840 as the new standard for generally accepted accounting principles (GAAP) leasing. Lessees will see the biggest changes with this advancement, as nearly all leases lasting longer than 12 months (with few exceptions) will now be capitalized onto the balance sheet as Right of Use (ROU) assets and lease liabilities. There will also be many additional disclosures required. Lessors will see fewer changes, with the largest being the additional required disclosures. Lessees should review debt covenants to ensure they still comply after adding the lease assets and liabilities. A few recommended next steps include:
  • Inventory all leases, including contracts that have embedded leases
  • Create lease abstracts of key terms for each contract to facilitate data input into an accounting system
  • Select an accounting system (Excel or off-the-shelf, such as LeaseCrunch)
  • Define a bookkeeping method (monthly entries versus year-end closing entry)
  • Coordinate a plan with your audit firm
Click here to read our series on implementing the new lease accounting standard.


With the growth of hybrid and remote workspaces, there has been an increase in need for closer security in online platforms. Social engineering remains the biggest threat to cybersecurity. Methods include:

Business email compromise:

An attacker sends a malicious email impersonating someone with authority in an organization. These attacks have evolved from simple emails to even remote Zoom meeting invitations. With these advanced forms, attackers may use chat, deep fake audio, or possibly video impersonation to extract information.

IT Help Desk impersonation:

An attacker pretends to be a member of IT helpdesk with the goal of gaining remote access to a laptop. Since employees are familiar with receiving remote assistance from helpdesk members on their computers, attackers will prey on this trust. Entry points into an organization’s network and systems via cyberattack can result in ransomware and extortion. Ransomware is when an attacker encrypts data in a system, such as a database, making the data unreadable and unusable. The encryption key is exchanged for a ransom payment. Many organizations unfortunately believe that recovering the database from a replica will solve all problems. However, without proper due diligence, it is nearly impossible to know the extent of an attack. When live databases are encrypted, data typically cannot be processed, read, or used in real time, resulting in direct impacts on business performance. The most effective way to address security risks is to implement a formal security program with proper governance and management. There should be a process to ensure security accountability along with the adoption of an industry framework. This means having someone accountable for security and the adoption of an industry framework. Such security frameworks include:
  • ISO 27001
  • PCI
Additionally, everyone within an organization should be conscious of the behavior used in managing data. Security training must go beyond helping users identify attack patterns and methods through which data can be compromised. Users should be trained to report any threat or attack based on the organization’s defined incident management and response plan. Organizations should also actively “hunt” for system vulnerabilities that enable a successful attack. Performing vulnerability scans are good first steps, but the next step should be performing a penetration test. Penetration tests enable ethical hackers to simulate real-world attacks, such as the use of phishing and social engineering to actively gain access to systems. Only testing defense will prove whether defense works. Finally, it is imperative to share information on security breaches to prevent future events. A one-off attack has the potential to reveal patterns, such as a national security threat. Reporting breaches to the authorities, such as the FBI, will help identify relevant resources and plans to remediate. Most states do have disclosure laws that require organizations to report these breaches.

Tax Updates

Business Interest Deduction Limitation

Starting in 2022, depreciation and amortization cannot be added back for purpose of the business interest limitation calculation. This will result in many more companies being impacted by interest limitations. Speaking with a designated CPA regarding pros and cons should be your first course of action if limitations have not yet been elected out for 2022.


After 2022, bonus depreciation will decrease to 80%. Thereafter, an additional 20% decrease will occur each year until eliminated in total. It is recommended that the 100% bonus rules are taken advantage of in 2022 by placing in service qualifying additions. CPAs should analyze improvements to determine if they would qualify as repairs and maintenance for tax purposes under the tangible property regulations. Further steps include reviewing fixed asset listings to dispose of any assets that are no longer held.

Opportunity Zone Reminders

  • Any deferred gain from the initial investment in an Opportunity Zone Fund must be brought into income in 2026.
  • Opportunity Zone Fund investments should be made by the person or entity with a gain to defer so that it will be a qualified investment for purposes of the 10-year hold rules.
  • Ensure that the proper disclosure forms are filed each year. Working with a knowledgeable CPA will result in best practices.

Amended Partnership Returns

Unless the centralized partnership audit regime (CPAR) is specifically elected out of, an amended partnership return will be unavailable for filing. Instead, an Administrative Adjustment Request (AAR) would need to be filed. It is recommended to elect out of CPAR if eligible. Extending partnership returns is also recommended, even if the filing 3/15 date is expected to be met. In the case there are necessary changes after the 3/15 filing date, there will be the opportunity to make corrections before the extended due date.

Deductibility of Losses

Rules relating to Excess Business Losses have been made permanent and may limit the ability to deduct losses in the year they are incurred. Any excess business losses will be treated as net operating losses (NOL) in the subsequent year and will be subject to the NOL limitation of 80% of taxable income. Please reach out to Clark Nuber if you have any questions relating to these real estate, lease, security, and/or tax changes. Shelley Oswald is a senior manager in Clark Nuber's Audit and Assurance Services Group. © Clark Nuber PS, 2022. All Rights Reserved.

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