A Loss of Appetite

In another lifetime I spent 12 years covering the restaurant industry.

No, not reviewing them, but rather my job was to focus on the business portion of foodservice operations although admittedly, the perks and benefits were perhaps the best of any job I’ve ever had.

For example, I had an open invitation to Le Cirque and The Four Seasons in New York, as well as Spago out on the left coast.

A veteran of the industry once told me that the single most expensive thing in a restaurant is an empty seat. So, you can imagine the degree of damage the COVID-19 pandemic has wrought on the foodservice landscape. Initially, during the pandemic, many were shuttered completely with no inkling of when they would reopen. When certain states relaxed their prohibitions, many were allowed only take-out and delivery services or relegated to outdoor dining only.

I can only image the present and future impact on CPA firms who count restaurants as a major portion of their client base. Not to say that foodservice is the only sector where firms will have to being searching for replacement clients, ditto for bowling alleys, hair salons and movie theaters.

It seemed each day another restaurant brand announced either closures or an intent to file for Chapter 11. On a personal level many familiar names were dining staples of my college and young adult life when discretionary income, was well, not so discretionary.

The Waiting Game Can Be the End Game

My teammates used to joke that when I played high school football, I was the starting “drawback.”

Despite an obvious lack of talent, the coach decided that at 150 lbs. I was suited to play outside linebacker and surmised I was able to take on 200-pound plus offensive lineman as they led running backs on sweeps and draw plays.

I begged to differ but at least he was playing me.

One game late in my senior season, we were ahead by five points when the opposing team marched some 80 yards down to our five-yard line with less than 30 seconds to play. Instead of covering the halfback circling out of the backfield, I hesitated thinking the quarterback would attempt to run and before I knew it, the back had gathered in a soft pass for the winning score.

I expected an old-fashioned ass-reaming but instead the coach calmly pointed out that indecision or as he termed it, “paralysis by analysis” rarely leads to a happy ending. But he stressed that even a bad decision is sometimes better than no decision at all.

Fast forward far too many years than I want to reveal here, and I see the CPA succession version of that play time and again.

A Much-Overlooked Competitor

A number of years ago I was interviewing one of the partners of a mid-sized accounting firm about a new service line they launched and during the course of the conversation asked him point blank who his largest competitor was.

Since his practice was in the New York area I expected him to recite the names of several regional or even Top100 firms sited in the tri-state region.

Without hesitating for a second, he simply replied “the banks.”

It took a moment for that to sink in.

Sensing my confusion, he proceeded with a deeper dive.

He explained that the large banks and even some of the smaller brands offered many of the small business services to their clients that his firm did – financial statement preparation and wealth management just to name two.

Like any good journalist verifying his sources, I visited the local branch of a large banking institution and snared an armful of those promotional pamphlets that banks always seem to stockpile on a rack at the entrance.

Sure enough, their offerings included such products as elder care, estate and trust planning, asset management as well as number of small business-centric financial services.

I subsequently wrote several columns about my findings and for the most part was met with some degree of derision from subscribers. “They could not possibly have the expertise that we have,” was a common thread among responses.

Okay, fast forward about a decade.

The Elephant in the COVID-19 Room

It was only a matter of time.

I should have known something was amiss when over the course of the past two weeks I received no less than five phishing emails purportedly from such august institutions as Microsoft, Bank of America and Verizon asking me to re-enter personal information – the result of internal software glitches that somehow lost that protected data. Or so they claimed.

It was hard to keep from even mild chuckling when I noticed that the Microsoft address was a Gmail account. Meanwhile the one from Bank of America was in fuzzy black and white with Bank spelled “Banc.”

Seriously.

Which sort of ties into today’s missive, the spike in fraud since the pandemic.

Recently, the Association of Certified Fraud Examiners released a report that said 77 percent of the organization’s over 2,000 members who responded to the survey indicated that they have witnessed an increase in fraud since the outbreak of COVID-19. No surprise there.

And perhaps more disturbing is that 92 percent predicted a steady increase in malfeasance over the next 12 months.

Predictably the largest rise was insurance fraud (12 percent from the last report) followed by bank and loan fraud, identity theft and employee embezzlement. The area where most ACFE members project the largest growth is cyber fraud where over 90 percent indicated a rise over the next year.

With the number of remote workers increasing exponentially as a result of the pandemic, the organization said that trend can usher in a spike in fraud because employees are away from their direct reports and upper management with many able to gain access to company internal systems 24/7.

With so many small businesses fighting for survival, it’s also not surprising that management may push the envelope in ways that they normally would not with regard to risk assessment and tolerance or on completing financial statements.

Closer to home, there was an article in my local newspaper that a nearby medical supply company is currently under indictment for fraudulent billing stemming from COVID-19 testing. And I am fairly certain that the number of companies running afoul of the law during the pandemic will not stop at one before it’s all over.

And you can “Banc” on that.

Sorry, just couldn’t resist.

“Mailing” It In!

I’m not exactly going out on a limb when I say there has been a bit of recent controversy surrounding the United States Post Office. The issue of whether you are pro or con on mail-in ballots is fodder for a future column, but I digress.

Sadly, since 2007, the USPS has posted more red ink than all my corrected math and English papers from grades 2-12. $78 billion to be exact including a $2.2 billion loss the last quarter. Now one can point to a litany of reasons for its bottom-line malaise, but again that’s content for a future debate.

Not long ago I spoke with a former assistant Postmaster General who explained that one of the major causes of the downhill slide was the advent of electronic bill payments, which resulted in a precipitous drop in volume of what is known as remittance mail. Why take the time to hand write checks and affix stamps to your utility and credit card bills when you could pay with the click of a mouse?

Add to that delivery competition from UPS, FedEx, DHL and Amazon Prime and you have what basically has become a Blockbuster Video economic model in era of Netflix.

But my experience with the post office on a local level is likely a microcosm of what’s happening nationally.