Turning to independent contractors can be a smart option in a number of situations, such as when you have a seasonal upswing in workload or need a specialized skill for a short period. But independent contractors come with potential risks, too. They may not help you trim your total workforce costs if you use them excessively. More important, there can be tax and legal ramifications if you mishandle the relationship.
The IRS has long scrutinized employers’ use of independent contractors as a way to avoid payroll tax obligations. If the IRS recharacterizes an independent contractor as an employee, you could be on the hook for:
- Back payroll taxes you should have paid,
- Back payroll and income taxes you should have withheld, and
- Interest and penalties.
Also, earlier this year, the Department of Labor renewed its focus on employee misclassification. Its Wage and Hour Division released Administrator’s Interpretation No. 2015-1, which includes six factors to help employers determine proper classification and warns of serious potential penalties.
Independent contractors can give you flexibility to even out the peaks and valleys of your workforce needs. But these arrangements have risks. We can help you understand the tax implications and work with your legal advisors to keep you in compliance. Contact us today!
Like race car drivers, business owners need to monitor gauges on their dashboards to keep an eye out for serious operational failures before a total breakdown occurs. These gauges are commonly referred to as key performance indicators (KPIs).
There are two broad categories of KPIs: financial and nonfinancial. Financial KPIs often take the form of ratios, such as:
Debt to Equity: Total Debt / Shareholder’s Equity,
Current Ratio: Current Assets / Current Liabilities, and
Days Sales Outstanding: Number of Days × Accounts Receivable / Credit Sales.
Nonfinancial KPIs may include measurable metrics in the areas of customer service, sales and marketing. For example, if a company’s goal is to improve its response time to customer complaints, its KPI might be to initially respond to complaints within 24 hours, and to eventually resolve at least 80% of complaints to the customer’s satisfaction.
KPIs differ from one company to the next based on industry, company type (B2B or B2C, for example) and, most important, strategic objectives. Your KPIs will stem mainly from your mission statement and your short-, medium- and long-term goals.
We can help you target the KPIs best suited to your business, and ensure the calculations are accurate and based on the timeliest financial data. Contact us today!
A sound succession plan is a must for every business. But even the best-laid strategies can go awry. Here are some steps you can take to fix a shaky succession plan:
Compare progress to plan. Don’t rely on vague notions of why your succession plan isn’t working. Identify the specific gaps in its execution. Also consider how your impaired plan is affecting your company’s bottom line, productivity and morale.
Be a communicator. Inform key parties about the problems, such as your successor, members of your board of directors or advisory board, managers, family and key nonfamily employees, shareholders and investors, and professional advisors such as your attorney and accountant.
Hit the pause button, if necessary. Don’t be afraid to retain control of the business a little longer while your next-in-line resolves his or her shortcomings or while other problems are resolved. Alternatively, you might name an interim CEO.
Revisit your successor choice. In extreme cases, a business owner may simply need to find a new leader-to-be. Remember, no one can afford to continue investing in someone who can’t successfully drive the company forward.
We’d be happy to review your succession plan and provide insights into its strengths and potential weaknesses. Contact us today!
The employee stock ownership plan (ESOP) is hardly a new concept. But it remains an intriguing benefits option for many companies.
An ESOP is a form of qualified retirement plan — specifically, a profit-sharing plan. It allows employees to own part of the company that employs them and then cash in their shares when they retire or otherwise leave the business.
Generally, an employer creates an ESOP by setting up a trust and contributing new company shares to it. The trust becomes the legally recognized owner of the company shares and is managed by a trustee who oversees the employees’ interests. Once the ESOP is up and running, the company makes annual, tax-deductible contributions that fund participants’ retirement accounts.
ESOPs offer businesses some exciting advantages, including:
- Increased employee motivation,
- Ease of ownership transition, and
- Immediate tax benefits.
These arrangements, however, do present challenges. They’re not easy to set up, and the rules for plan distributions are complex. You’ll also need to have a business valuation performed. What’s more, ESOP fiduciaries have recently faced scrutiny by the Department of Labor.
If you think an ESOP might be a good fit for your company, contact us. We can help you further assess this type of retirement plan and, should it suit you, help implement it.
To succeed at strategic planning, business owners must look to actively mitigate the many uncertainties under which every company operates. Here are six ways to do that:
1. Be curious. Identify the demographic, technological, cultural and other changes occurring outside your company and industry.
2. Assess how those changes might impact your organization and industry. For example, trends toward a more ethnically diverse and older population have been well documented. How will they affect your business?
3. Gain insight on how to succeed in today’s world. Talk with employees at all levels and from across departments. Network with peers at companies within and outside your industry.
4. Figure out what you know. Soak up as much information as you can through industry journals, trade association gatherings and social media.
5. Challenge your assumptions. As markets, technology and industries advance, determine whether your current plans are still relevant. If they aren’t, make competitive adjustments.
6. Focus on flexibility, agility and resilience. Continually ask “what if” questions and plan for a range of scenarios. For instance, what if your supply chain breaks down?
Strategic planning should be approached prudently and decisively — not rashly or hesitantly. We can help chart your company’s course toward a brighter, more profitable future. Contact us today!