Business Consultants & Certified Public Accountants

Your Accounting Software Should be a Many-Splendored Thing

You’ve probably heard the song, “Love is a many-splendored thing.” Well, your company’s accounting software should be, too. That is, you’ve got to make sure your system does all of the big and little things necessary to efficiently and accurately track your financials.

It’s not only about revenue

Annual revenue doesn’t always dictate what software you should acquire. Some $50 million a year businesses will do just fine using a less expensive accounting software package, while some $5 million businesses will require a much higher end product. The key is to thoroughly review your accounting processes, tax-reporting requirements, transaction volumes, staff’s abilities and management reporting needs.

The future matters as much as the present

Another important factor: your company’s growth rate. If you’re growing 20% or more per year, you must have an accounting package that can grow with you. Otherwise, converting to a new accounting system every couple of years will be a painful and expensive process.

Your users matter the most

You’ll never get maximum value out of accounting software that your employees can’t fully use. Better systems provide on-screen tutorials that walk users through a sample company’s transactions and offer prompts for completing certain tasks. Extensive help should be available on-screen as well as via a 24-7 phone number. Some providers even provide support through instant messaging.

You’re not just tracking, you’re analyzing

The system should allow you to readily generate monthly and annual accounting reports. This means being able to easily record and access bank reconciliations, recurring transactions, and aging of accounts payable and scheduling of payments. A better package will customize reports that include instant unadjusted trial balances, income statements, balance sheets, cash flow statements, statements of retained earnings and more.

A second opinion is always helpful

So do you love your current accounting system? If you can’t say “yes” unequivocally, give us a call. We can review your existing functionalities and make recommendations regarding whether and how you should upgrade.

 

5 Ways to Cut Costs and Improve Cash Flow

When business owners start to feel the choking effect of a slow cash flow, they often blame their customers. “Why aren’t we getting paid on time?!” But it’s important to remember that cash flow is affected by a variety of elements. For example: Operating expenses and overhead can have a significant impact. Here are five often-missed ways to cut costs and improve cash flow:

1. Review your rent or mortgage. Can you negotiate a lower rent with your landlord or refinance your mortgage? Also look into whether you may not need as much office space if you’ve begun to allow many employees to telecommute.

2. Implement energy efficiency improvements. You’d be surprised by how much of a difference little changes can make to lower your utility bills. For example, draw the shades in the summer and adjust the thermostat a few degrees. Or look into whether it’s time to make an upfront investment in better windows or HVAC equipment.

3. Take a close look at travel and entertainment expenses. Can you pare these down by conducting more meetings via teleconferencing or using a Web-based application? Can you cut back on expensive meals and, if applicable, sports and concert tickets for clients? Clearly, you don’t want to diminish relationships with clients and vendors by cutting back too much. But there may be ways to save.

4. Slow down shipping expenses. Employees often send packages overnight when two- or three-day shipping would suffice. Establish or re-establish clear policies. In addition, you might be able to find some lower cost shipping arrangements by comparing providers.

5. Give us a call. We’d be happy to take a comprehensive look at your company’s expenses and assess how they’re affecting your cash flow. Most likely, we can make some strong money-saving recommendations.

 

Is It Time To Get Accountable With Your Employees’ Expenses?

Many companies start out, and get pretty far down the road, using the “per diem” approach when reimbursing employees for lodging, meals and incidental expenses. Doing so involves the use of either IRS tables or a simplified high-low method to reimburse workers up to specified limits.

The per diem approach is relatively simple and doesn’t involve too much record keeping. But it also puts businesses at risk if they exceed the per diem limits, exposing them to IRS penalties and employees to higher tax liability. For this reason, companies often reach a point where they create an “accountable plan” for handling employee expense reimbursements.

Reaping the tax advantages

An accountable plan is a formal arrangement to advance, reimburse or provide allowances for business expenses. The primary advantage is that your business can deduct expenses (subject to a 50% limit for meals and entertainment), and employees can usually exclude 100% of advances or reimbursements from their incomes. Workers whose jobs involve frequent travel may realize significant tax savings.

Qualifying for eligibility

To qualify as “accountable” under IRS rules, your plan must meet the following criteria:

  • It must pay expenses that would otherwise be deductible by the employee.
  • Payments must be for “ordinary and necessary” business expenses such as airfare and lodging charges.
  • Employees must substantiate these expenses — including amounts, times and places — ideally at least monthly.
  • Employees must return any advances or allowances they can’t substantiate within a reasonable time, typically 120 days.

If you fail to meet these conditions, the IRS will treat your plan as nonaccountable, transforming all reimbursements into wages taxable to the employee, subject to income and employment taxes — though potentially deductible by the employee.

Getting some help

Accountable plans take time to establish and require meticulous record keeping. Let us help. We’d be happy to assist you in setting up your accountable plan and regularly reviewing its compliance with IRS rules.

The Tragic Tale of a Troubled Business Succession

It’s a tragic tale that plays out in many businesses across the country. The owner of the company believes he’s finally ready to trigger his succession plan and retire. So he names his daughter as his successor, enjoys his retirement party and departs for his vacation home.

Reluctant retiree

For six months of the year, the now-former business owner lives at that vacation home while his daughter toils away at establishing control of the company. Although her father has given the daughter stock in the company, he still retains the majority vote.

And whether on vacation or at his primary residence, the former owner insists on calling into work almost every day and being kept informed via email of everything going on. When tough decisions are required, top managers still look to him for final confirmation. Every so often, he even pays a visit to the office with much fanfare, undermining the authority he has seemingly given his daughter to oversee the business.

After a year or two of this, the true consequences start to become clear. The former owner’s relationship with his daughter has deteriorated severely — mainly because of business disagreements. And, without a clear strategic direction, the company itself is floundering and falling behind the competition.

Sad lesson

The lesson of this sad story is fairly clear: Once your retirement date arrives, stick to it. Doing so means getting out — all the way out, at least in terms of decision-making.

Remember, you can always stay available as a consultant. Just make sure not to undermine your successor’s authority. Making a clean break is usually the most effective way to ensure a succession plan succeeds.

Strong moves

If you’re nearing retirement, let us help you go over the details of your succession plan. We can help with both the financial aspects and the strategic moves that will keep your company strong.