Can Your Business Survive An Employee Exodus?

Tom Jeffries | June 23rd, 2015
Do Your Employees Love Their Jobs - Rea & Associates - Ohio CPA Firm

It’s easy to blame the pay scale when an employee leaves or when it becomes a struggle to recruit new talent and it’s common for top performers to leave for bigger and brighter opportunities that promise a larger pay check. But sometimes, the reason a top performer leaves has nothing to do with dollar signs. Sometimes their departure has everything to do with whether they believe their work is appreciated. When an employee does a good job, do you let them know?

As the economy continues to improve, it’s more important than ever to remain focused on the well-being of your team – because if you don’t, somebody else will.

Just because your employees aren’t actively looking for another job opportunity, doesn’t mean that other companies aren’t looking for them. And that makes

your responsibility to keep them happy in their current position or company more important than ever. Maybe your closest competitors have begun to regularly communicate with members of your team as part of a strategy to siphon your top talent or maybe an appealing job posting on LinkedIn has prompted one of your best employees to take a critical look at their current situation. While widespread mutiny among your rank-and-file may not top your list of business threats, it’s a real possibility that must be given proper consideration. If key members of your team determine that the grass is, indeed, greener on the other side, you could be left shorthanded, unable to fulfill your business obligations and ultimately branded with a bad reputation.

Read: Are Your Employees Stakeholders In Your Business?

Could your business recover after taking this kind of hit?

If you’re not sure how your company would be able to handle the exit of your star employee or a mass exodus of talent, try implementing these tips into your team-building strategy to help secure your overall business structure – and ultimately your success. As an added bonus, you might be able to earn the “workplace of choice” status in your community in the process, which can have an extraordinary impact on all aspects of your organization.

Be A Better Leader

How effective you are as a leader hinges on your ability to provide support, motivation and direction to your team on a regular basis while utilizing fair and constructive methods of communication. Leadership is not just about barking orders, it’s about listening to your team and providing solutions that address challenges and promote higher levels of proactivity and efficiency. Want to be a better leader? Get involved. Listen. Be hands-on. And actively demonstrate the qualities you expect to see from your team.

Encourage Ownership

When team members are able to take ownership of their work and accomplishments, they will take more pride in their work and in the company. Oftentimes, the quality of your team’s work will increase and they will be more likely to offer valuable insight into the effectiveness and shortfalls of certain aspects of their area in the organization. You can’t be everywhere and they can serve as your eyes. Your team’s intuition can be incredibly valuable and can help improve your business’s processes and procedures. One way to encourage your team to take ownership is to give them the chance to walk away with a bonus for their efforts. Individual and company performance bonus plans have been successfully implemented in many businesses.

Environment Matters

Want to know the best way to drive your employees away? Make them work in cramped space with poor lighting, uncomfortable working conditions and outdated facilities. On the other hand, if attracting great hires and retaining top talent is your goal, be sure to provide your team with the tools they need to do their jobs effectively while ensuring that your facilities are up-to-date and the working conditions are manageable. Just like you, your employees are working harder than ever to earn a living. Another great way to satisfy your team is to understand that many of the men and women working for you are part of a household that depends on both parents working full-time jobs. Therefore, respecting the need for greater work/life balance might also give your business the edge when it comes to attracting and retaining top talent.

Be Generous With Feedback

It’s easy to blame the pay scale when an employee leaves or when it becomes a struggle to recruit new talent and it’s common for top performers to leave for bigger and brighter opportunities that promise a larger pay check. But sometimes, the reason a top performer leaves has nothing to do with dollar signs. Sometimes their departure has everything to do with whether they believe their work is appreciated. When an employee does a good job, do you let them know? When your team works together to fulfill an especially difficult quota, do you speak up? When you notice that one, two, 10 or more members of your team are struggling, do you take the time to work with them and help them overcome their challenges? When you take the time to give employees feedback with regard to how well they are performing their specific job duties, you help provide them with a roadmap for their own success. Some companies have begun to implement longevity awards to help acknowledge their team for the great work they do. These rewards are not only great incentives, they become points of pride.

Email Rea & Associates to learn more about the benefits a great team can have on your company’s bottom line.

By Tom Jeffries, CPA (Millersburg office)

 

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Is Your Business Batting A Thousand?

Dave Cain | June 22nd, 2015

Why You Need A Banker On Your Team

A lot has changed since the first time I sat behind my desk at Rea & Associates in 1979. Technology has advanced in ways that no one could have imagined or predicted. Our nation endured – and survived – The Great Recession. And someone somewhere decided that Pluto isn’t a planet anymore (and I just became a grandpa!).

But with all these changes going on, one thing has remained the same: to be successful in business, you can’t go it alone.

Read Also: Why Is A Relationship With Your Banker Important To Your Business? 

You never know when you will need a sounding board, some insightful guidance or even someone to go to bat for you, but if you are looking to hit a home run, you need to make sure your team is stacked with advisors you trust – and be sure to make room on your roster for a banker.

As a business owner, it’s easy to get caught up in the daily responsibilities of managing operations, customer needs and stakeholder interests. If your banker is just watching from the bleachers, you are missing out on a great opportunity to improve your business. Get a banker on your team, and if it’s the right one, you’ll see results.


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A Key Player

Maybe you’re already making payments on a business loan, or perhaps you’re in the market to refinance or secure a new loan. Either way, you’ll have better results if you see your banker as a teammate.

When your banker is a key player in your business, you will find:

  • The bank is more willing to give you a loan.

    Banks don’t loan money to business owners they can’t trust. When you develop a relationship with your banker, not only do they get the chance to know you better, they get broader insight into your company and the objectives that drive your business. Yes, your cash flow, collateral and financial statements are important, but so is your character. If your banker knows you, likes you and trusts you – and knows, understands and believes in your business – you could be more likely to secure the financing you need when you need it.
  • You and your business are often top-of mind.When you have a strategic banking relationship, you’re more likely to get a call when a great opportunity arises. Your banker has greater insight into your short- and long-term strategies and will be able to alert you when a low interest loan program lands on their desk. Additionally, they are in a great position to recommend your business to other clients and professional acquaintances.

If you talk to your cousin’s neighbor’s dog-walker more often than you talk to your banker, it’s time to make a change. Try setting a recurring reminder on your calendar to meet for coffee, visit the batting cages or hit a few golf balls. Before long, you’ll start to see a return on your efforts.

By Dave Cain, CPA (Dublin office)

 

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The Plight of the Snowbird

Trista Acker | June 19th, 2015

It’s warm and muggy now, but once winter blankets the Buckeye State with record snowfall and subzero temperatures again, you will likely be kicking yourself for not having hightailed it to Florida after last year’s bitter cold snap. Sure, it’s easy to say that you would like to pack up and head for a warmer climate during a seemingly endless freeze, but once the icicles melt and the flowers bloom, you begin to remember why you’ve stayed around for so long in the first place. Maybe the fact that your family and friends still call Ohio home is enough to convince you to stay put. Or perhaps its memories of your own childhood that are keeping you tethered to the state. Either way, now that it’s summer – the need doesn’t seem so intense anymore … that is, unless you are considering taking advantage of possible tax savings.

Will Taxes Influence Your Decision To Fly South This Winter?

The Plight of the Snowbird - Rea & Associates - Ohio CPA Firm

Now that you have settled on whether or not you will be packing up and moving for tax and/or weather reasons, make sure you know what’s involved when it comes to changing your state of domicile.

What if I told you that the State of Ohio has made it a little easier for you to escape the winter chill, spend more time in the nation’s heartland during the seasons you love and save on your tax bill? Would you consider making the move then? If so, you’re in luck!

Read: How Can I Make The Most Of My Retirement?

Which State Do I Call Home?

For some, it’s relatively easy to buy and maintain several homes across state lines. The hard part comes when the Internal Revenue Service wants you to decide which home should be considered your primary residence based on how much time you spend in each state. These are the facts that will ultimately influence whether you pay taxes or not. If you are a snowbird who flocks back and forth between Ohio and Florida, for example, to avoid reporting your income to Ohio for tax purposes, it’s up to you to prove that you have spent no more than seven months (or fewer than 212 contact periods) in the Buckeye State. That compares to the 182 contact sessions (or six months) snowbirds were allowed to remain in Ohio under prior rules. The rules were changed in March.

How Do I Change My Residence For Tax Purposes?

Now that you have settled on whether or not you will be packing up and moving for tax and/or weather reasons, make sure you know what’s involved when it comes to changing your state of domicile. Some states, such as Florida, require basic documentation to establish your change of domicile. Therefore, you should make sure all your paperwork is in order, including your Declaration of Domicile. And while you are filing paper work to establish your new residence for tax purposes, keep in mind that some states, including Ohio, require documentation in order to relinquish your residency. Ohioans looking to relocate must complete and sign an Affidavit of Non-Ohio Residency/Domicile. This document helps establish your desire to establish nonresidency within the state. But keep in mind that there are there are other bright line tests the State of Ohio may look at to help determine whether you are actually domiciled in another state. For example, the State may look for information that indicates where you are registered to vote, which state issued your driver’s license, where your vehicles are titled and what address is listed on your tax return.

Email Rea & Associates to learn more about the tax benefits some snowbirds enjoy and whether migration is right for you.

By Trista Acker, CPA, CFP (Dublin office)

 

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Want A Better Business? Structure Matters

Gene Spittle | June 5th, 2015
Minimal Tax Liability - Rea & Associates - Ohio CPA Firm

Perhaps the biggest argument for establishing your business as an S-Corp is the minimal tax liability it provides to shareholders and to the business as a whole. Only the wages paid to owners and employees are considered earned income and subject to Federal Insurance Contributions Act (FICA) tax for Social Security and Medicare. Other net earnings passing through to shareholders are considered “passive income,” protecting them from the taxes that would otherwise be assessed per the Self Employed Contributions Act (SECA) tax.

Are you an entrepreneur who wants to take advantage of the benefits often awarded to small-to-midsize business owners? If so, you may want to consider establishing a limited liability company or an S-corporation. Both options offer several distinct advantages depending on the size and scope of your business and it’s even possible to combine the two – potentially providing you with the best options of both worlds.

Read: Is It Time To Review Your Choice Of Entity?

Keep in mind that in some circumstances, making the change to an LLC may simply be impractical. Given your particular situation, the switch may have unfavorable consequences. Consider working with a knowledgeable financial advisor and/or business consultant who can assist you with proper planning and who can articulate the advantages and disadvantages of each option. If you are ready for a structure change, be sure to look closely at your short and long term goals and objectives – and be sure to build in some flexibility so that your business can adapt as it matures.

While it may be nearly impossible to find a perfect fit with regard to your specific needs, you may find one option to be better than another when working toward accomplishing your unique financial and tax goals. Read on to learn more about a few organizational structures that might make sense for you.


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Just Passing Through

Regardless of whether you establish an LLC or an S-corp, you will receive the benefits associated with owning a pass through entity, meaning that your company’s income will pass directly through to the business owners – potentially receiving better tax treatment. Furthermore, both options grant owners with some form of limited liability protection.

What To Expect From Your LLC

If you decide to structure your business as an LLC you will likely enjoy the tax efficiencies and operation flexibility this traditional sole proprietorship or general partnership will provide. If you plan to enter into a partnership, each owner will be considered members and will report their portion of the profits and losses to the internal revenue service (IRS) on their personal federal income tax return. Another great benefit LLC members report is the ease of their operation and administration responsibilities. Members also enjoy fewer restrictions when the time comes to distribute earnings through profit-sharing.

Be aware, however, that the liability protection provided by an LLC is typically limited to each member’s personal investment in the company.

What To Expect From Your S-Corp

Corporate income, losses, deductions and credits are passed directly through to owners (or shareholders) of S-corporations. Shareholders of the company are then expected to report the business’s income and losses on their federal tax returns – similar to an LLC. Keep in mind that S-Corps may have no more than 100 shareholders. Furthermore, partnerships, corporations and non-resident aliens are not eligible to own S-corps. Shareholders only consist of individuals and certain trusts and estates.

Perhaps the biggest argument for establishing your business as an S-Corp is the minimal tax liability it provides to shareholders and to the business as a whole. Only the wages paid to owners and employees are considered earned income and subject to Federal Insurance Contributions Act (FICA) tax for Social Security and Medicare. Other net earnings passing through to shareholders are considered “passive income,” protecting them from the taxes that would otherwise be assessed per the Self Employed Contributions Act (SECA) tax.

But be forewarned, even though S-Corps have some great tax benefits, they also have complex administrative and recordkeeping obligations. All S-Corps are required to maintain formal minutes, bylaws, forms and filings. Additionally, because shareholders earnings are limited to a proportional percentage of capital contributions, profit sharing is difficult to establish. In other words, if you are looking for a relatively low-maintenance option – you may not want to choose to establish an S-Corp.

The Best Of Both Worlds

Wouldn’t it be great if you could structure your business in a way that allows you to enjoy the benefits of minimal tax liability, profit sharing, and fewer administrative and operational responsibilities while curtailing the restrictions posed by establishing the company solely as an LLC or S-Corp? Good news – that option exists!

There are steps you can take to establish your business as an LLC while allowing it to receive the tax treatment of an S-Corp – it just requires you to seek insight from a professional in business and financial matters and a special election with the IRS via Form 2583.

The decisions you make today will impact the future of your business for years to come. Email Rea & Associates to learn more about the pros and cons of LLCs and S-Corps, as well as other options that may be available to address your specific challenges.

By Gene Spittle, CPA, PFS, CGMA (Wooster office)

 

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Managing Wealth In A Volatile Industry

David Shallenberger | June 4th, 2015
Navigate The Busts and Booms of Business - Rea & Associates - Ohio CPA Firm

Owning a business in a volatile industry can be a big gamble, but if you strategically manage your assets, your odds of success become much greater. Be prepared for outside factors that may force your business to go lean by preparing early and creating a solid, sustainable financial management strategy.

The oil & gas industry has long been known to experience regular cycles of booms and busts. One of the most recent examples occurred only a few months ago, when Organization of the Petroleum Exporting Countries (OPEC) made the decision to maintain its current level of production levels in an attempt to capture greater market share. This decision caused the price of oil to tank. By the time the dust settled, oil prices dipped 60 percent and the ripple effect had already begun to take a toll on companies throughout the industry.

Read: This Is An Intervention – Step Away From Your Business

This is just one example of how the market can change overnight, but this type of volatility is not exclusive to the oil & gas industry, which is why all business owners throughout all industries should consider taking the steps necessary to guard against a bust – even if you are still riding high on a boom.

3 Tips To Help You Navigate Your Industry’s Busts – And The Booms

  1. Take Good Care Of Your Assets – Successful navigation of a finicky industry depends on how well you manage your assets. For example, when times are good, take the necessary steps to manage your cash flow and consult with an advisor who can help you make wise, sustainable financial decisions. When it comes to investments made outside the volatility of your business, consider giving your blood pressure a break and make it a priority to first seek the preservation of your capital over your rate of return. Emphasizing capital preservation can better prepare you for those unexpected downturns.
  2. Live Frugally (Even When You Don’t Have To) – Don’t buy that new car unless you are absolutely sure that you will have the funds needed to cover the payments, and any other unexpected expenses, later on. Setting goals for your spending and saving habits, for example, can help keep your finances in line – helping you to keep your head above water when your business, or the industry, takes unexpected downturn. Instead of driving off the lot in that brand-new car, start by putting some money aside to make a nice down payment. Even though you may have to postpone the purchase for a few months or so, when you are finally able to put the money down you will also be able to significantly reduce your monthly payments – putting you in an even better long-term financial position.
  3. Choose To Play The Long Game – It may seem hard to diversify your business when so many others appear to be doing pretty good for themselves by chasing the quick rewards. But by operating your business and managing your personal finances more conservatively, you stand a better chance of securing long-term wealth – not to mention a comfortable retirement. In other words, when you diversify your assets, you are able to protect yourself and your business from a sudden and complete collapse.

Owning a business in a volatile industry can be a big gamble, but if you strategically manage your assets, your odds of success become much greater. Be prepared for outside factors that may force your business to go lean by preparing early and creating a solid, sustainable financial management strategy. Take a look at your current operations and consider what changes you can make today to help protect your business from a possible financial catastrophe tomorrow.

Email Rea & Associates to discover more ways to protect your business.

By David Shallenberger, CPA (Wooster office)

 

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What’s That ‘New’ Charge On Your Amazon Bill?

Joe Popp | June 2nd, 2015
Amazon Looks To Drone Delivery - Rea & Associates - Ohio CPA Firm

Amazon appears to be unaffected by the possible repercussions of adding sales tax to customer’s invoices as its focus seems to have shifted from a superior price point strategy to high efficiency and extra speedy service. According to reports, the online giant continues to move forward with initiatives that promise even speedier delivery – further cutting the time it takes for a product to hit the customer’s front porch after the order was placed.

If you aren’t already aware, Amazon is in the process of bringing three of its data centers and a distribution center to Ohio. And yes, the company’s decision to open up shop in the Buckeye State is expected to boost the state-wide economy and add about 1,000 jobs to the ranks. But what is generating the most excitement these days (at least throughout Ohio’s retail industry) is the company’s new responsibility to collect sales tax from our state’s shoppers.

Read: If You Buy Online You Might Owe Use Tax

Traditional retailers anticipate this move will effectively level the playing field, helping encourage the growth of the state’s locally-owned businesses. Amazon, however, appears to be unaffected by the possible repercussions of adding sales tax to customer’s invoices as its focus seems to have shifted from a superior price point strategy to high efficiency and extra speedy service. [SPOILER ALERT: Drone delivery appears to be imminent!] According to reports, the online giant continues to move forward with initiatives that promise even speedier delivery – further cutting the time it takes for a product to hit the customer’s front porch after the order was placed. The company is also exploring ways to keep the cost associated with such speed minimal – information from the US Patent and Trademark Office reveals the company’s desire to “dominate the skies.”

Ohio-Based Amazon Shoppers Begin Paying Sales Tax

Paying taxes on your purchased items is not a new phenomenon. In fact, you’re probably not too shocked to see the roughly 7 percent (based on your county) charge permanently affixed to the bottom portion your receipts whenever your purchase a variety of products from a local brick-and-mortar shop. Until June 1 though, Ohio residents didn’t see this charge when purchasing products from Amazon, simply because the online retailer wasn’t required to make those living in the Buckeye State pay these taxes.

In Ohio, only vendors with a physical presence in the state, such as a storefront, warehouse, factory or call center, must charge sales tax to in-state customers. Otherwise, it’s up to individual taxpayers to report and pay the taxes when filing their annual tax returns, which is a relatively uncommon practice.

“The Ohio Department of Taxation has estimated that Ohio will lose out on about $400 million in unpaid sales or use tax on unpaid sales or use tax on so-called remote sales this year,” reported The Columbus Dispatch. “More than 5 million Ohioans filed tax returns for 2012. Of those, a little more than 50,000 paid a total of $3 million in taxes due on Internet or mail-order purchases. Retail groups and analysts welcomed the news that Amazon will start collecting taxes.”

Ohio Taxpayers Still On The Hook For Other Purchases

It may seem like it’s too soon to start thinking about your 2015 tax return, it’s actually a great time to start collecting information you will need to complete your paperwork early next year. For example, while you won’t need to collect your Amazon receipts anymore, you may have to keep tabs of your Etsy habit (for example) to help make calculating your 2015 use tax as simple as possible.

Email Rea & Associates to learn more about use tax.

By Joe Popp, JD, LLM (Dublin office)

 

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Hackers Target IRS – 100,000 Taxpayer Accounts Breached

Lesley Mast | May 27th, 2015
Hackers Target IRS – 100,000 Taxpayer Accounts Breached  - Rea & Associates - Ohio CPA Firm

Reports state that cyber-criminals were able to gain access to taxpayer accounts by obtaining specific, personal information, which allowed them to navigate the Get Transcript authentication process. The IRS said, since February, there have been about 200,000 attempts to access taxpayer’s Get Transcript accounts from “questionable email domains – of which, about 100,000 were successful.

Just when you thought it was safe to let your guard down, cyber-criminals have blindsided us again. This time they’ve used the Internal Revenue Service’s “Get Transcript” application to gain access to approximately 100,000 taxpayer accounts.

Read: Could A Cyber-Attack Cripple Your Business In 2015?

The IRS released a statement Tuesday stating the government agency is “working aggressively to protect affected taxpayers and strengthen [their] protocols even further going forward,” after learning that hackers used “non-IRS sources” to access data, including Social Security information, dates of birth and street addresses associated with the accounts of nearly 100,000 taxpayers. The IRS said the security breach occurred when criminals gained access to its online Get Transcript application, which has since been shut down pending a full investigation by the Treasury Inspector General for Tax Administration.

According to the IRS, “the online application will remain disabled until the IRS makes modifications and further strengthens security for it.”

The data breach was limited to the Get Transcript application, said an IRS representative. The main IRS computer system that manages tax filing submissions was not affected and remains secure.

Reports state that the criminals were able to gain access to the accounts by obtaining information specific to the certain taxpayers, which allowed them to navigate the Get Transcript authentication process, which includes asking the user to answer several personal questions to confirm their identity. The IRS said, since February, there have been about 200,000 attempts to access taxpayer’s Get Transcript accounts from “questionable email domains – of which, about 100,000 were successful.

Expect to receive a letter in the mail if your account was one of the 200,000 accounts targeted. And if your account was one of those that were compromised, your letter will provide additional information, including specific instructions to access free credit monitoring services that will be provided by the IRS to ensure your data is not being used in other financially damaging ways. According to the IRS, the letters started going out this week.

Concerned about identity theft as a result of this breach? Click here to learn what to do if your identity is stolen or if your personal information is compromised.

If you are a business owner, do you have protocols in place to protect your business from a cybercriminal?Email Rea & Associates to learn how you can protect your business from a cyberattack. You can also get some useful tips and information in the related articles below.

By Lesley Mast, CPA (Wooster office)

 

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School’s Out For Summer, But Tax Credits Are Still In

Denell Skelton | May 26th, 2015

Summer is an exciting time for families. It’s a time to get outside and have fun hanging out by the pool or to catch fireflies in a jar at the end of a long day. For many parents though, the summer holiday is overshadowed by the need to find affordable childcare during your work hours. The good news is that your opportunity to claim the Child and Dependent Care Tax Credit doesn’t end at the last day of school. In fact, you may be able to claim a variety of summertime childcare expenses when tax season rolls around again. Check out the list below to familiarize yourself with this credit.

Read: Can My Summer Day Care Expenses Earn A Tax Credit?

8 Tips To Help You Claim The Child Care Tax Credit

  1. Child care must have been provided so that you (and your spouse if filing jointly) can work or actively look for work. Your spouse must also meet this obligation during any month in which the child was a full-time student or was physically and/or mentally incapable of self-care.
  2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There’s an exception to this rule for a spouse who is a full-time student or who is physically and/or mentally incapable of self-care.
  3. Care must have been provided for dependent(s) younger than 13 years old. Your spouse or another dependent qualifies if they lived with you for more than have the year and are physically and/or mentally incapable of self-care.
  4. Qualifying child care expenses include those that are used to secure enrollment at a daycare facility outside the home or at a day camp. Expenses for overnight camps or summer school tutoring do not qualify. NOTE: If you pay someone to come to your home to care for your child or children, you may be a household employer. For more information, see IRS Household Employer’s Tax Guide.
  5. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses.
  6. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person and can be up to 35 percent of your expenses, depending on your income.
  7. You can claim up to $3,000 of your total unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying persons.
  8. Keep your receipts and records to use when you file your 2015 tax return next year.  Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return.

Email Rea & Associates to learn more about the Child and Dependent Care Tax Credit or other tax incentives you may qualify for.

By Denell Skelton, CPA (Coshocton office)

 

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Don’t Shy Away From Business Debt

Dustin Raber | May 22nd, 2015
Leverage Your Debt - Leverage Your Cash Flow - Ohio CPA Firm

Traditionally, companies with strong, positive cash flows are those with proper pricing models in place, a healthy labor force, controlled spending and active collections. When it’s time to grow, they are ready to make a move.

You know the satisfaction you feel when all of your debts have been settled and any extra cash flowing into your bank account is purely disposable income. Neither do I. But, contrary to popular belief, if you are a business owner, carrying a little extra debt could be a good thing – and here’s why …

Read: How Can My Statement of Cash Flows Transform My Business?

One of the most important jobs a business owner has is to prepare, monitor and analyze their company’s cash flow. As the single most important tool you have in your business’s arsenal, your company’s cash flow (business income minus its cash payments) provides you with an accurate way to measure its overall financial wellness.

Do You Know What You Need To Grow?

One of the most powerful ways to measure how well your company is doing is to monitor its projected/forecasted cash flow while analyzing the business’s past financial information.

  • Your company’s projected/forecasted cash flow should provide you an educated prediction of your future cash income and expenses. You can use this information to develop the initiatives needed to ensure the long-term growth and sustainability of your business.
  • When you monitor your company’s past cash flow you will tap into the data needed to zero in on the business’s strengths and weaknesses – effectively shining a light on processes, products, services and strategies that are hindering your company’s growth. Then you can act quickly to build upon the objectives that work and eliminate those that hinder ongoing success.

Traditionally, companies with strong, positive cash flows are those with proper pricing models in place, a healthy labor force, controlled spending and active collections. (Notice that I didn’t say that these companies were debt free!)

Leverage Cash Flow, Leverage Your Debt

The word “debt” has a bad reputation. Yes, for many reasons living your life and managing your business “debt free” can be a great thing. But, especially in business, working exclusively for the purpose of eliminating all debt can actually hinder you from experiencing healthy, sustainable growth. For example, in the quest to settle your company’s debts, you may be left with an anemic savings account and little-to-no cash to jump on opportunities that arise and could potentially propel your company to new heights. As a savvy business owner, you should always anticipate changes that could positively and negatively impact your business. The key is to leverage your company’s cash flow. Here are two ways you can get started.

  1. Take advantage of financing opportunities with favorable interest rates.  

Oftentimes, especially if you have taken the time to develop a strong relationship with a local financial institution, you can secure financing at a very low interest rate. This will allow you to take the cash that was not used to finance your project and reinvest it in the market, which can provide you with a better return. For example, in the current market, if you are able to finance new equipment for your company with an interest rate of 4 percent, you are free to invest your own cash in the market, which could yield a return rate greater than the interest charges you owe to the bank per your financing agreement.

  1. Utilize a line of credit

One of the best ways to invest in your business is to make sure you have the cash on hand that will allow you to take advantage of unforeseen opportunities. It’s hard to predict when a strategic partnership or change in the marketplace can open up a door that had previously remained shut. But when it does, an open line of credit makes seizing the opportunity possible while ensuring that your business’s current operations remain unaffected.

If you practice strategic control over your business, make sure you are giving your cash flow the same attention. To properly leverage your company’s debt you must constantly monitor your cash flow to ensure that these strategies make sense for you. Email Rea & Associates to learn more about leveraging your cash flow and whether it is the best move for your company.

By Dustin Raber, CPA (Millersburg office)

 

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Study: Nonprofit Organizations Lack Governance Structure, Processes

Mark Van Benschoten | May 19th, 2015
Directors of Nonprofit Organizations Lack Governance Structure - Rea & Associates - Ohio CPA Firm

Enacting proper policies throughout the organization will not only help rectify problems that stem from a weak system of governance, they will help solidify the connection between the directors and their organization while putting a solid structure in place for streamlining the nonprofit’s central objectives, such as fundraising, budgeting and lobbying.

If you had to guess, how strong do you think your nonprofit organization’s policies are? If you’re unsure or have that gut feeling they’re not strong, you’re certainly not alone. After surveying more than 900 directors of nonprofit organizations, the Stanford Graduate School of Business, in collaboration with BoardSource and GuideStar, reported some concerning findings in their 2015 Survey on Board of Directors of Nonprofit Organizations.

You may know that it’s important to have good governance when it comes to ensuring the stability and strength of your organization. Without having the right procedures in place to help govern the board of directors and the institution as a whole, the entire organization risks collapse.

Read: How Effective Is Your Nonprofit Organization?

While securing sources of revenue and recruiting new members are critical elements of every nonprofit, the real backbone of your organization is your board’s governance. Without the proper structure in place to help shape and reinforce your vision, mission and objectives, your board will not have the tools needed to lead – making your funding and membership objectives less effective.

According to Stanford Graduate School’s survey:

“Over two thirds (69 percent) of nonprofit directors say their organization has faced one or more serious governance-related problems in the past 10 years. Forty percent say they have been unable to meet fundraising targets. Twenty-nine percent have experienced serious financial difficulty. A quarter (23 percent) have asked their executive director to leave or had to respond to unexpected resignation [and] sixteen percent say they have had extreme difficulty attracting qualified new board members.”

Furthermore, the study found that:

  • Too many directors lack a deep understanding of the organization
  • Most lack formal governance structure and processes
  • Many directors are not engaged, do not understand their obligations

While the shortcomings underscored by this report highlight a widespread problem throughout the nonprofit industry, the solution may be as simple as writing (or reevaluating) and implementing a variety of key policies. Enacting proper policies throughout the organization will not only help rectify problems that stem from a weak system of governance, they will help solidify the connection between the directors and their organization while putting a solid structure in place for streamlining the nonprofit’s central objectives, such as fundraising, budgeting and lobbying. Policies can, and should, be in place to help manage the organization’s advisory council, board member orientation, ethics, confidentiality, donor relations, performance, and sponsorship activity – among many others.

Not sure what policies you should have in place? Take a look at this comprehensive Not-for-Profit Policy Checklist. Here are also a few examples of sample policies to give you greater insight into what you should be striving to accomplish.

By Mark Van Benschoten, CPA (Dublin office)

 

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