3 Tips On Managing Your Corporate Debt

7. April 2019 17:58 by Jason Kelley in

Whether that be a term loan, line of credit, or some other bank credit facility, a business usually has some sort of debt on the books. For big business especially, it’s important to know how to best manage your debt so it doesn’t hinder your growth or sink your business altogether. Here are three suggestions to better manage your debt as you grow your business.

 

1. Negotiate better terms

If protecting your cash flow is a key goal of yours, then making your minimum payment as low as possible gives your company flexibility to protect its cash flow. See if you can have your interest and principle accrue, or if you can have interest only payments due. You can always turn an interest only payment into an amortizing one by paying down additional principal.

2.Negotiate better amortization schedules

The longer it takes to pay off your loan, the lower your payments are going to be. If the loan amortizes over ten years, your payments are going to be lower than if it pays off over five. You may have to pay extra principle, but the key is to minimize your required payments to guard your cash flow.

3. Negotiate better interest rates

This may take a little tact and salesmanship, but the best tool to help you negotiate interest rates with your lenders is to get them competing for your business. This shift takes you out of the position of “applicant” and transforms your lenders into people trying to earn your business.

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Asset Protection Planning

10. February 2019 11:30 by Junita Jackson in

Now that you are familiar with the most important asset protection and estate planning concepts how do you create the best plan? Protecting what you have from liability and preserving your estate for your family involves many new concepts for you and it’s not always easy deciding where to begin.

In this section, we will present a summary of the issues and options available-techniques to think about to frame the building of your overall plan. This is the approach we use with our clients to analyze their particular needs and to build an efficient program for asset protection, estate planning, and tax savings.

“Asset Protection and Estate Planning with the Family Savings Trust“

An increasingly popular tool used for asset protection and estate planning is known as The Family Savings Trust.  The term is broadly descriptive of a trust designed specifically to hold and protect a variety of assets against lawsuits and business risks.  It can be very flexible in form and allows for the accomplishment of most important asset protection and estate planning goals. 

“What is the Best Asset Protection Plan for Physicians?“

In our initial discussions with a client, these questions always come up “What’s the best asset protection plan?”  “Are there any plans which are completely bulletproof?”

Like any well-trained professional, I usually duck those kinds of direct and unconditional questions. After all, this is the legal system we’re talking about and when we compound the mixture of judges, jurors, and lawyers,  the results can be unexpected, to say the least.  The  Law is probably a lot like medicine in that respect.  So while we can’t honestly guarantee that the particular plan we design will produce the exact outcome we want, we do know what has happened before in similar situations.  If existing case law and legislation are clear and well developed then an asset protection plan that falls within the pre-set boundaries will have favorable and predictable results.

“Answers to Key Asset Protection Questions“

When I sit with clients to prepare or review their estate planning and asset protection goals in a wide variety of questions and issues arise: What plan is most efficient? How are tax savings created?  How do we protect against the lawsuit and business risk?  Although I have addressed many these topics in detail in previous columns, here are a few starter questions which often arise and which may open the door for further thought and discussion. 

“Asset Protection: Needs Change Over Time“

The type of asset protection planning you need depends on where you are in your career. Because the amount and form of your investments and the particular risks you face will vary over time, your initial planning should be appropriately flexible and capable of adjusting to meet these changing needs. 

“When Is It Too Late For Asset Protection?”

One of the life’s ironies is that the worst time for asset protection planning is when you really feel like you need it the most. Although the law favors and encourages asset protection in most circumstances, there comes a point in financial transactions and legal proceedings when it is no longer permitted. In some cases, this boundary is clearly defined, but often the question of when the remedy of asset protection is still permissible is fuzzy. Experienced planners can follow several guidelines and make some educated guesses about where the line should be drawn in situations that physicians may encounter in their practice. 

 

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What Business Advisory Tools Do I Choose?

25. December 2018 16:17 by Junita Jackson in

With a growing number of business advisory software tools on and entering the accounting market, it is often difficult to know what to choose.

At Smithink we recommend following our EnablerTM Seven Step to Success process using the best software at the critical steps. It is not as easy as having one tool for each step. There are several great applications that can be used. In this article, we will look at some of the tools that are available for each step.

The first step in the EnablerTM process is preparing your firm to succeed with business advisory services. This is critical to the ongoing delivery of services and should include the appointment of a champion and analysis of the right clients to start with. Many firms are using Excel sheets and Word documents to plan out their service packages and strategies for implementation. Key to this step is the development of a Client Relationship Management (CRM) solution such as MYP's Arm and Arm Pro.

From there you need to unlock your client's business advisory needs with an interactive client needs analysis. This, in my opinion, is the most important step, as it will indicate where the client's strengths and weaknesses are, and allows a proposal to develop to address specific needs. Great cloud tools here include Cash Flow Story's simple four-chapter approach to business performance and My Yardstick What's Important to you (WITY) tool and E-Scope automated pricing system can assist here to understand client needs and develop innovative proposals.

The third step is to create a "disturbance" in your client's mind using business value assessments. Paramount to this step is establishing how much the client thinks their business is worth against the commercial value and linking this to the concept of a Business Value Gap (BVG). Some of the best applications here are Cash Flow Story's Business Value Indicator and Bastar's materials, tools and programs that will calculate a capitalization rate for the client's business off financial data and a risk and value assessment. Another new tool in this space to increase the sellability of your client's business is Sellability Score.

From there we introduce financial diagnostic software to fill the gaps by analyzing and managing the client's key macro drivers and results that will improve their financial performance. We will look at where the business is today, its strengths (green flags) and weaknesses (red flags) and where it can be in the future. There are many solutions here including Cash Flow Story's Power of One, PANALITX, Fathom and Profit Guardian.

It is then time to look at the strategies required to implement micro services using smart tools and resources such as ESS BIZTOOLS and ESS BIZGrants. Attaché Software also has great tools here that can assist to implement key strategies with your clients.

Then track the performance of the client's business by preparing budgets and cash flows (or action plans) with Castaway, Calxa or Plan Guru. This step can link back to the development of business and action plans. MAUS Software's Master Plan is an innovative solution to address this need. Another great tool here is MYP's Estate Planning application to unlock your client's estate planning needs and develop key strategies for the future.

Finally, generate new business by growing your business advisory specialization through profitable scenario planning and offering your "how would you like to see the financial impact of every business decision before you make it" service. This look into the future requires software that can simply show the client their pre and post position. Any of the financial diagnostic tools will adequately handle this task.

With this myriad of choices, a firm needs to be confident that they select the right application for their clients and staff.

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5 Simple Ways To Create A Balance Sheet

16. December 2018 19:21 by Junita Jackson in

First things first: what is a balance sheet? A balance sheet is an essential way to evaluate a business’ financial health and can be calculated every month, quarter or half-year to create a snapshot of a company’s net worth.

In this article, we will be discussing how to calculate an annual balance sheet for a business. Creating an annual balance sheet will help you evaluate the equilibrium between your company’s assets against its liabilities, to determine the overall financial strength and value of your business. For an example of a full balance sheet, scroll down to see the example at the end.

1. Understand the Basic Equation

The following equation is a simplified representation of what a Balance Sheet calculates: the total sum of your company’s assets equals the value of the company’s liabilities and owner’s equity.

Assets = Liabilities + Owner’s Equity

As with any math equation, you can play around with the equation to isolate one category. Most business owners and investors use the following equation to calculate the value of the company’s equity.

Owner’s Equity = Assets – Liabilities

2. Calculate Assets

Assets, money, investments, and products the business owns that can be converted into cash: These are what put companies in the financial positive. A thriving company should have assets that are greater than the sum of its liabilities; this creates value in the company’s equity or stock and opens up opportunities for financing.

It’s important to list your assets by their liquidity—the facility by which they can be turned into cash—starting with cash itself and moving into long-term investments at the end of the list. For the purpose of an annual balance sheet, you can separate your list between “Current Assets,” anything that can be converted into cash within a year or less, and “Fixed Assets,” long-term possessions that can be sold or that retain value down the line, minus depreciation.

“Current Assets” may include:

  • Cash: All money in checking or savings accounts
  • Securities: Investments, stocks, bonds, etc.
  • Accounts Receivable: Money owed to the business by a client or customer
  • Inventory: Any products or materials that have already been created or acquired for the purpose of sale
  • Prepaid Insurance: Any payments made in advance for business insurance coverage or services (this tends to be paid in advance for the year).

“Fixed Assets” may include:

  • Supplies: Important objects used for business operations (manufacturing equipment, computers, office furniture, company cars, etc.)
  • Property: Any office building or land owned by the business
  • Intangible Assets: Intellectual property such as patents, copyrights, trademarks and other company rights that retain intrinsic value

3. Determine Liabilities

Liabilities are the negative part of the equation; these include operational costs, debt and material expenses. Generally speaking, the lower your liabilities, the greater the value of your company (and equity) can be. “Current Liabilities” include cash spent, as well as any debts that must be paid out within one year, while “Fixed Liabilities” refer to bills due anytime after one year.

“Current Liabilities” may include:

  • Accounts Payable: Money owed by a business to its suppliers or partners
  • Business Credit Cards: Company credit card bills due
  • Operating Line of Credit: Any money owed to a bank that has extended the business an operating line of credit
  • Taxes Owed: Any federal and state taxes owed for one year
  • Wages and Payroll: Employee compensation, including wages, medical insurance, etc.
  • Unearned Revenue: Any revenue garnered from a service or product that has yet to be delivered to the customer or client

“Fixed Liabilities” may include:

  • Long-Term Mortgages: Property or building mortgage expenses
  • Bonds payable: Long-term bonds owed to the government, as well as any interest paid on the bond (this interest is often semi-annual and can be added to “Current Liabilities”)
  • Pension Benefit Obligations: The total amount of money the company owes to employee pension plans up to the current date
  • Shareholder’s Loan: A form of financing provided by shareholders
  • Car Loan: Any long-term car loans on company vehicles (plus insurances costs)

4. Equity Valuation

Owner’s Equity = Assets – Liabilities

The value of your assets minus your liabilities will result in an estimation of the value of your company’s capital. If this equation results in a negative net worth, this can be dangerous for a small business; it will make it difficult for to secure financing, which can be troubling for a company whose expenses are already eclipsing its profits.

If, however, a company has positive equity, this means that business owners have the option of acquiring capital by selling part of their business through equity, stocks and/or dividends.

In a sole proprietorship, this is called the “Owner’s Equity”; in a corporation, this is called “Stockholder’s Equity,” and it can include common stock, preferred stock, paid-in capital, retained earnings, etc.

“Equity” may include:

  • Opening Balance Equity: The initial investment into the company
  • Capital Stock: The common and preferred stock a company issues
  • Dividends Paid: Profits paid out to shareholders by a company (applies to corporations)
  • Owner’s Draw: Portion of the revenue used by company’s owner (applies to sole proprietorships)
  • Retained Earnings: The sum of a company’s consecutive earnings since it began

Having an Income Statement will assist you in filling out this section since it helps you determine the opening balance equity and the retained earnings.

5. Consider All Applications

When you put it all together, a balance sheet will probably look something like this:

balance sheet example
 

A solid balance sheet is an essential financial statement and part of a complete financial report. It can be used to secure financing or take a snapshot of a company’s current financial state, but it can also be used to evaluate the worth of your company over time. While accounting software like QuickBooks can easily generate balance sheets and other financial statements, it’s good to know the process to ensure your calculations are accurate.

Comparing your “Current Assets” minus “Current Liabilities” on a yearly basis will paint a picture of your company’s annual growth and expenses, which may have room for improvement. Calculating “Fixed Assets” minus “Fixed Liabilities” can provide a more long-term view of the company’s value over time and its ability to pay back long-term debts or expenses built up over many years.

Remember, the expenses of different companies may vary greatly, so don’t forget the assets and liabilities that are specific to your industry or area. For more help with balance sheets and other financial statements, see our infographic on financial reporting.

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10 Frequently Asked Questions About Payroll Processing

29. November 2018 20:28 by Junita Jackson in

Processing payroll is one of the most complex and time-consuming tasks a business must complete. If you’re new to the process, payroll can be confusing. Here are answers to some of the most frequently asked questions about payroll.

What Is an EIN?

The IRS issues employee identification number (EIN) numbers. This 9-digit number is used on federal and state tax filings for businesses, including payroll tax reporting documents. You can apply for an EIN through IRS.gov.

The EIN number can be used for a variety of business entities, including sole proprietorships, S corporations, and C corporations. Assume, for example, that you operate a C corporation, Ganz Manufacturing. Your corporation can operate under more than one fictitious name, and you can use the same EIN number. Ganz Furniture and Ganz Tool and Die, for example, could be fictitious names used by the same corporation.

This policy simplifies the tax filing process. You’ll need to register your fictitious names in the state where your business is headquartered.

What Is an I-9 Form?

Employers use Form I-9 to verify the identity and employment authorization of individuals. Every U.S. employer must have a completed Form I-9 for each worker hired, whether or not the individual is a U.S. citizen. To complete the form, an employee provides documents as evidence of their identities, such as a driver’s license, birth certificate, or passport.

An employer must retain each Form I-9 for a specific period of time, and a state or federal government official may ask to inspect the forms. Government agencies review I-9 forms to verify that each employee is authorized to work in the U.S.

What Is a W-4 Form?

Each worker completes IRS Form W-4 to indicate the amount of tax withheld from gross pay for federal income taxes. Employees complete similar forms for state income tax withholding.

How Do I Determine Payroll Taxes?

Once a W-4 is completed, the employer uses IRS guidelines to calculate the dollar amount of federal income taxes withheld. Each state has similar guidelines to calculate state tax withholdings.

The payment schedules are published in IRS Publication 15.

What Does Withholding Actually Mean?

Withholding refers to the dollar amount of federal and state income taxes that an employer collects from a worker’s gross pay. The dollar amount is determined based on the IRS W-4 form and the state’s withholding form. The company sends the taxes withheld to the IRS and the state’s department of revenue.

The dollar amounts withheld are reported to the worker on Form W-2 after year-end. It’s the employee’s responsibility to file their personal tax return and calculate their tax liability. The worker subtracts the W-2 taxes withholdings from the tax liability, and any remaining amount of taxes owed should be paid when the tax return is filed. This process applied to both federal and state taxes.

What Are Third-Party Liabilities?

In addition to withholding taxes, employers may also withhold the worker’s share of payments for insurance premiums, retirement plan investments, and other benefits. The worker decides on the amounts withheld for the payments. Once these payments are withheld from gross pay, the employer forwards the payments to each third party (insurance company, an investment firm, etc.).

When Do I Need to File W-2s and 1099s?

W-2 and 1099 forms are issued for different reasons. A W-2 is issued to an employee to report gross wages earned, tax withholdings, and other withholdings from gross pay. If you have wages withheld to pay for insurance premiums or to fund a retirement plan, those amounts are reported on a W-2.

The IRS requires employers to mail W-2 forms to workers no later than January 31st of the year following the end of the tax year. So, 2017 W-2s must be mailed by January 31st of 2018.

If your firm has paid at least $600 to a vendor for a product or service, you must issue a 1099-MISC form to that vendor. Freelance workers are considered vendors and are issued a 1099-MISC form. The IRS also requires employers to mail 1099-MISC forms to vendors no later than January 31st of the year following the end of the tax year. The employer combines all of 1099 issued and reports them to the IRS on Form 1096.

What Is Workers’ Comp Insurance?

Businesses purchase workers’ comp (compensation) insurance policies to pay for medical care and other costs if a worker is injured or killed while working on the job. The insurance policy pays for medical expenses and makes payments to the injured party based on a state’s workers’ compensation laws.

The insurance premiums are based on the total dollar amount of payroll a company pays, and the type of work performed the employees. If workers perform manual labor or work in jobs that expose them to physical injury (such as construction), the insurance premiums will be higher.

Construction, engineering and other firms that have a higher risk for worker injury need to have safety plans in place to reduce the risk of workplace injuries. If you can limit worker injuries, you can keep your insurance premiums at a reasonable level.

Am I Required to Have Labor Law Posters?

There are state and federal labor law poster requirements for businesses. The posters address worker rights related to the federal minimum wage, equal employment rights, and worker safety, among others. Companies can purchase “all-in-one” posters for both federal and state labor law requirements. The posters should be displayed so that employees can see them each day. The posters are typically posted in a break room.

What Does a Payroll Company Do?

A payroll company can perform many of the complex tasks required to process payroll accurately. To get started with a payroll company, a business provides the gross pay and withholding amounts for each employee. The payroll company uses current tax laws to calculate the correct tax withholdings and also withholds any benefit payments.

You can give a payroll company access to your corporate bank account so that the company can send each net pay amount to employees. This outside firm submits the payments withheld to the IRS, state revenue departments, and any other third parties. The company will complete all payroll reports and create W-2s and 1099s at year-end.

Every business should consider using a payroll company. This decision will help you save time and ensure that your payroll processing is accurate.

QuickBooks offers a number of payroll solutions ranging from simply cutting checks to full-service payroll. All payroll products integrate directly with your accounting software to keep your books in order with less work.

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Why are Insurance Audits Important?

26. July 2018 11:28 by Megan Kunis in

An insurance audit is when an insurance company checks on the payroll or revenues of a customer or policyholder, to ensure that the policy reflects accurate rating information. Audits are common with all Worker's Compensation policies, many general liability policies, as well as some marine policies and other kinds of insurance.

Here's why audits are important: insurance policies are rated based on many different metrics, many of which we just do not know at the beginning of a policy term. For example, if a rating metric for a development is the number of acres in the development, that number won't change.  If the grading metric is gross revenues or gross payrolls, we don't know the true revenue or payroll until after the policy is over. The audit helps the insurance company to rate insurance policies most accurately.

Imagine you have a business that typically generates $1 million in revenues.  If you tell your broker that your business does only a half million dollars in revenues you may get a one year break in your insurance costs. The audit, however, is the mechanism insurance companies use to keep you honest.

The rating metric that drives Worker's Compensation costs is payroll. This makes sense: the more employees working at a place, the higher the payroll; this ties to the greater the exposure for somebody to file a claim.

Underestimating Payroll or Gross Revenues

Underestimating payroll or revenues for an insurance program carries some risks. Suppose a business does $1 million in sales and the general liability is based on that rating metric. To save money the business owner tells the insurance company their sales are only $500,000. Let's say the insurance costs $5,000 under these assumptions; you'd think the business saved $5,000. But when the audit uncovers the fact that the business does $1 million in sales, last year's policy cost is adjusted retroactively by $5,000 to get up to $10,000 in this example. (The additional $5,000 is due right away because it's for last year's policy.) Further, the insurance company has seen this tactic once or twice before.  In the interest of collecting a proper amount of premium for the new year, the insurance company will also update the estimated sales for that policy year to $1 million resulting in an additional $5,000 charge. This is the double whammy scenario: the insurance company collects the retroactive premium, as well as adjusts the current policy to reflect the reality: in this case resulting in a total $10,000 additional charge on what was budgeted as a $5,000 insurance cost.  This isn't good for cash flow or for relationships between risk partners. Underwriters don’t have a great sense of humor when it comes to mis-reported rating metrics.

We counsel our customers to be as accurate as possible or slightly underestimate projections so that audit adjustment is minimized, and premiums are paid as revenues and payrolls are accounted for.

A new trend in workers compensation is rendering these audits nearly obsolete. Worker's Compensation charged through a payroll service company allows Worker's Compensation expenses to tie almost exactly 2 labor expenses.

The Good that Comes from Audits

Not all is bad about audits. When sales come in below true expectations, most policies provide for return premiums under these circumstances. Some surplus and excess policies do not make such allowances, however, so it is important to discuss projected revenues and payroll with your professional agent or broker.

The audit exercise is typically a simple process of providing evidence of sales (income statement or tax reports) or payroll (941s and similar tax forms). However, we know it isn’t something anybody wakes up in the morning looking forward to doing. Thus, occasionsionally businesses don't get around to completing audits for their insurance company partners right away. The standard recourse is effective, but a nuisance: when an audit is not completed they generate an "assumed audit". Here the insurance company simply assumes that your payroll or revenues increased by 50% or more, generating a huge bill for the retroactive policy as well as a huge bill for the new policy. When an audit is not completed in a timely fashion the insurance companies leverage is often this giant bill. This is when the accounts payable folks get over to the bookkeeper to get that audit done. We work with our customers on expediting such events, but encourage prompt completion of any audit to avoid such unpleasantries.

In the contracting environment where a general contractor engages several types of subcontractors, the auditor will charge for costs of uninsured sub contractors much differently from insured subcontractors. When an uninsured contractor causes a loss, the general contractor's insurance may be responsible for covering a loss, therefore the attendant charge will be included for his policy.  Certificates of insurance properly organize and document insurance of subcontractors to reduce the effects of an audit on the general contractor's insurance program. See our separate blog on certificates of insurance

Be Prepared

Don't let an audit surprise you or catch you off guard. Here, we try to advise you in a way that results in the best possible insurance program while protecting your cash flow and budget. Don't hesitate to call or contact us if we can assist with achieving these common business objectives.

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The most common mistakes when managing personal finances

18. July 2018 11:30 by Megan Kunis in

The ability to manage money competently is especially valuable quality in the conditions of financial crisis, when the purchasing power of the population is shrinking, inflation is rising, and currency exchange rates are completely unpredictable. Below are the common mistakes related to money affairs along with financial planning advice to help manage your own finances properly.

The budget is the most basic thing in financial planning. It is therefore especially important to be careful when compiling the budget. To start you have to draw up your own budget for the next month and only after it you may make a yearly budget.

As the basis takes your monthly income, subtract from it such regular expenses as the cost of housing, transportation, and then select 20-30% on savings or mortgage loan payment.

The rest can be spent on living: restaurants, entertainment, etc. If you are afraid of spending too much, limit yourself in weekly expenses by having a certain amount of ready cash.

"When people borrow, they think that they should return it as soon as possible," said Sofia Bera, a certified financial planner and founder of Gen Y Planning company. And at its repayment spend all that earn. But it's not quite rationally ".

If you don't have money on a rainy day, in case of an emergency (e.g. emergency of car repairs) you have to pay by credit card or get into new debts. Keep on account of at least $1000 in case of unexpected expenses. And gradually increase the "airbag" to an amount equal to your income for up to three-six months.

"Usually when people plan to invest, they only think about profit and they don't think that loss's possible", says Harold Evensky, the President of the financial management company Evensky & Katz. He said that sometimes people do not do basic mathematical calculations.

For example, forgetting that if in one year they lost 50%, and the following year they received 50% of the profits, they did not return to the starting point and lost 25% savings. Therefore, think about the consequences. Get ready to any options. And of course, it would be wiser to invest in several different investment objects.

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How Trump’s New Tax Plan Might Affect Your IRS Debt

31. March 2018 13:21 by Zach Haris in

It’s really too soon to tell how any changes within the Trump administration will affect taxes, but one thing is certain, if you are currently in debt with the Internal Revenue Service (IRS), it is fully expected for you to pay what you owe. That’s not going to change no matter if the taxes are raised or lowered.

Stay Focused! Do Your Due Diligence.

It’s important to not let your emotions get in the way of your financial obligations to the IRS. No matter who is in office, as United States citizens, it our responsibility to uphold our part and pay the taxes we owe. If for some reason you believe that the amount that you owe is incorrect, you have a right to contest these numbers. You can do this by mail or telephone, although we recommend that you do both—in that order. This way, you’ll have written documentation that proves you’re actively communicating with the IRS, and speaking to a representative by phone will show that you’re following up accordingly.

Need Help with That?

We realize personally speaking to the IRS can be intimidating. That’s why the professionals at Success Tax Relief, a tax relief firm is staffed with a team of tax experts to communicate with the IRS on your behalf.

Back to the Whole Tax Thing!

We realize that you still may be a bit concerned about how Trump’s new tax plan might affect your taxes in the years to come.

The plan has been described as “Reagan on steroids”, a plan that follows the concept of the ‘rich getting richer and the poor getting poorer’—all in theory, of course!

According to White House Reporter, Matthew Nussbaum ,who tweeted a photo of the one-page 2017 Tax Reform for Economic Growth and American Jobs, are as follows:

  • The standard deduction will double, but many tax breaks will no longer be available to individual filers except for home ownership and charitable contribution—this will reduce a number of deductions that you’ll be able to claim.
  • Tax relief will be provided for families with dependent care expenses.
  • “Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers”
  • Repeal:
    • Alternative Minimum Tax
    • Death tax
    • Obamacare
  • For businesses, the overall objective is to level the playing field of the territorial tax system for American companies.

In a Nutshell…

The plan reportedly is not projected to decrease the country’s deficit until after 10 years from now, and it will need a straight party vote. So, as of right now, there’s nothing to be actively concerned about, because it’s too soon to tell. It also doesn’t have much to do with you pay the IRS what you owe.

What Can You Do?

The best thing to do during this continuous transition is to continue taking care of your financial obligations. Maxfinancials.com/taxationandadvisory can help you along with this process. We work on your behalf—not for our benefit.

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Business 2017 - The Need for Speed

21. December 2017 21:02 by Zach Haris in

We are racing rapidly towards 2017 (where did this year go?), and never have I seen such a compelling argument for business leaders to adopt the "need for speed" as part of their culture.

The phrase that haunted me from my course at UC Berkeley HAAS school of business is "If you don't someone else will", suggests that if you don't move rapidly in your business to implement strategies and actions, others will. Those "others" may be existing competitors, or as we are seeing more and more, fresh new entrants. Think Uber to taxis and Airbnb to hotels.

A good example is Tesla which started producing cars in 2008 and really shifted gear into mass production with the Model S in 2012. In one of the toughest industries to enter, Tesla within the space of 8 years has become a household name.

A year to adopt the idea, a year to produce business cases and amend budgets and then a year or two at best to implement. During this four to five year process nimble, agile entrepreneurs can race ahead. of slow moving corporates.

I also find that while it is important to have considered thinking, many organisations are procrastinating. "Democratic" management hierarchies are stifling debate. dumbing down decisions and slowing down decisions.

I have seen organisations undertake management buy outs in the space of six months while others take three years.If a major company can do an MBO in six months, then surely a new website can be created in two months or selling our existing products into a new market should take no more than three months. Leaders are setting themselves up for failure by accepting a culture of stretched timelines.

Why speed?

Speed will give you the competitive edge, and if you don't move quickly in your business, guaranteed others will seize the opportunity. It is not a matter of big corporate's beating small businesses anymore. It is about fast businesses versus slow businesses.

7 Ways to develop speed.

1. Think as an entrepreneur. If you were setting up tomorrow to compete with your own business, what would you do differently? What would be the priorities you would focus on? You need to document the urgent big ticket items.

2. Work out why decisions or major projects are taking too long in your business. Work out the blockages. Every business is different and has its own unique culture. I would use the "Five Whys" tool, to identify "Why are decisions taking too long?"

3. Do an agility audit. McKinsey have a very useful guide to what is agility and the importance of agility.  

4. Set a deadline and work backwards. Don't write a  plan where the end date is a result of all the actions. This will lead to the actions driving the timing. Urgency must create the timing.

5. Have a good change process that you follow every time. I use the Mindshop 8 week cycle, so every 8 weeks we can drive the thinking and have a plan around any major issue. The teams produce a GANNT chart and also examine their likelihood of change success using the Mindshop "Change Success Audit". 

6. Accountability. It is important that any major change has someone who is independent of the project monitoring the speed of implementation. At Dropbox, they have the Objectives and Key Results ("OKR") police. The police have the right to question anyone in the company right up to CEO level on how they are progressing on a project, and if they are behind, why they are behind and what are their plans to get back on track.

7. Resource properly. Too many people get distracted by their day jobs and use this as an excuse as to why longer term projects have not been tackled. Either take tasks off existing people to free them up, or employ additional resource to help out.

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