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In Part 1 of this article, I discussed the impact of the economy on a business’ fair market value and why uncertainty leads to lower values. In Part 2, I want to fill you in on professional observations presented at the recent AICPA Valuation Conference.
Now, we all read articles and hear stories about the death of the American economy, spun from whatever particular political bent the teller wants to convey, so it’s always interesting to hear an economist’s professional assessment. This particular presentation was given by Scott Clemons, Chief Investment Strategist of Brown Brothers Harriman & Co., an investment banking firm.
According to Clemons, this model represents his perspective on GDP growth:
70% of the change in GDP is driven by personal consumption. So, what drives personal consumption? When making a purchase decision, people ask themselves one basic question:
“Am I rich enough or do I make enough money to afford it?”
The largest driver of personal wealth in the U.S. is the housing market and the main driver of income is labor. So, based on my memory of the transitive property in geometry (if A=B and B=C, then A=C), gains in GDP rely on improvements in the housing and labor markets. Two other factors reduce personal consumption (and, in turn, GDP). Money put into personal savings decreases consumption, as does deleveraging, or personal debt reduction.
So, according to Clemons, what is happening right now?
- The housing market has made a significant recovery across the nation.
- Every sector of the private economy is adding jobs. The durability of the recovery is strong
- People are saving more and repaying debt. Although this temporarily decreases personal consumption, it indicates that the recovery will be more solid.
GDP has grown at an annual rate of 2.2% since the downturn and the expectation for 2014 is similar. The domestic economy is in pretty good balance.
The federal government has gone from being a stimulant to the economy to being a brick. Estimates are that the sequestration we recently went through may have cost up to a point in GDP growth. Contrary to what many believe, the debt ceiling was not raised in October; it was suspended until February 2014.
The result of this is that the Federal Reserve Board feels that it is the last remaining stimulus to economic recovery and stabilization, which explains why we’re not seeing much in the way of dramatic change on its part. Clemons states that the Fed Funds rate is usually about 3% and that we may get there by around 2017.
Clemons was posed with a question. “If you had to pick one country in which to invest over the next 20 years, which country would it be?”
In every factor that increases labor force growth and productivity (fertility, mortality, immigration, workforce participation, productivity, and creativity/innovation), the U.S. ranks among the top countries in the world. While there is much negativity as far as our global position, we are better-positioned than any other country for growth and prosperity.
A couple of points were made:
1) Immigration is a big driver in GDP growth because we need a growing workforce. Immigrants tend to be younger and less dependent. Therefore, we must get immigration right.
2) Although patent applications in China and India are growing at 20% per year, China still only holds 2% of the total patent filings and India holds only 1%. The U.S. holds 49% of the world’s patents.
Here are Clemons’ short-run observations:
- To monitor our recovery, watch the labor and housing markets as the best indicators.
- The Federal Reserve will remain very accommodating and will not be slamming on the brakes.
- Politics will continue to add to our level of uncertainty, which threatens short-term growth. Corporate America has $2 trillion of cash on its balance sheet, but uncertainty increases risk and decreases investments in activity.
- Pay attention to the demographics.
- Get off the ledge.
- The future looks pretty good.
While we hear many personal stories predicting doom and gloom for the U.S., Clemons reminded us that…
“The plural of ‘anecdote’ is not ‘evidence’.”
Contrary to what some may want you to believe, Clemons strongly believes that the U.S. economy is rebounding and indications are that the recovery will be a stable one.
You can read more from Scott Clemons on this topic in his article, In the Long Run: the Ingredients of Economic Prosperity.
My son recently told me about a TV show he had watched a few weeks earlier. Bar Rescue is a TV show where an expert comes into failing bars and advises them how to become more profitable. In this particular episode the expert asked the bar manager two questions:
1) What’s your average product cost as a percentage of revenue?
2) What’s your average labor cost as a percentage of revenue?
Unfortunately the manager didn’t have the answer to either of those questions and was chastised by the expert for not knowing basic financial metrics. “Any manager worth his salt,” said the expert, “should know both of those.”
So my son, who is a plant operations manager for a southern California aerospace tooling company, was feeling a bit squeamish and immediately contacted his superior to set a time to sit down and discuss the financial performance of his division. He wanted to better understand how they measure their profitability on any given job.
Now, if a manager is expected to know basic financial data about the operations he manages, how much more should an owner of a small business know?
The surge in the availability of business intelligence (analytics, metrics, key performance indicators, etc.) to mid-size businesses has certainly given them a leg up against their competitors. Pricing decisions, financing issues, lender relationships, and cost management have all been enhanced by the availability of valuable data that can be easily accessed by those who need it.
The cool thing is that the same information is now available to small business owners.
Many accounting software vendors are now building analysis reporting tools into their programs and making information available through reports, graphs, and dashboards. The type of insight depends on the specific vendor, but
Before you start to benchmark yourself against your industry competitors, ask yourself a few questions:
- Is this information relevant? Just because it’s available doesn’t mean it’s useful to you. Find out which measures are key to the profitability of your business.
- Is the information reliable? Are your accounting records accurate? Are all of the transactions reported according to acceptable accounting standards? If not, it’s difficult to compare yourself to others.
- Is the information timely? Is your financial information current or are you basing your decisions on information that is out-of-date? With current information, it’s much easier to make changes early in the game.
- Will the information influence your decisions or actions? Many owners dismiss financial information in their decision-making process because it fails one or more of the above tests. With relevant, reliable, and timely information, the business metrics that you may have discounted as meaningless may suddenly become very important to you. The question is still, “What will you do with the new knowledge you have?”
The Cloud Comes to the Rescue
With the advent of cloud-based technology and applications, financial information can now be accessible 24/7 from any computer or handheld device. Just like your banking has been made simpler and more convenient through online access, your accounting transactions can now be entered remotely, uploaded to you for approval, invoices sent and bills paid electronically, and reports and dashboards made available to you anytime you wish to see them. To paraphrase the retired Fresno State football coach, Pat Hill, “Anything, Anywhere, Anytime.”
This accessibility also means that you can have the expertise of your CPA available to you, performing the roles of your Controller or CFO, without investing in a high salary, benefits, and other long-term commitments. You can get timely, accurate, and relevant information from someone who understands you and your business. Your financial discussions move to a higher level because you now have access to quality information and insights.
We will be talking much more about “Cloud-Based Accounting Services” in the weeks ahead. Needless to say, we think it can revolutionize the way small business owners run their companies. At last, a Controller or CFO is accessible by just about any serious business.
I had the privilege of hearing noted political columnist and commentator, George Will, speak for an hour on the current state of the political economic climate in the U.S. As you may know, Will is a conservative pontificator, but always has a well-reasoned argument for his viewpoints. You may not agree with his perspective, but he commands respect for his erudite vocabulary, dry wit, and rational and reasonable arguments.
As you might imagine, the theme of Will’s presentation was that America is in a precarious economic position. After describing an overview of the negative trends in the economy, he moved into a discussion of what he sees as the underlying causes of concern for not only where we are, but, more importantly, where we’re going if we don’t do something different.
Will admitted that the discussion is a difficult one.
“It reminds me of the story of the teacher who asked her class of eight-year olds to draw a picture of anything they wanted. As she walked around the classroom, she asked a little girl, ‘Sally, what is it your drawing?’
The girl responded, ‘It’s a picture of God.’
Amused, the teacher said, ‘Sally, you can’t draw a picture of God. No one knows what God looks like.’
‘They will in a minute.’”
According to Will, entitlement spending for Social Security and Medicare will cripple the government if they’re not addressed sufficiently and quickly.
When Social Security was implemented in the 30′s, the average life expectancy from retirement age was two years. Today, it’s 20 years. In addition, there were sufficient people in the workforce to fund the retirees’ payouts. In 1934, there were 42 active workers for every Social Security recipient. Today, that ratio is 3 to 1. The solution is to raise the eligibility age to 67 or 68.
As perilous as the Social Security system is, though, the real problem is with “medicine”. Health-care costs Americans 18% of our GDP. In the 1960s, it was 6%. Of course, this is putting pressure on Medicare funding. Several factors are causing Medicare payouts to explode at a rate that is simply unsustainable:
* A top-heavy aged population due to the number of baby boomers retiring
* Longer life expectancies
* Advancement in available (and extremely expensive) medical procedures (artificial joints, coronary bypass, etc.)
* The 12-cent problem
What is the 12-cent problem? For every dollar of medical treatment incurred, the receiver of that treatment directly pays 12 cents out-of-pocket. The other 88 cents is paid from insurance companies or the government. In contrast to other capital markets, the buyer has no skin in the game and, therefore, has little incentive to manage costs. In 1943, Congress agreed to allow employers to take a tax deduction for payments into employee health-insurance plans. The patient was no longer the direct payer, but was removed from the pricing decisions. As a result, according to Will, costs have accelerated at a much faster pace, putting extreme pressure on our current Medicare system.
Will told the audience, “The Obama contingent stated during the campaign that the Ryan plan will end Medicare as we know it. Ladies and gentlemen, if nothing changes, arithmetic will end Medicare as we know it.”
He also cited the recent surge in high-deductible health plans as a result of more people opting for Health Savings Accounts. People with these plans, he said, use the system less frequently. Also, there has been no decline in public health as a result.
This all being said, Will is not pessimistic about America’s future. He argues that the American people are intelligent enough to understand that something must be done. America will get better because we can choose to get better. We value a system where the cream is able to rise to the top. We have faced much tougher times before. Imagine Civil War America as President Lincoln led the country while cannons were pointed at the White House from across the river.
This too will pass away.
Well-known technology consultant and author, Geoffrey Moore (most famous for “Crossing the Chasm“), spoke at the recent Digital CPA Conference on “The Accounting Profession: Digital Disruption and the Next Big Thing”. The mass availability to technology invites big change in the way businesses deal with their accounting processes. The status quo is no longer acceptable, especially for those who have now grown up with instant access to information from wherever they are. (Even those of us who remember LPs and black-and-white TV have climbed onboard.)
Here are just a few questions to ask yourself about how you access information:
- Do you use online banking to pay bills? Look up balances? Transfer funds?
- How often do you open the phone book? Or do you look up the number online?
- When is the last time you pulled out your encyclopedia? Or do you “Google it”?
- Do you manage your 401k funds electronically?
- Has your medical provider offered mobile access to your appointments, test results, etc.?
- Lastly, do you do all of this from your computer or from your mobile device?
Plain and simple, we have much better access to information we want. We demand that it be:
- Simple to access
- Easy to use
- Instantly available
- Meaningful and tailored to us
The accounting profession, too, has to make this leap across the chasm. According to Geoffrey Moore, we are facing three mega-trends:
- Digitization – Move from paper-based to paperless systems. Use the “cloud” for storage and access to data. Access information from anywhere.
- Virtualization – In addition to a physical presence, provide a digital presence. Remove the geographic limitations of market reach. Broaden our systems of engagement. In person, phone, email, portals, real-time cloud access.
- Transformation – Transition from compliance vendor to a truly trusted advisor. Simplify and streamline the accounting functions so we have time to spend working with you on growing your business. Analyze your data to provide business intelligence about your company and industry. Forecast where you want to go and how best to get there.
Grimbleby Coleman recognizes the power of technology, which is why we’re constantly investing in ways to improve how we operate, communicate, and work with you. The demand is accelerating at a rapid pace and we want to be in the lead pack. We’re excited to see where that may lead.
I’m sitting in Reagan National Airport at O-dark-hundred after an inspiring and challenging three days with CPAs from around the country. Okay, now set aside the thoughts that just went through your head. (“Three days with CPAs!? Kill me now.) But, this wasn’t what you think. There was no debate about the definition of Modified Adjusted Gross Income or the merits of IFRS over GAAP. And when you engaged in conversation, the person actually talked to you and not to your shoes. (Okay, now I’m just reinforcing your stereotypes. Apologies to all my colleagues. Scratch that last section.)
The Digital CPA Conference was a forum to explore the use of technology to free up business owners’ time from accounting tasks that are important and necessary, but outside their wheelhouse. The internet and mobile access now allow that function to be seamlessly performed by someone outside the business, free the owner from managing the people and the process, and allow them to focus on the things that truly matter to them… growing the business as they imagine it can be.
It also means that we, as CPAs, can focus, not on fixing accounting entries, but on providing insight to help owners grow their businesses. This is an exciting opportunity for us to step up our games as relevant, forward-thinking advisors who leverage technology and mobility. Imagine reports and dashboards available in real-time, delivered to the people who need it, and available from anywhere at anytime. That’s the world we’ve become used to and we look forward to advancing that ideal.
What do you get when you put over 100 accountants in a room for 3 hours? Wait! It’s not a joke, even though this statement may bring to mind the old yarn “Why did the accountant cross the road? To bore the people on the other side.” On the contrary, you would actually be surprised to find a lively group of outgoing individuals, bubbling over with energy and sociability.
The annual IMA Student Night, hosted by California Chapter 384 of the Institute of Management Accountants, brings together a wide range of both professionals and students for networking and dinner. The evening concludes with a question and answer session fielded by a panel of individuals who are getting started in their accounting career. This year’s panel featured K-deep Dhaliwal, CPA, Business Assurance Manager for Moss Adams LLP; Shannon Ferrero, Staff Accountant for Foster Poultry Farms; Carmen Garcia, Administrative Analyst for the CSUS College of Business Administration; and Matthew Gurule, Financial Advisor for Merrill Lynch. Each individual brought a varied range of knowledge and insights, with Matt and Carmen having hiring experience, and K-deep and Shannon having recently gone through the job seeking process.
Here are just a few of the helpful insights young attendees left with:
- Take advantage of everything your school has to offer and get involved. Join community organizations, attend career fairs, and utilize internship opportunities. The more you do, the better it will look to recruiters. Keep in mind that there will be times where you have to burn the candle at both ends, both while you’re in school and in your career. “You’ll be amazed at how much you can do. You just have to manage your time well,” said Carmen.
- Work experience will give you a leg up on the competition. It’s the hands-on experience that teaches application of theory and the little intricacies that just can’t be learned in a classroom.
- Network, network, network, and do it sooner than later. “It’s all about who you know,” said Carmen. Shannon could attest, as her first two positions were attained by connections made at school career fairs. And “don’t wait to network,” said K-deep. “A lot of us think we can sit around until our junior and senior years, THEN start making connections, “ but your best bet for finding a position after graduation is by doing it early and often.
- How you present yourself is extremely important. Dress appropriately to job interviews, that is, suits, ties, and appropriate business attire for ladies. According to Matthew, if you “look like you’re getting ready to go out on a Friday night,” you’re not going to be taken seriously. Carmen stressed that this attention to attire should additionally go beyond just the work and interview environment. “Of course, you don’t have to wear a three piece suit every day, but you never know who you’re going to run into and when.” Stay well groomed and maintain a look of confidence and self respect.
- Use spell check, but don’t trust it. “If I see a spelling error on your resume,” says Matthew, “that shows me that you can’t pay attention to details.” Have a well put together resume that you’ve checked over more than once, and maybe had a friend or ten check over as well. And be sure to include your GPA, as some recruiters pay extra attention to those that do.
- Don’t expect to have a glamorous accounting job on your first time out. K-deep, for example, started out stuffing envelopes in a front office, but as supervisors began to gain confidence in his abilities, they gave him more and more responsibilities. Carmen began doing secretarial and bookkeeping work (“anything to do with numbers”) before formally moving into the accounting field. Sometimes you have to start at the bottom to get to the top.
- Learn about your potential employer before the interview and definitely before you accept a position. Do some background checking beforehand; the web is a great resource for researching a company. Use the interview as an opportunity to ask questions about work culture and expectations. “Ask what a day in the life would be like,” said K-deep. And Carmen stressed finding out what turnover rates are like. “If you go around the table and each person has been there only one or two years” that’s probably not a good fit for someone seeking a stable position. “I personally don’t want to be looking for a new job every year,” she said.
- When you finally meet that recruiter, be persistent. Say hello each time you meet them at a career fair or function, and reintroduce yourself if necessary. If you are truly interested in working for their company in the future, make it obvious! Send follow-up emails reinforcing your desire for an interview, and once you get that interview, follow-up again with a thank you. There are ways to be persistent without coming across as a nag.
For information about job opportunities at Grimbleby Coleman CPAs, please visit the career portion of our website.
Grimbleby Coleman Accountant Becky Austin was recently awarded her Enrolled Agent Status from the National Association of Enrolled Agents. Becky took a moment out of her busy tax season duties to answer a few of our questions about her new designation and what it means to clients.
Becky Austin, EA
Becky, what is an Enrolled Agent, and what makes them different from other tax preparers?
Enrolled Agents are equipped to advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Unlike other tax preparers, Enrolled Agents must fulfill continuing professional education requirements that exceed the IRS’ required minimum. This continued learning ensures they can effectively represent taxpayers audited by the IRS in lieu of continually changing tax laws.
How long have you been dabbling in taxes and tax code? What do you enjoy about it?
I have been involved with taxes for the past 20+ years in both the private and public sectors. Thoroughly knowing the tax code is a benefit I can offer our clients. I can help them by being aware of how changes will impact their filings and what possible tax credits they are not currently taking advantage of.
What are the top reasons companies and individuals seek the assistance of Enrolled Agents?
There are two unique benefits to using an Enrolled Agent:
- Emphasis on ethics – Our principal focus is honest, intelligent and ethical representation of taxpayers before the governmental agencies. Enrolled Agents adhere to a stringent Code of Ethics and Rules of Professional Conduct of the Association, as well as the Treasury Department’s Circular 230 regulations. In addition, we belong to a strong network of experienced, well-trained tax professionals who work to make the tax code fair and reasonably enforced.
- Proof of Expertise – Enrolled Agents are required to demonstrate their competence in matters of taxation before they may represent a taxpayer before the IRS. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all enrolled agents specialize in taxation. In addition, Enrolled Agents are the only taxpayer representatives who receive their right to practice from the U.S. government (CPAs and attorneys are licensed by the states).
We all know what you’re doing January through April 15: tax prep, tax prep, and more tax prep! But what services can an EA offer in the other 8.5 months out of the year?
While tax prep is mainly completed during January through April 15th, an Enrolled Agent is busy throughout the year in advising clients on tax law changes, preparing tax returns that were placed on extension past the April 15th deadline, representing client before the IRS, and offering tax planning services to their clients.
What do you find most rewarding about helping companies and individuals with their tax concerns and preparations?
It is always personally and professionally rewarding when you can help a client through a troubling time of receiving a letter from the IRS or simply by preparing tax returns for business and individuals knowing they have confidence in your professional ability.
Learn more about the Enrolled Agent designation at www.naea.org
More information about Grimbleby Coleman CPAs, Inc. Tax Services can be found at www.grimbleby-coleman.com/services/tax-services or by emailing email@example.com
In February 2012, Grimbleby Coleman Principal Martin Fox earned his Accredited in Business Valuation (ABV) designation from the American Institute of CPAs. We took a moment to ask him a few questions about the ABV, business valuation, and his relationship with both.
Marty, give us a brief overview: what is business valuation?
Business valuation is a complex process to determine the worth of a partial or full interest in a business or entity. This can include anything from a sole owner of an operating business to a minority interest owner in real-estate partnership. Business valuation requires knowledge of accounting, finance, economics and business, along with expertise in valuation methods.
When did you become interested in business valuation?
In the mid-‘90s I became intrigued with business improvement. Why were similar types of businesses so dissimilar in profitability? What made some successful and others just so-so? Using my many years of experience with business, I began to help owners make better decisions by focusing on the profit drivers. These same drivers affect the ultimate value of the business. If a business can be focused on the right drivers (and sustain that focus), it can achieve superior performance and significantly improve its value. Business valuation was a natural extension to tie together the profit drivers, sustainable performance, and exit value for the owner. Business valuation completed the progression.
What is required to earn your ABV designation?
A CPA who holds the ABV designation must demonstrate significant experience in business valuation, pass a rigorous 6-hour exam, and obtain a minimum of 60 hours of continuing education every three years.
What can a CPA with ABV accreditation offer that your average CPA cannot?
CPA/ABVs have demonstrated expertise in valuation methodologies and professional standards, in addition to competencies in accounting, taxation, financial analysis, and business operations. This expertise is often a requirement for valuation reports submitted to taxing authorities or courts of law, and offers additional assurance that the professional has an adequate understanding of current bodies of knowledge.
What are the top 5 reasons a business valuation expert should be contacted?
- I want to sell my business. How do I maximize its value and what’s it worth?
- I need to determine the fair market value for estate or gift tax purposes (including a thorough understanding of discounts for lack of control and marketability).
- I’m converting my C corporation to an S corporation and I have to establish the goodwill value.
- I have a buy-sell agreement with my co-owners and now one of us wants out. What’s the buy-out price?
- I need to obtain financing for a new or existing business. The bank needs an independent appraisal.
What is the most rewarding part of doing business valuation?
I love numbers and I love business. Every business is unique because every owner has imprinted a unique personality and philosophy on the business. Each business is a creation of its owner (or successor) and a strong emotional bond exists between them. My job is to understand what makes the business tick and how that translates to sustainable cash flow and perceived risk. There are many ways to build a sustainable business, but it comes down to focus. Business valuation is about understanding how that focus impacts the cash flow and risk of the business, how it is positioned in the market place, and how it appeals to the prospective pool of buyers.
For more information about the ABV Credential, please visit the AICPA ABV overview page.
View the press release regarding Marty Fox’s ABV Designation here.
View Marty Fox’s bio and resume here.
On April 15th of this year, our firm joined the BDO Seidman Alliance, a nationwide association of independently owned local and regional accounting, consulting and service firms with similar client service goals. The Alliance gives us an opportunity to expand the services we provide our clients – without jeopardizing our existing client relationships or our autonomy. We asked Nate Miller, one of our newer shareholders, to tell us what membership in the alliance means to him.
What does the BDO Seidman Alliance mean to you personally?
Being a member of the BDO Seidman Alliance means our firm can quickly reach experts on almost any subject. Knowing that I have access to Alliance resources gives me greater confidence with current and prospective clients.
We just met with several BDO partners from the San Jose and San Francisco offices. The partners made it clear that whatever experience or expertise they have, we now have as well. The Alliance really means something to member firms.
How will it benefit your clients?
Even in this sluggish economy, clients are continuing to grow and improve their businesses. They are looking for ways to gain a competitive advantage and expand their customer base. Their search for an edge has caused some companies to expand beyond state and country boundaries. Thanks to our membership in the BDO Alliance, we can now provide services well beyond our local market – and can better address multi-state and foreign issues. We can also serve larger, publicly-traded companies who require more complex services.
BDO also offers tax specializations including R&D Credit services and Cost Segregation studies. We’ve already invited members of these teams to meet with several of our clients who might benefit significantly from a specialized study. These are just a few of the additional services we’ve explored so far, but there are many more areas that we plan to explore in the future.
Clients expect us to provide basic services in a timely and accurate manner. Our goal is to exceed their expectations by providing solutions they might not have even considered. These specialized tax areas can be of great value to our clients and I’m excited about bringing BDO in to help us continue delivering exceptional client service.
What did you learn from others at the Alliance conference you just attended?
The most important thing I gained at the BDO Seidman Alliance conference was access to the BDO staff. I’ve already contacted them after the conference for guidance on several key issues. With the size of the BDO firm, they are able to have staff and partners specialize in specific areas so they can become experts. This has been a huge resource for us – now we are able to go to a specific person with a specific issue and they know the answer.
What can you contribute to other members of the Alliance?
For starters, we plan to share our expertise in agriculture in the Central Valley with other members of the BDO alliance. We expect to be a key resource for member firms who work with agricultural clients.
Why this alliance and not others?
BDO seemed to us to be the premier alliance for CPA firms. As part of our research, we spoke with partners from several firms who have been BDO Seidman Alliance members for many years. We left the meetings with a sense that these firms shared our views on practice management and client service. They were drawn to the BDO Alliance for similar reasons.
Since the BDO Seidman Alliance is a client of the firm BDO USA, the staff and partners of BDO USA treat the Alliance members as one of their top clients. We take pride in providing excellent service to our clients and they do as well.
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We polled everyone on our team for some ideas that would help our current and future clients begin 2011 on the right track. Here are the resulting suggestions.
The number one suggestion, according to our unscientific, non-secret vote, was for businesses to update their 2011 Strategic Plan and decide where they want to be financially in 2011. We also suggest every individual prepare his or her personal financial budget. (If you don’t have a Strategic Plan or a personal financial budget, now would be the time to sit down and create one. Ask us for a $COPE grid that you can use to start the process.)
Here are some other resolutions you might want to add to your list.
Retirement and Estate Planning
- Review your estate plan. Recent tax law changes and asset revaluations may have substantially impacted your planning.
- Consider meeting with an estate attorney if you don’t have an estate plan.
- Review your retirement portfolio. Is it time to change your investment allocation?
- Review your retirement contributions. Is it time to increase the amount or frequency of your contributions?
Pension Plan Fiduciaries
- Review pension plans to ensure that all fees are reasonable. (To comply with new rules that take effect in July 2011.)
Employees and Employers
- Use the QuickBooks budget feature.
- Use the Accountant’s Copy to securely share files with your accountant – it will save you time and money.
- Review your chart of accounts. Is it too detailed or not detailed enough?
Closely held businesses
- Avoid paying personal expenses with company credit cards.
- Review related party loans between owners/partners and the business.
- Establish or review your business succession plan. Who is next in line? Are your processes documented?
Planning and budgeting
- Establish or update your 5 year plan.
- Create both an Income Statement and a Cash Flow budget. (Ask us how our $COPE It! Software can help.)
- Focus on building more business now.
- Review and communicate your company’s break-even point.
- Create a capital expenditures budget to capture any planned projects or expected investments in furniture, fixtures, buildings, equipment or other similar items.
- Prepare a monthly budget to actual analysis (check your software for reports that provide this view.)
- Start capturing 1099 vendor information early. Formalize the process each time you add a new vendor.
- Contact your top vendors and suppliers to see if you can negotiate a better deal based on volume purchases.
- Look for ways to improve your accounting system.
- Review your lending relationships to see if you can lower your interest rates on debt.
- Look for business expansion opportunities – is it time to add a new product or to acquire a new business?
- Review your Accounts Receivable. Now is the time to take action on any amounts that are older than 60 days.
- Review your advertising and marketing expenses. Investigate new marketing ideas and evaluate the success of your past efforts.
- Review and improve your internal controls.
- Look for ways to reduce your expenses. Make sure your expenses are broken out in enough detail to provide clear insight.
- Improve profitability. Review all components of your Cost of Goods Sold for opportunities to lower costs.
Analysis and Systems
- Learn and apply significant financial ratios.
- Determine if you can pay down some extra debt.
- Take time to research your clients’ needs and measure their satisfaction with your products or services.
- Review your software for opportunities to update, enhance, or expand its use in your business.