Preparation is Key to Securing a Bank Loan

Posted on August 15, 2011 by admin

These economic times have provided many challenges to the small business owner.  One such challenge has come in the form of tightened credit available and banks heightening their loan review processes.  The good news is that there IS credit available and loans CAN be had.

Tim Armstrong, an analyst with Sageworks, a company that develops tools for financial analysis, had some noteworthy suggestions when we consider how to make the loan application process easier.  The five steps he outlined are based on the premise that while securing a business loan can be tricky, there are still loans to be had…and that being prepared is key.

  • Find the right bank.  Not all banks are created equal when it comes to securing a loan for the size of your business.  Find a bank that specializes in businesses of your size.  Larger banks will have an overall formula for reviewing loan applications, while smaller banks will scrutinize more closely each application.  

A bank’s “Texas score” measures how much (if any) credit trouble a bank is facing.  This would be a quick way to access the bank’s ability to loan funds to you.

  • Know your risk tolerance.  Have this discussion with your banker and have a plan for managing both business successes and challenges.   As counter-intuitive as it might seem, it is good for a bank to see you are realistic enough to know there may be challenges ahead…but if they come, you are ready to face them.
  • Know your banker BEFORE you need a loan!    Like anything in life, we want to know we can trust and feel confident with those whom we come in contact with.  Babysitters for our children, our financial advisors, our doctors, etc.  The same is true from a banker’s perspective!  They will be much more receptive to your loan applications if they know you ahead of time.  Get to know your banker by establishing a relationship and giving them your day-to-day business.  Your relationship will now serve as a foundation for the loan you hope to secure!  When loan time comes, take time to take your banker to lunch.  Send regular financial reports –not just when they request them!
  • As with a job interview, prepare for the loan interview.  Have a full understanding of your situation and your plans for securing and repaying the loan.  Your banker will need to know some of the very basics, such as 1) How much money do you need?  2) What are you going to do with the money?  3) When will you repay the loan?

Do your homework!  You should be prepared to answer these and other basic questions when you meet with your banker.

  • One application may not be enough.  It may require applying to several different banks in order to secure the loan you need.  These economic times demand a bit more persistence and patience for the process.
  • Take your accountant along to meetings with your banker and /or hold meetings at your accountant’s office.  Bankers are comforted by the fact that you have a good working relationship with your accountant and that regular and accurate financials are being prepared. 

Bottom line:  banks want to see that businesses have done their homework and take the loan process seriously.

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Cash flow forecasting: A Vital Business Tool

Posted on August 2, 2011 by admin

In life, we often find ourselves in a reactive mode vs. a proactive mode.  This is especially true when faced with the business challenges and tasks that confront us every day.  We find we get stuck in working “in the business” versus “on the business.”  Yet, it is expressly in your business where a proactive approach to cash flow can significantly impact the financial health of your organization.    A few important reminders as you consider how to predict how much capital investment your business needs and making sure you have enough cash available throughout the year:

  • While easy to put on the back burner, cash flow forecasting should be front and center to the overall financial management of your company.  Don’t delegate this to employees who lack understanding of the company finances or to those who are already overloaded and don’t have the time to dedicate the time this requires and deserves.    
  • Don’t overestimate sales nor underestimate the potential for negative events.   Rely on past experiences within the company, research the current economic climate and do your best to be realistic in your cash flow forecasts.  Draft forecasts for both the best and the worst case scenarios.
  • Creating the cash flow forecast is not the end of the process!  Regularly compare your forecast with actual cash flow and if you can foresee cash flow problems, you now have the time to make necessary adjustments.
  • Communication with all departments is key!  Work with staff from each department area to ensure you are including all department initiatives in your cash flow forecast. Have all appropriate staff members and management review the forecast so that nothing is overlooked.

 Accounting Resource Group provides cash flow forecasting to those who need help.  We can consult with your staff to get them off on the right foot to forecasting or dive right in and put the forecast together for you.   Taking Care of you and your business…providing trustworthy and valued services for your peace of mind is at the heart of everything we do.

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Cafeteria Plan Calculator To Help You Save Tax Dollars

Posted on May 19, 2011 by admin

A “Section 125 Cafeteria Plan”, often referred to as a “Flexible Spending Account”, helps you keep more of your paycheck by reducing your Federal and state taxes. It allows you to pay certain expenses before taxes are deducted from your paycheck. These expenses include daycare, insurance premiums and most out-of-pocket medical costs. Use this calculator to see how participating in your employer’s “Section 125 Cafeteria Plan” can help you pay less tax, and increase your net take home pay. This calculator has been updated to use the new withholding schedules for 2011.

Find this and other useful financial calculators on our website page designed to assist individuals with tax strategies.

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The Health-Workplace Connection

Posted on May 12, 2011 by admin

We make sure our kids are safe, we take care of our parents as they age, we do our best to exercise and eat right.  All the while….we go to our offices and our jobs.  Research is showing that the best employers and managers recognize that having employees take good care of themselves is the best thing they can do for the health of their workplace.

The Gallup organization researched this very topic and found that “well-being,” like many other management matters, is both quantifiable and manageable.   Five universal, interconnected elements were identified in the Gallup research as the things that people of all faiths, nationalities and cultures look for in life and what causes them to thrive:

 Career well-being:  how you occupy your time – simply liking what you do each day

Social well-being:  having strong relationships & love in your life

Financial well-being:  managing your economic life in a way that reduces stress and increases a feeling of financial security

Physical well-being:  having good health and energy

Community well-being:  a feeling of involvement and connectedness with the area in which you live.

It has been shown that when employers encourage and support these areas in the lives of their employees, they will then have employees that thrive in the workplace as well.  There is a reduction in costs and increases in value over time as employees who are thriving are more engaged and productive in the workplace as well!

 The bottom line?  What’s best for the employee is best for the workplace as well.

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Save Tax Dollars While Gifting Toward Your Grandchildren’s College Education

Posted on May 5, 2011 by admin

 

This time of year, many families have grandchildren making plans to attend college in the fall.  While financial planning for this event might have been going on for some time, there are still several ways to help your grandchildren pay their expenses while potentially cutting your family’s income and/or estate tax bill.

Write a Check to the Child
In 2011, you can give each grandchild $13,000 in cash a year – or $26,000 if your spouse joins in the gift.  No gift tax implications are incurred. Just write out checks and give them to your grandchildren.  (If they still have a few years before college, set up a custodial account at a bank, mutual fund or brokerage firm.  The money can be used for tuition or other college-related expenses.)

Give Stock
If you give appreciated stock or other investments to your college-bound grandkids, your family can potentially cut the capital gains tax bill. Let’s say you want to sell stock you’ve owned two years to free up some cash for tuition. You will probably pay 15 percent capital gains tax rate on the profit, plus state taxes of up to 7.85%. You can give a certain amount to your grandchildren at a lower tax rate and by gifting stock, you eliminate your capital gains taxes altogether.

Keep in mind that if the child is under age 19, or age 24 if a full-time student, the Kiddie Tax rules may apply. If a child affected by the Kiddie Tax rules receives “unearned income” above a $1,900 threshold, the excess is taxed at the top tax rate of the child’s parents. If the threshold is not exceeded, the Kiddie Tax doesn’t apply for that year. If it is exceeded, only unearned income in excess of the threshold gets taxed at the parents’ higher rates 

Pay Tuition Yourself
Under current tax law, tuition can be paid directly to a financial institution with no gift tax implications. The catch is the money cannot pass through the hands of grandchildren (or their parents) first. It must go directly from your account to the university. This approach might be appealing if you’re worried about the youngsters spending it frivolously.

This tax break applies only to tuition and can’t be used to pay room, board and other college expenses. However, you can still give your grandchild a cash gift of up to $13,000 to cover those other expenses ($26,000 if your spouse joins in the gift) and not incur any gift tax implications.

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Paying for College…What Do I Need To Know?

Posted on April 28, 2011 by admin

As one school year wraps up, parents, as the main provider of funding for our children’s college educations, quickly begin to look toward the upcoming school year and what that means to the family finances.  Whether you’re inching just that much closer to the day where college expenses will begin or whether those expenses are now at your doorstep….how to pay for your child’s college education is best decided using all the tips and tools available.  This guide can be a good start to getting help:  http://tinyurl.com/3oq6lqx

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A Financial Concierge For Enriching Your Life!

Posted on April 8, 2011 by admin

When you look up the word “concierge” on Merriam-webster.com or dictionary.com, it’ll tell you that a concierge is “a usually multilingual hotel staff member who handles luggage and mail, makes reservations, and arranges tours” or, especially in France, “a person who has charge of the entrance of a building….the owner’s representative.”    A broader definition is given as “a person employed (as by a business) to make arrangements or run errands.”

Accounting Resource Group has put a new spin on the concierge concept with its trademarked Financial Care Concierge service. Taking Care is what we do…it’s the driving principle for how we treat our clients, and through this financial care concierge service, we offer *management of personal financial records, *insurance claims submissions & tracking, *coordinating with your financial advisors, *bill paying, *credit card expense tracking, *cash-flow management and reporting of current financial status, *income tax planning and preparation and *other customized services. 

Enriching the quality of life….isn’t it what we all strive for?  Yet too many things (think electronic gadgets) meant to enrich our life may, in fact, act in the reverse by sucking up our time, getting in the way of our personal relationships, draining our financial resources, etc.  True enrichment calls for something to give more meaning and richness to life. For some, having stress, worry or challenges of their daily financial affairs (or those of an elderly or widowed parent or grandparent) handled by a trusted expert would be #1 on their “wish” list.  It almost sounds too good to be true, doesn’t it?   It’s NOT!  Accounting Resource Group enriches the quality of life for our financial care clients by delivering a sense of calm and serenity.

Download a brochure, read a testimonial, or contact us and we’ll tell you more.

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QUALIFYING THE COSTS FOR A HOME OFFICE

Posted on April 4, 2011 by admin

As a self-employed, sole proprietor you can deduct as an ordinary and necessary business expense the costs of a qualifying home office on Schedule C.
 
If you are an employee of your own one-man corporation, whether a regular “C” corporation or a “sub-chapter S” corporation, you have three choices for handling the costs of a qualifying home office.

1) You can deduct the costs as an unreimbursed “employee business expense” under “Job and Most Other Miscellaneous Deductions” on Schedule A. Expenses in this category of itemized deduction are only deductible to the extent that the total exceeds 2% of your Adjusted Gross Income.
 
2) The corporation can pay you rent for the home office.

3) The corporation can pay you for the “out-of-pocket” costs of a home office under an “accountable” plan for employee business expense reimbursement.
 
The third option, being reimbursed under an accountable plan, provides the greatest tax savings. It is an excellent way to get money out of your closely-held corporation tax-free. The corporation can deduct the amount of the reimbursement and you do not have to report the payment as income.

This option is better than having the corporation pay you rent for the home office. While your corporation can deduct the rent paid to you, you must report the rent as income on Schedule E. You can only deduct the pro-rated share of real estate taxes, mortgage interest and casualty losses against the rental income on Schedule E, expenses that are otherwise deductible in full on Schedule A. You cannot deduct the proportionate share of insurance, utilities, repair and maintenance, depreciation or any other indirect expenses.
 
To qualify as a home office, the space (it does not have to be an entire room) must be used regularly (on a continuous, ongoing or recurring basis) and exclusively (there can be no personal use – take out the tv) for your trade or business, and it must be your principal place of business or a place where you physically meet with patients, clients or customers on a regular basis. The space will be considered your principal place of business if it is used for performing administrative or management activities, such as billing, bookkeeping, ordering supplies, setting up appointments and writing reports, and there is no other fixed location where you regularly perform these activities.
 
As an employee, the home office must be for the convenience of your employer. This means the home office is required as a condition of employment, it is necessary for the business to function, or it is necessary for you to properly perform your duties as an employee. If you do not have any other place of business, such as a rented office or storefront, your home office should qualify.
 
For an expense reimbursement plan to be considered “accountable”, the expenses that are reimbursed must be for actual job-related expenses (you cannot reimburse personal expenses) and you, as the employee, must substantiate the expenses by providing your employer with receipts or other documentation.
 
Create a monthly “Employee Expense Report” form for your corporation.  Include a Home Office section in the report. Calculate the “business use percentage” of your home by dividing the square footage of the office area by the total square footage of the home. List each item of expense paid during the month, such as real estate taxes, homeowner’s insurance, oil heat, gas and electric, water and sewer, alarm or security service, garbage disposal, general repairs and maintenance, and mortgage interest (taken from the monthly mortgage billing statement or a loan amortization statement you can create online). Multiply the total of these expenses by the business use percentage to determine the amount to be reimbursed.
 
A self-employed person can, within limits, deduct depreciation on a home office, because depreciation is not an “out-of-pocket” expense it follows that your corporation cannot reimburse you for the depreciation of your home office. However, this issue is not clear.
 
Total up all the business expenses listed on the form, including the home office amount, and write a check from the corporation to yourself for this amount. 

You must reduce the amount of your itemized deduction for real estate taxes and mortgage interest by the amount of reimbursement you receive from your corporation during the year for these items. If your real estate taxes for the year are $10,000, but in the course of the year you were reimbursed $2,000 by the corporation, you can only deduct $8,000 in real estate taxes on Schedule A.
 
Deducting, or being reimbursed for, a home office today will no longer turn around and bite you when you sell your personal residence, as had been the case in the past. If the home office is within the same “dwelling unit” as the residential portion of your home, you are treated as using the entire home as a principal residence.
 
If the office space was 10% of the total area of your home, you DO NOT have to pay income tax on 10% of the gain from the sale. You will be able to exclude the entire gain, up to the $250,000 and $500,000 limits, if you qualify, less any “post-May 6, 1997″ depreciation. You must report any depreciation you deducted on the home office after May 6, 1997 as “un-recaptured Section 1250 gain”, which will be taxed at the capital gains rates up to a maximum of 25%.
 
If you were not able to deduct depreciation on your home office, or were not reimbursed by your corporation for depreciation, there is no income to report and 100% of the gain, up to the limits, will be tax-free.

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Setting Financial Goals through Vision Planning

Posted on March 28, 2011 by admin

Michael Hyatt, the CEO of Thomas Nelson Publishers blogs on “Leading With Purpose.”   He also recently contributed to an ebook and with an entry entitled “Why Vision Matters.”  Mr. Hyatt refers to VISION from the perspective of leadership… “it is about reminding people of what it is (they) are trying to build. “  He goes on to say “Vision is the lifeblood of any organization.  It is what keeps it moving forward.  It provides meaning to the day-to-day challenges and setbacks that make up the rumble and tumble of real life.” 

Worthy thoughts….and it caught my attention because VISION is also something we talk frequently about within our office.     It is indeed very true that Vision is what keeps people moving forward.  Yet, with any business, working “IN” the business often overtakes the ability and time for working “ON” the business.   We want to help people gain clarity about the path they want to take for the future and the steps they can take to reach their goals.

But goals can be fuzzy, and how to achieve those goals even more so.  Strange as it may sound, at times it becomes hard to even recognize when those goals have been achieved!  Accounting Resource Group has a unique program called VISION PLANNING in which we take the business owner through the journey of discovery:  What are your goals and dreams?  What is standing in the way?  What are the areas of potential that will get you where you want to go?

“When times are tough, VISION is the first casualty.” Says Mr. Hyatt.  He’s right.  It’s easy to hold back – afraid of this uncertain world.   But clarity of vision can make even the most challenging times exciting and fruitful!  We’d be happy to help you achieve clarity of YOUR vision.  Contact us and find out how we can help.

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IRA Contributions

Posted on March 24, 2011 by admin

There is still time to contribute to an Individual Retirement Account for the 2010 tax year.  Taking control of maximizing retirement savings appears to be increasingly more critical as we hear of the shortened estimated timeframe for when social security funds will run out.  Find out more about this and other helpful financial tips here.

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