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Plan Now for a Comfortable Retirement

8/31/2016

Planning can help you achieve a comfortable retirement. Here are five suggestions to consider:

Start a retirement savings program as early as possible and contribute regularly.
The longer and more consistently you contribute, the larger your nest egg will become, even before the compounding provided by growth and earnings. Regular, reasonable deposits wisely invested will easily outgrow sporadic and insignificant contributions.

Deposit your funds in tax-deferred accounts.
Invest in tax-deferred accounts to the greatest extent possible. If your employer offers a tax-deferred plan, such as a 401(k), contribute as much as you can, particularly if the plan provides matching funds.

Investigate individual options, such as IRAs, for additional planning opportunities. Why?

One of the advantages of tax-deferred accounts is that investments that aren’t reduced by taxes will grow and compound at a faster rate.

Other advantages include the ability to control your withdrawal rate and the amount of any accompanying tax, and the opportunity to postpone recognition of taxable income until retirement, when you’ll likely be in a lower tax bracket.

Establish an investment plan.
As funds within your retirement accounts accumulate, you’ll have to decide how to invest them. Establish an investment plan as early as possible. Then follow your plan consistently, revising only enough to keep matters on course, correct for deviations, and respond to unexpected events.

Track your portfolio and re-balance as needed.
Maintain a balance among growth, income, and short-term investments, and adjust the ratios as you age.

The standard rules of thumb:

When you’re under forty, consider investing more heavily in moderately aggressive growth vehicles.
In your forties and fifties, you might want to become more conservative, shifting your balance toward income-generating investments such as high-dividend stocks.

Once you’re retired, plan withdrawals so your funds will last the rest of your life.
To avoid running out of funds, plan for a long retirement.

Postpone withdrawals as long as possible, and pay them out carefully.
Calculate a workable percentage to withdraw from your portfolio on an annual basis.
Assume your funds will need to last at least thirty years.
Continue to revisit your investments each year to monitor and re-balance as needed.

A successful retirement plan requires forethought, discipline, and monitoring. For assistance, contact your CPA or financial advisor.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

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What’s Your DSO?

8/24/2016

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If you grant credit to customers, then you have a balance in accounts receivable.

DSO stands for Days Sales Outstanding, and this helps you measure how fast your receivables are being converted to cash.

Here’s how to calculate it:

DSO = Accounts receivable balance / Annual net credit sales * 365.

DSO is measured in days and it represents how many days it takes to collect the customer invoice balance and convert it to cash.

Whether the DSO measure is “good” or not varies by industry as well as the terms you’ve set for your clients.

If you’ve set your invoices to be due in 30 days and your DSO is 45 days or less, that’s pretty good.

If you’ve set your invoices to be due in 10 days and your DSO is 60 days, then you might want to consider a more aggressive collection policy to speed up your cash flow.

Here are some tips to reduce DSO:

Invoice clarity

Make sure your invoices are accurate and clear. Make it clear whom to make the check out to, where to mail it, the due date, and the amount due. All of these features should be easy to find on the invoice.

Consider discounts

A common discount term is 2/10, net 30. This means the customer can take two percent off their invoice if they pay in 10 days; otherwise they owe the whole amount in 30 days.

If you have customers from large companies, discounts are often required by policy to be taken and this can speed up your payments from them.

Consider electronic payments

Going paperless with your invoicing as well as your payment process can speed up the entire billing cycle. Customers getting their bills earlier will also pay earlier.

So, what’s your DSO?

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Beyond Saving Trees: New Trends in Receipt Management

8/17/2016

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Accounting automation has come a long way in the last few years, and the process of handling invoices and receipts is included in those changes. No longer is there a mountain of paperwork to deal with. In this article, we’ll explain some of the changes in this area.

Vendor Invoices

Most invoices are now sent electronically, often through email or from accounting system to accounting system. Some accounting systems allow the invoice document, usually in PDF format, to be attached to the transaction in the accounting system. This feature makes it easy for vendor support questions as well as any audit that may come up.

Some systems are smart enough to “read” the invoice and prepare a check with little or no data entry. Others are able to automate three-way matching – this is when you match a purchase order, packing slip, and invoice together – so that time is saved in the accounts payable function.

Receipts

Today’s systems allow you or your bookkeeper to scan in or take cell phone photos of receipts – whether cash or credit card – and then “read” them and record the transaction. This type of system cuts way down on data entry and allows the accountants to focus on more consultative work rather than administrative work.

Some vendors will email you receipts so all you have to do is use a special email address where your accountant is copied or forward the receipt as you receive it.

The biggest challenge for business owners is getting into the habit of photographing the receipt and sending it to the accountant. The days of shoebox receipts are not completely over, but cloud-savvy business owners are definitely enjoying the alternative options of today’s paperless world.

Approvals

Some systems automate bill approval. This is especially handy for nonprofits or companies with a multi-person approval process. It cuts down on approval time and the time it takes to pay the bill.

New Systems

Here is a short list of new systems that automate a part of the vendor payment or receipt management system. There are a lot more, in addition to your core accounting system, and all of them have different features, platforms, software requirements, integration options, and pricing.

Bill.com
Receipt Bank
Hubdoc

Tallie
Concur
Expensify

SmartVault
LedgerSync
ShareFile

If you are interested in finding out more about automating your accounts payable invoices or receipts, please reach out anytime.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

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Keep Up With Section 179 Depreciation Changes

8/10/2016

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Did you know that a recent law made changes to the Section 179 expensing election for 2016? These modifications took effect as of January 1.

Here’s what to consider as you make asset purchasing decisions this year.

Change #1. Beginning in 2016, section 179 is indexed for inflation. This year, the basic section 179 expensing limit will be $500,000. That limit is reduced dollar-for-dollar once your purchases exceed $2,010,000.

Change #2. The definition of “section 179 property” now permanently includes computer software and real property such as qualified leasehold and retail improvements and restaurant property. That means you can elect to use section 179 expensing when you purchase those assets.
Change #3. You may be able to deduct more of qualified leasehold and retail improvements and restaurant property in 2016. Beginning this year, the law eliminated the $250,000 cap on the amount of section 179 you could claim for this property.
Change #4. Beginning in 2016, air conditioning and heating units are eligible for section 179 expensing.

Talk with your CPA or financial advisor for help in maximizing the Section 179 deduction for your business asset purchases.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

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Are You at Risk for an Audit?

8/3/2016

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According to recent statistics, budget cuts, staff attrition, and a heavy workload for IRS employees mean your chances of undergoing a tax audit are less than 1%. Does that sound like a non-event to you?

Don’t be lured into a false sense of security. The statistic is a blended rate covering many types of incomes and taxpayers. Here are some of the reasons returns were audited:

No adjusted gross income (AGI). For AGI of zero, audit risk jumped to over 5%. The IRS benchmarks AGI because it is total income including losses from businesses and investments.

Large adjusted gross income. Audit risk was nearly 2% for returns with AGI over $200,000. Audit risk climbed to 16% when AGI was $10 million or more.

International returns. Due to a focus on offshore tax evasion, the audit rate of international returns was almost 5%.

Estate taxes. Approximately 8.5% of estate returns were audited. Gross estates of $10 million or more were tagged with a 27% audit risk.

Corporate returns. Small corporations experienced up to a 2% audit risk. The risk for large corporations with assets over $20 billion was 85%.

Be aware that even if you don’t fit into any of these categories, your return may still be selected for audit. That’s one reason it’s essential to keep good records to support all deductions and credits you claim on your tax return for at least three years after filing.

Examples of required record-keeping include:

When you deduct expenses for meals and entertainment, the written evidence must show who was in attendance and what business was discussed.

A home office deduction must be supported by evidence showing your home office is used regularly and exclusively as the principal place of business.

Certain non-business property that you gift, donate, or intend to distribute through your estate requires an appraisal.

If any of the above risk factors are present in your business’s books, talk with your CPA or financial adviser on what steps to take to protect yourself from an audit.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

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Plan Now for a Comfortable Retirement

What’s Your DSO?

Beyond Saving Trees: New Trends in Receipt Management

Keep Up With Section 179 Depreciation Changes

Are You at Risk for an Audit?

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