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Tax Reform Changes - How will they affect you?

When you file your 2018 tax returns – about a year from now – your return will look very different.  Here are a few of the biggest changes that may affect you.

 

Individual Tax

• Individual tax rates will range from 10% to 37%.
• Standard deduction increases and personal and dependent exemptions eliminated
• The Child Tax Credit increased and a new Dependent Credit created.

Disappearing deductions: Beginning with the 2018 tax year, you will no longer be able to deduct:

• State income tax and property taxes above $10,000 per year in total;
• Moving expenses (with an exception for certain military);
• Employee business expenses such as mileage, travel, entertainment, home office expenses, union dues, tax preparation fees, and investment fees, among others;
• Mortgage interest beyond interest on $750,000 of acquisition debt (if you buy a new home); and
• Mortgage interest paid on equity debt (all homeowners).

Some new benefits for individuals include:

• Medical expense Adjusted Gross Income (AGI) threshold will temporarily drop to 7.5% of AGI for 2017 and 2018;
• Alternative Minimum Tax (AMT) threshold increased;
• A deduction for qualified business income for passthrough entity owners;
• Recharacterization to an IRA cannot be used to undo a Roth conversion;
• The estate tax exclusion has increased to $10 million (adjusted for inflation); and
• Annual gift tax exclusion remains the same ($14,000 for 2017 and $15,000 for 2018), but the maximum rate on gifts is 35%.

Small Business Tax

• Corporate tax rate will be a flat 21% for 2018
• Up to 20% deduction from net business income for a sole proprietorship, LLC (excluding those taxed as a C corporation), partnership, S corporation, and rental activity. The rules are complex but there is a lot of planning that we can do to maximize this deduction for you.
• Corporate Alternative Minimum Tax (AMT) repealed;
  
• IRC §179 expensing and bonus depreciation increased;
• Deductible business interest reduced;
• The net operating loss (NOL) carryback repealed, NOL deduction amount limited;
• The domestic production activities deduction is repealed;
• IRC §1031 treatment is limited to certain real property; and
• Entertainment expenses are disallowed.

We are here if you would like to discuss how the changes apply to your unique situation >> Contact Us

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This includes the pulse or heart rate, body temperature, respiration rate, and blood pressure. Taken together, these help indicate the state of the patient’s essential body functions.

If any – or all – offer some cause for concern, the doctor can start diagnosing the patient more thoroughly, before suggesting a course of action…

And now we’ve arrived at the part where you’re wondering why we’re discussing basic medical practice.

Well, this idea of ‘vital signs’ is something that can be comfortably extended to your business.

Your company’s financial health should be examined regularly to make sure there are no underlying maladies that will only grow worse if left untreated.

Knowing What to Look For

These financial ‘vital signs’ have many names, some of which may be familiar to you. They include: Key Performance Indicators (KPIs); business metrics; critical success factors; and moneymaking statistics.

No matter the label attached, they are all essentially the same thing: a means of tracking the performance and success of your business.

Just as a soaring temperature or irregular heartbeat will make a physician want to dig deeper in diagnosing their patient, there are a few things you should keep an eye out for when it comes to the health of your business.

For instance, revenue is a clear indicator as to the financial performance of your company. By monitoring your income in comparison to your expenses, you will have an understanding of how much you are making (or not, for that matter), and why.

And when it comes to revenue, consider the various streams. In particular, online sales are simple to measure by implementing sales software, allowing you to spot trends and take action before it’s too late.

Or perhaps you could track the referrals that bring you new business. This will help you determine whether or not your marketing endeavours have been worthwhile, and if your current clients are actively recommending you to their network.

Once you have those customers, think about retention. How many clients are returning to your business over time after first working together or selling them on a discount or offer? Are you maintaining a loyal customer-base, or are you struggling to retain them? The answer will give you an insight into your company’s customer service capabilities.

Take the Pulse of Your Business

These are just some of the Key Performance Indicators – or vital signs – that you ought to look out for as you measure the performance and success of your business.

Understanding how your business is doing at any given moment is crucial to helping you make informed and effective decisions as its leader.

Tracking financial and non-financial metrics can help keep your business healthy. And as with your body, spotting any worrying trends early will make it a great deal easier to remedy than if you leave them untreated.

And it can be tough when you dig deep and track these metrics, only to discover that your business is living on borrowed time. When that happens, you must be ready to evaluate the alternatives; and quite often those alternatives can mean making difficult decisions, such as letting people go, selling the business, or filing for bankruptcy.

Start Tracking Today

Putting a plan in place to track key business metrics is fundamental to the growth and success of your company.

By staying on top of your KPIs, you will be in a much better position as you work with an up-to-date and accurate budget. And by doing so, you will be able to grow and invest in new resources, personnel, or locations, without putting your business under financial strain.

If you’d like to discuss setting up a system to track your key business metrics, please contact us.

The post Is your business ill? appeared first on Checkbox Accounting.

Implementing a performance measurement program requires the development of an information feedback system. By this we mean a system that allows the management to identify, monitor, and take action to improve select KPIs (key performance indicators) that relate to the primary performance areas of the organization.

In this post, we will discuss how to identify these performance areas for your nonprofit, and how to implement your own performance measurement system based on your mission statement.

Don’t Try to Measure Everything at Once

It’s important that you drill down into the performance areas that truly matter to your nonprofit. Trying to measure everything and anything will only lead to information overload.

For most for-profit businesses, the areas of interest typically include sales, customer relations, operations, finance, and personnel. You may have noticed that a number of these performance indicators are bottom-line oriented, or tend to influence and impact profitability and productivity.

More often than not, this kind of information can be quickly and easily accessed by running reports in an accounting system.

However, if your nonprofit organization is to evaluate how well it is doing in achieving its mission-driven goals, it will need to devise a way to measure the overall effectiveness of its programs and services.

In essence, your performance measurement system needs to be able to determine whether or not the not-for-profit programs and services provided by your organization are having the desired effect, as promised by your mission statement.

How to Measure Nonprofit Effectiveness

The performance indicators we recommend nonprofit organizations use to measure service effectiveness and accomplishments typically fall into one of the four following categories:

1. Input measures which quantify the efforts or resources expended in an activity or program.
2. Output measures which quantify the volume or level of services provided or delivered.
3. Outcome measures which quantify the actual effect an organization’s efforts have on its objectives.
4. Efficiency measures which compare the amount of inputs with output or outcome quantifiers.

And once you have identified the performance indicators relevant to your organization, you can then look at the process of implementing your performance measurement system.

This can be broken down into the following basic steps:

• First, clearly identify the organization mission and its mission related objectives.
• Then define the main performance areas that have a significant impact on whether or not, and how well, the organization achieves these objectives: service accomplishment, client relations, fundraising, community image, etc.
• Next, develop and map a system of key performance indicators organized by the above determined performance areas: meals served, beds occupied, cases treated, local literacy rate achieved, client satisfaction level, etc.
• Finally, implement the new performance measurement system, including procedures which require ongoing monitoring and reporting.

Put Your Mission Statement to Work

Most nonprofit organizations have a mission statement, but many don’t take the time to evaluate it.

The process of developing a performance measurement system provides an excellent opportunity for you and your management team to gauge whether your organization is on track to meet its mission goals.

At every step in the measurement process, the input of employees, program managers, accounting staff, and the board of directors is vital for developing practical, realistic, and workable measures for which management and staff can be held accountable.

What’s more, the identified measures or indicators should be incorporated into an overall performance measurement system. This should cover all the key performance areas of the organizations and allow for periodic monitoring, reporting, and reevaluation.

Do You Need Help Measuring Performance?

If you’ve come to the end of this post with the realization that you need to start tracking your nonprofit’s performance, then we can help.

By facilitating the process and helping with its maintenance, Checkbox can put your nonprofit on the path towards a more effective and efficient output.

Contact us today if you feel your organization would benefit from a performance measurement and performance improvement system.

The post Performance Measurement for Nonprofits appeared first on Checkbox Accounting.

In particular, the financial aspects of a growing organization require a great deal of attention. And while you may not be in a position to bring someone on full-time to take care of this for you at the moment, that doesn’t mean that you shouldn’t look to delegate these tasks to a professional.

By outsourcing your financials to a part-time CFO (Chief Financial Officer) you can access “big company” resources without the expense.

In this post, we take a look at the benefits of appointing an outsourced CFO.

What is a CFO?

A CFO is a senior executive who is responsible for the financial affairs of a company or other institution.

These responsibilities often include the past, present, and future financial health of an organization.

Typically this involves presenting and reporting accurate and timely historical financial information; addressing the present financial condition of the organization, taking into account risk and liquidity; and economic forecasting so as to ensure the company’s future financial success.

What are the benefits of hiring an outsourced CFO?

There are a number of benefits to outsourcing a CFO’s duties. These include – but are not limited to – the following:

Save Money

An average CFO salary in 2014 clocked in at around $314,000 per year. For a number of small and growing businesses and organizations, this level of expense is simply not feasible.

However, this does not diminish the need to appoint someone to oversee financial matters, and so rather than hiring a full-time CFO (which comes with the need to pay taxes, health insurance, and other benefits) you can outsource the responsibility to a qualified individual for a flat fee. This represents a significant amount of savings, without compromising on the quality of work your organization receives.

Valuable Insight & Advice

When you delegate your financial responsibilities – including your accounting, bookkeeping, financial statements, income projections, tax, budgets, and cash flow management, among others – to an outsourced CFO, you are tapping into a wealth of experience.

What’s more, you will receive a fresh set of eyes ready to address your organization’s challenges and help solve its problems.

And when you’ve hit that metaphorical brick wall, and you don’t know how to go about improving the financial situation of your company, you’ll have a source of expert advice and guidance ready to step in and steer you in the right direction.

Accuracy, Efficiency and Experience

An outsourced CFO can help you make better, more informed decisions as the leader of your business or nonprofit.

They do this by streamlining your accounting systems, doing away with out-of-date methods and processes, so that you’re looking at only the most accurate and up-to-date financial information.

You’ll also have peace of mind knowing that your company’s finances are being looked after by someone with a high level of experience, built up over many years. Your financial statements will be delivered with accuracy, financial analysis conducted with care and consideration, and your records organized so as to be ready when potential investors come knocking.

Are you ready to hire an outsourced CFO?

If you’re still in startup mode, you will find yourself wearing a number of different hats; from sales executive and HR manager, to bookkeeper and marketing director. But there will come a time in every growing business or nonprofit where your time is better spent on the big picture.

And the big picture should always be underpinned by solid financial information.

So, if you’re ready to embrace the growth of your organization, you should begin removing your many hats. Allow them to be worn by the relevant experts and watch your business or nonprofit prosper.

Checkbox can take the strain, providing the tools and expertise necessary to interpret your financials and help you meet your personal, financial and social goals.

As your strategic financial partner, you’ll wonder why you hadn’t outsourced the CFO role sooner.

Contact us today to discuss a customized plan that meets the needs of your business or nonprofit.

The post The many benefits of an outsourced CFO appeared first on Checkbox Accounting.

Or maybe you’re between boardroom meetings, planning the growth and expansion of an existing company.

No matter where you are in the lifecycle of your business, one thing will always ring true.

You will need cash.

After all, cash is king. But it’s not always readily available.

That’s why it’s fundamentally important that you, as a business leader, understand the ins and outs of business loans.

In this series of three posts, we’ll provide you with an overview of the available loan types; the concerns you may experience as a borrower; the various push backs that can come from lenders; the benefits of SBA loans; and the pros and cons of buying vs leasing equipment.

What Type of Loan Do You Need, and Why?

Before deciding that your business definitely needs a loan, you must first ask yourself for what purpose you are borrowing the money.

Typically, loans can be categorized as short-term and long-term, and will be secured or unsecured (difficult to obtain).

If you’re borrowing money to get started, you will most certainly be asked for a Personal Guarantee. That is to say, you will be required to personally vouch that the money will be repaid, even if the business fails.

It’s also less likely that you will be able to borrow the money and repay it over a longer period of time if you do not have a track record in the sector or industry you are entering with your new business.

However, if you have an established business turning a profit, you’ll find borrowing money on more agreeable terms much easier.

You may still be asked for collateral to secure the loan, which can take the shape of valuable equipment, for example. This would then be seized by the lender to recoup their losses should you fail to repay the loan.

Alternatively, if the loan is unsecured, you may be faced with higher interest rates, meaning repaying a great deal more than you borrowed over the duration of the loan.

Concerns Go Both Ways, You Know

Borrowing money is a big decision, particularly if you’re still at the early stages of your entrepreneurial journey.

You may have some apprehension when it comes to taking on a loan, and that’s understandable. Interest rates and bank fees can be confusing at the best of times, while the fine print of a loan agreement can throw its fair share of curve balls. For instance, you can often be penalized for repaying your loan early, so that’s definitely something of which to be aware.

Your best bet is to shop around, gather all the necessary information, and find a bank or financial institution with which you feel comfortable.

But even if you come armed with all the necessary facts and figures, lenders can still be concerned enough to not offer you a loan.

You ought to be aware that they will question your ability to repay the money you’re borrowing, your collateral, your credit history (personal and business), the cash flow forecast of your business, and even the competency of your management.

With this in mind, you may wish to look at borrowing money from the SBA.  Stay tuned for our next post which outlines the benefits of an SBA loan.

Questions? Contact us at Checkbox.

The post A Guide to Selecting the Right Business Loan appeared first on Checkbox Accounting.

Having cash that’s available in the business for unexpected financial challenges is part of building risk control into your business model. In an uncertain world, knowing that the adequacy and growth of cash reserves has been considered in your budget plan provides real comfort that you will be able to:

• deal with the emergencies that may come, and
• build capacity toward the successful achievement of your organizational goals, whether those goals takes the form of an increase in profits or market share for your for-profit business, or the expanded and deepened social impact of your nonprofit’s programs.

On the flipside, not putting the right consideration into cash flow can have serious consequences for your reserves.

As an example, one of our nonprofit clients holds a regular, annual event which is its primary fundraiser for the year. A significant amount of board, staff and volunteer time is committed to making this event a success.  In the months leading up to the event, cash inflows from increased memberships, sponsorship support, exhibitor and attendee fees, caused cash reserves to swell.— So far, so good— But when the overall expenses for the event  were added up, including supplies, speakers and advertising etc., this overhead would subsequently cause the client’s cash reserves to plummet.

How, then, do you resolve this challenge of cash reserves being decimated by ever-increasing fundraising costs?

The answer was to supply the nonprofit with a trend analysis. This showed the client how, at the end of each year, they were ending up in the same cash position. Their cash was being emptied out and there was no profit to drive back into the charity. The organization as a whole was not growing.

With the information in the trend analysis, and our support and guidance as business advisors, the client could intelligently review the value of the event as it related to its social goals.

Running the event is a great fundraising opportunity for this client, but it needed to be planned with an eye on the organization’s financial stability and growth and with its ultimate and primary social purpose in mind. To do that effectively, they needed a proper budget and a cost center review.  Armed with those foundational tools, the client could then analyze if their event was aiding the long-term strategy of the organization and furthering its mission to serve a greater good.

—

Whether you’re a small business who wants to increase your profits, or you’re an organization wanting to increase your social impact, Checkbox can help you achieve your goals.  Get in touch with us to get the expert assistance you need.

The post The importance of growing your cash reserves appeared first on Checkbox Accounting.

Budgeting is one of the fundamentals that can often be overlooked by business owners, or non-profit CEOs, whose focus is pushing forward the next goal on the horizon. But when you neglect your budgeting, you’re setting a highly unstable foundation stone on which to build the rest of your business plan.

Why is budgeting so important to the health of your organization? And how can a more proactive approach to budget management improve your chances of achieving and maintaining your long-term business goals?

Why do I need a budget?

A good budget is the foundation of any business plan – you can’t finance your new product, your new office or the long-term expansion of your non-profit until you’ve worked out clearly and concisely what the costs are and what available cash you have to deliver on these objectives.

This means there’s a real imperative to think through each element of your project or strategic plan and to budget for these costs based on sound, realistic numbers.

It’s best to over-estimate, rather than under-estimate, but the costs you plug into your budget need to be an actual reflection of the overall spending that’s needed, and the funds that you can realistically access to meet this spending.

This is why building a budget that’s detailed, realistic and coherent can take some time. The process of gathering the necessary information can be lengthy, and the amount of time taken means that budgeting is often avoided as long as income is exceeding expenses.

Running your finances on a wing and prayer is never an advisable methodology, and that’s why a revenue plan and a good budget are so invaluable.

Comparing your budget to actuals

If you’re going to move beyond the ‘there’s still money in the bank’ mentality, your organization will need a sound revenue plan to guide its financial management.

By getting your planned revenues, expected overhead and other costs down into a more tangible format, you improve the vision and control you have over your financial destiny. And when you have clear budget targets to aim for, that can also become a motivating factor – both for you as the business owner, or non-profit CEO, and your wider management team and staff.

Your budget really begins to deliver once you begin to track and measure how well you’ve met your agreed targets. With a good accounting system in place, you can review your actuals (your historical transactions) throughout the year to measure them against your budgeted figures.

Comparing your budget to your actuals will show where there are any variances. These are gaps between the income/costs you’ve planned for and the actual income/costs that the business has experienced – in short, they’re the red flags that show you whether you’re meeting your budget, or missing those targets. And that’s essential information to be aware of when you’re in charge of the organization’s  future and financial sustainability.

When there are challenging variances coming through in your reporting, you can start getting proactive about improving revenues, or reducing costs: both of which can help to bring you back on track with your plan.

You can also use your variances and budget reporting to inform next year’s budget and ensure that the same pitfalls are avoided in the next financial year.

Get proactive about your budgeting

Your budget is something that should never be overlooked. With good budgeting, you not only set a clear structure for your expected revenues and spending, you also provide the information and data to analyze your performance and take the actions needed to keep you on track.

At Checkbox, we can help you to develop a sound, workable budget for your business or non-profit. And we’ll provide the necessary oversight to make sure you’re on track, realizing your potential and meeting your long-term goals.

Get in touch with us to arrange a budgeting session for your organization.

The post Why budgeting is essential to success appeared first on Checkbox Accounting.

Chapter 1

The Dream:

Running Your Own Business with Integrity

The Dream

Business is no different from life in the way that when you start a project, you have a picture in your mind as to how the end product should look. Everyone should spend time planning their business and personal lives so they may decide what their dream of success and wealth really look like!

Integrity: Pieces of the Dream

Everything has to be first class, from your product, to the way you treat your employees, to the way you treat your customers! When people think of your business and your product, they need to know they can trust you because your brand has integrity.

Offer Quality

When people do business with you, they assume you will deliver the best product or service at the best price. You are the expert simply by being in business. However, you must realize the customer’s perception of quality is often different front from the business owner’s.

Offer Value over Price

We should always strive to provide a superior product and never be afraid to price that product accordingly. After all, “good lumber ain’t cheap, and cheap lumber ain’t good.” Quality is much more important than quantity.

Be the Best

By offering your customers quality and good value, helping others, following the rules, and being the best, your dreams of small-business success can come true.

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