Okay – thanks, I didn’t see that one coming. Prayerfully, we continually strive to maintain sufficient working capital. Action begets reaction though and certainly we will be tightening the belts as we prepare for the coming tax season.

Enough about me — the purpose of this letter is to announce from atop the mountain that small business is in for a tougher year end planning season and winter that the main stream media is letting on. Banks require cash and are extending limited credit — to most I’m sure to be preaching to the choir, although there are many that disagree believing that the “Credit Crisis” is not real.

Regardless, the winter months are going to be tough on small business experiencing cyclical and seasonal difficulties. Family owned businesses can be especially burdened requiring greater communication and terms with slow paying customers. I agree and too struggle with collections as I am encouraged to maintain sound fiscal conservatism.  We are to be good stewards of our finances while being wise as serpents and gentle as doves.

Know that we are here to serve your business financial needs and assist in cash flow planning and profit analysis. We all need to plan for the cashflow of our business.

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the
opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

…but ask the small business owner opening his mail from his Commercial Bank credit line that reads, “Dear Customer: thank you for your patronage. Please be advised that to better serve you we are making improvements to your current revolving credit facility. Effective immediately, the extension of credit is being limited. Please feel free to call so that we may assist in compliance with these improved regulations.”

Ummmmm….that was political correct code language for “your loan is being called so that we may limit our lending exposure to generate cash immediately to avoid a run on the bank”

Friends, we have been talking for months about cash flow planning to avoid just the types of events that transpired on Wall Street last Wednesday and today Monday, September 29, 2008. We are called to know where we are in the forest and see the trees that are before us. Now is the time to strike while the collective iron is hot and drive home our business identity in this fragile and tumultuous time. Let’s talk….

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the
opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

]]> http://www.mybusinessoflife.com/blog/2008/09/30/hold-on-tight-here-we-gooooooooooooooooooo/feed/ http://www.mybusinessoflife.com/blog/2008/09/29/what-does-the-bailout-mean-to-me/ http://www.mybusinessoflife.com/blog/2008/09/29/what-does-the-bailout-mean-to-me/#comments Mon, 29 Sep 2008 01:39:19 +0000 Certified Public Accountant http://www.mybusinessoflife.com/blog/?p=12 It is Sunday night and Congress seems to have pressed a deal for the President to sign this week. While most of the news centers around sports, weather and entertainment, very few are aware of the sour grapes currently being smashed under political feet.

It is being called a BAILOUT. Well…okay - that’s what we will call it then.

What it means to me is another finger in an ever leaking dike. The real question is whether there are any fingers left because many holes exist. As we wait for another rendition of a Breaking News bulletin on whichever main stream news media you fancy, the financial markets are imploding. Unsure of the veracity of my claims? Try borrowing money to start a business. Have you talked to the Small Business Administration about a start-up loan lately?

Credit has nearly been seized and borrowings between banks are completely uncertain. Small business is caught smack in the middle of a big-time Texas Hold-em game and the deck is stacked. We are looking for serious leadership right now as a nation in perilous times and instead the International bankers have are parlaying a dog and pony show of Barack and John. Are you kidding me???

While special interests have the election bought and paid for, on the local front we are trying to meet payrolls. Between you, me and the lamp-post, I recommend getting back to basics. This “credit crisis” is not about home mortgages or asset values as much as it is about liquidity. Small business today must concentrate on liquidity to insure solvency.

BREAK-EVEN ANALYSIS

Daily in our conferences we talk about cash flow and sales break-even points. Commonly referred to as a “making our nut” in the sales community — we are talking about cash inflows exceeding cash outflows. At the end of the day, week and month did we make a profit? Let’s talk more about your Company in detail next time we get together.

CASH FLOW ANALYSIS

Are we making any money? If your outflows exceed the inflows, it is time to talk right now. We must always be concentrating on sell more to more people at less cost. While those three things are imperative, they are very difficult to do. I know — I am running a Small Business as well remember. Currently, we are in the process of preparing for the upcoming tax season and practicing what we preach. We understand the responsibility we have been afforded in your service.

TAX PLANNING ANALYSIS

We are currently developing a tax structured proforma for each Company we serve that considers the 2008 State and Federal Legislation being negotiated as we speak. In the coming weeks and certainly by Thanksgiving we anticipate meeting in person will all of out Company clients to review the developed tax proforma. We believe we have much to be thankful and a wealth of knowledge to assist and serve.  

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting
Group, PC., a full-service accounting firm providing tax, accounting
and business consulting services to small businesses. We welcome the
opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

We here at Veihl Consulting Group, PC are strong advocates of investing in yourself and your business. Nowhere else but your own business is the rate of return on investment so high as right at home. I consider my own business started on a shoestring and home equity loan. No real “capital” or assets were invested. We started with a dream of autonomy to serve the business community.

Today, the practice is growing and my efforts are to strengthen customer relationships to span the financial chasm that mires our local and national economy. While we cannot control the economy, we can effect the business of our business. My contention is that we have a duty and responsibility to press in to the troubles and beat back the adversity through better service and enhanced quality relationship to the customer.

The investment yields I am talking about do not show up on a profit and loss or stockholder report. The ROI is immeasurable and the reward unquantifiable.

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

In between preparing the pools for winter covering and seeding those bare spots in the lawns, we are also planning for wrapping up 2008 business years. Numerous questions remain on the horizon and mutual fund balances slip-and-slide to a seeming quagmire. What will happen with the credit crisis and interest rates? Will Congress act by December 31 to ease the Alternative Minimum Tax and stave off massive taxes to the middle class?

Another “Stimulus Payment” before year-end as Obama wants? I doubt it — but hold the reigns tight as this Presidential election campaign promises fireworks necessary to drown out the groans and screams from Bear Sterns, Lehman, Freddie, Fannie and Merrill Lynch carnage. Oh, by the way its only September 15th, did you quarterlies remember to pay your taxes today?

We’ve got our ears to the ground listening to the tremors effecting your Federal and State taxation. Give us a call to talk about what it all means to you.

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

Really—not every day is a new sales record or winning contract? No new sales office or product placement? I hear you…me neither. Some of my most difficult days are my average days where everything is going along ho-hum—nothing special one way or the other. In fact, the droning of procedure and protocol reeks of boredom. Is all the risk with no guarantee of success really worth it?

I think so. The reason I started this consulting practice was so that every day would be a new day. Regardless of the meeting schedules and business deadlines, I love the idea of having the ability to meet new people and serving their business opportunities. These are only a few of the areas we serve.

- New business start-ups.
- Entity planning for taxes.
- Employee compensation and relations.
- Business valuation.
- Cash flow planning.
- Break-even profit studies.
- Financial analysis.

While these are only a few of the areas we serve, so often we are simply an ear to an idea. Call today and see what is new about our business today.

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

Purchasing. Instead of buying supplies all at once, buy similar quantities more frequently. Buy in bulk only if offered a significant price break.

Negotiate the best possible payment terms with vendors. Pay bills on time, but don’t pay early unless offered a discount for prompt payment. Passing up a discount can be costly. Know your vendors terms and work terms that are mutually advantageous.

Getting paid. To help speed up receipts, put the same concept to work by offering customers a discount for paying their invoices early. If that isn’t successful, charge an extra percentage on past-due invoices – and, send bills promptly. I personally know this can be very difficult – especially during busy seasons. Instead of waiting for a 30-day billing cycle, send invoices immediately after the goods and services are delivered. Consider switching perennially slow-paying customers to COD.

Managing inventory. Generate cash flow by getting rid of slow-moving inventory. Return the items where possible and come up with a plan to move the rest, even if it means marking down the items substantially. For new purchases, avoid overstocking by carefully planning the quantities that need to be kept on hand.

Trimming spending. Review operating expenses to make sure they are necessary. Look at ways to cut costs by shopping for better rates on insurance, telecommunications and other overhead items.

Controlling taxes. Take advantage of opportunities to reduce taxes by planning capital acquisitions or setting up tax-deferred retirement plans. Many of these year-end planning opportunities require timing considerations.

Forecasting and budgeting. Using reliable, up-to-date financial information, map out projected cash inflows and outflows. We can help to make standard practices of regularly monitoring Company cash flow’s.

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

Ratio Analysis looks at the realtionship between key numbers on a company’s financial statements. After the ratios are calculated, they can be compared to industry standards — and the company’s past results, projections, and goals — to highlight trends and identify strengths and weaknesses.

The hypothetical situations that follow illustrate how ratio analysis can give company decision-makers valuable feedback.

Rising Sales, Rising Profits?

The recent increases in Company A’s sales figures have been impressive. But the owners aren’t certain that the additional revenues are being translated into profits.  Net profit margin measures the proportion of each sales dollar that represents a profit after taking into account all expenses.  If Company A’s margins aren’t holding up during growth periods, a hard look at overhead expenses may be in order.

Getting Paid

Company B extends credit to the majority of its customers.  The firm keeps a close watch on outstanding accounts so that slow payers cab be contacted.  From a broader perspective, knowing the company’ average collection period would be useful. In general, the faster Company B can collect money from its customers, the better its cash flow will be.  But Company B’s management should also be aware that if credit and collection policies are to retrictive, potential customers may decide to take their business elsewhere.

Inventory Management

Company C has several product lines.  Inventory turnover measures the speed at which inventories are sold.  A slow turnover ratio relative to industry standards may indicate that stock levels are excessive.  The excess money tied up in inventories could be used for other purposes.  Or it could be that inventories simply aren’t moving, and that could lead to cash problems.  In contrast, a high turnover ratio is usually a good sign — unless quantities aren’t sufficient to fulfill customer orders in a timely way.

These are just examples of ratios that may be meaningful.  Once key ratios are identified, they can be tracked on a regular basis.

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

Tax Treatment During the Rental Period

Overs report their rental income expenses on their personal income-tax returns.  Deductible expenses include money spent on advertising, cleaning and maintenance, insurance, mortgage interest, real estate taxes, repairs, and utilities.

A deduction for depreciation is also available.  Unfortunately, the depreciation period for residential rental property is quite long — 27.5 years.  And, if a home is worth less than its adjusted tax basis (typically, the home’s cost plus improvements) when the rental period begins, the annual depreciation deduction is based on the lower market value.

Even if a rental property is “paying for itself,” it may show a tax loss for the year because of depreciation.  When there is a loss, the tax law’s “passive activity” rules come into play.  Under those rules, a loss of up to $25,000 may be claimed against non-passive income (such as wages) if the owner actively participates in running the home-rental business.  The $25,000 loss allowance phases out with adjusted gross income between $100,000 and $150,000.*

Tax Treatment When the Property Is Sold

Homeowners generally don’t pay taxes on capital gains of up to $250,000 ($500,000 on a joint return) if they’ve owned and used their home as a principal residence for at least two of the five years before the sale.  But this tax break isn’t available for the sale of a residence that has been converted into a rental property unless the rental activity was temporary ad the sale takes place while the owner still meets the ownership and use tests.  Even then, gain is taxable to the extent of all depreciation that was (or could have been) claimed on the property.

What happens if the property is sold at a loss?  For the loss to be deductible, the owner must be able to establish that the property’s conversion into a rental property was meant to be permanent — not merely a temporary measure util it could be sold.

* The loss of allowance for a maried taxpayer filing separately is $12,500.  This allowance phases out with the adjusted gross income between $50,000 and $75,000.

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

Cash Control

All small business owners have to be careful cash managers.  Strict management is particularly critical when cash flows in over a relatively short period of time.  One very important lesson to learn:  Control the temptation to overspend when cash is plentiful.

Arming yourself with a realistic budget and sound financial projections — including next season’s start-up costs — will help you maintain control.  And you may want to establish a line of credit just in case.

In the Off-seaon

It’s difficult to maintain visibility when you aren’t in business year round.  But there’s no reason why you can’t send your customers periodic updates via e-mail or snail mail.  You’ll certainly want to announce your reopening date well ahead of time.  You can also spend time developing new leads and lining up new business.

Time for R and R

You deserve it, so take some time for rest and relaxation.  But you’ll also want to use the time you’re closed to make any necessary repairs and take care of any sprucing up you’d like to do.  You can also use the off-season to shop around and look for deals on items you keep in stock and/or equipment you need to buy or replace.

Expansion Plans

If you’re thinking of making the transition from “closed for the season” to “open all year,” start investigating new product lines or services.  If you diversify in ways that are complementary to and compatible  with your core business, your current customer base may provide support right away.  A well-thought-out expansion can be the key to a successful transition into a year-round business.

Being the owner of any type of business has its ewards — and its challenges.  We have a lot of experience working with small business owners and would be happy to assist you in any way we can.

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611