Cash Flow: Sometimes It Takes an Expert to Advise on It

Cash flow woes can be a major problem for a business as any Rochester accounting firm will note. Without a decent level of cash flow, a business will end up suffering from quite a bit up upheaval. Working with CFO outsourcing services may be able to curtail problems associated with cash flow woes. This is a must because a business does need to have enough cash coming in so as to effectively remain in operation and not suffer from resulting financial limitations. There could also be issues with Rochester taxes that might arise when not enough cash flow is generated to cover them.

Understanding why cash flow is so important begins with defining what exactly cash flow is. First, it is critical to point out that cash flow is NOT the same thing as profits. There may be profits found in monthly cash flow, but the cash flow itself is not solely profitable. Similarly, a business doing $35,000 a month in cash flow could be operating at a major loss. A Rochester CPA could point out numerous examples such as these.

How is this so? Basically, cash flow can be defined as the amount of money that comes into the business through revenues. A commercial gym, for example, may gain its cash flow through memberships combined with the sale of food and beverages along with merchandise. When all of the revenue is added up, the end result would be the figure for cash flow. Cash flow can be broken down into daily, weekly, monthly, quarterly, and annual amounts. Upon doing so, steps must be taken to determine whether or not the cash flow is contributing to profits or losses. A good Rochester accountant will tell you where you stand in this regard.

Obviously, the goal of the examination of the cash flow would be to maximize profits while also trying to cut down on any losses. This might all seem very basic, but there are complexities involved with the process. Many business owners can be good with the product or service they offer, but when it comes to actually managing their finances, they can only do so when they make enough profits to cover their expenses. And even this can actually be done from the wrong perspective.

What that means is the cash flow might be low due to not properly managing the expenses of the business. Money could end up being wasted because it is being overspent on areas that could easily be cut. Outsourcing CFO services could lead to recognizing what areas could benefit from budget reductions. It could also contribute to better tax planning.

And then there may be more complicated steps to take such as increasing funding to a particular area so that it might contribute to boosting revenues and cash flows as a result. An experienced eye may be able to locate such things, make suggestions, and then follow through on any affirmative decisions made from those running the company. Often, management will be quick to agree to what the CFO or a Rochester consulting firm is is suggesting. All they needed was the proper insights to be pointed out to them to make the necessary changes.

Tax Planning: A Way You Can Reduce Your Burden

Costs can drain the life out of a company. For those who live on a month to month basis with their business, not a lot of effort goes into such things as tax planning. Either those in charge of the business are not well aware of what is required to effectively engage in tax planning or they simply do not prioritize it. The former is somewhat understandable, but the latter is really nothing more than a path to getting into serious fiscal woes. Businesses do need liquidity in order to survive if not thrive. Cash flow and cash in reserve accounts allow a business to immediately access funds. Yes, it is true that a line of credit can do so as well. However, borrowing from a line of credit is exactly that: borrowing. When money is saved in reserve, it contributes to the overall net assets of the business. Also, the funds can be placed in a conservative investment where it can draw interest. Interest, of course, increases the value of the money saved in it.

This is where effective tax planning comes into play. There can be quite a number of misunderstandings about what tax planning entails. On the simplest of levels, tax planning refers to putting the proper effort through the year to be sure the lowest amount of taxes is paid. This is not as easy as some assume. Most do realize that taking deductions will greatly cut down on the amount of taxable income a business presents. A good accountant can definitely maximize the amount of deductions that a business can employ. Being able to do so would be the sign of a truly excellent and helpful accountant. However, there is far more to tax planning which can be done here.

One other effective component of tax planning would be to take advantage of tax credits. Tax credits are simply bonus deductions offered as incentives. One example of a tax credit could be taking a certain percentage of the costs to purchase alternative, green energy systems in an business. In some instances, a business might already have invested in making such purchases but does not take the tax credit because management simply does not know the credits are available. Professional who work in tax planning can invest a huge amount of time in research so they can locate the tax credits which could prove hugely helpful to a business.

There is also a strategy of replanning which a tax consultant can put effort into. For example, a business may be interested in starting down path A, but scores of tax credits could be gained by traveling down path B. Qualified tax planners and accountants just might be able to help devise more logical and business friendly paths for those interested in saving money and doing better with the operation of their business.

The Affordable Care Act: You May Need to Work with a Rochester Accounting Firm

The Affordable Care Act has been a topic in the news for well over three years. As the law begins its implementation, there are rules and requirements that must be adhered to in order to remain in compliance with the act. While some business owners may wish to try and figure things out on their own, they likely would be making a huge mistake. Granted, the employer mandate has been recently waived buying businesses more time to learn how to comply with the law, there is only so much a novice will be able to figure out. As such, it is absolutely necessary than anyone running a small business speak with a tax professional discuss matters with an qualified Rochester accounting tax specialist who is able to offer the proper guidance and advice. Anything less runs the risk of turning into a major problem for a business owner.

Most are likely aware that the law requires businesses with 50 full-time employees to offer health coverage or pay a penalty. Those who have heard this might not have looked closer at the wording of the law or read any of its related statutes. There is likely a good reason why they would not think to do so. The owner of a business is not involved with accounting and does not follow such matters closely. Be that as it may, the law is the law and there will be requirements which must be followed.

For one, the 50 employees refers to the total amount of employees among all the businesses owned by someone. In other words, if you owned 5 businesses with 10 employees, providing healthcare is required. As skilled Rochester accounting professional will be able to advise you about matters such as these.

Also, the delineation of 50 full-time employees could mean the equivalent of the total of the hours worked by 50 full-time employees. If a host of part-time employees end up equating with the number of full-time hours, requirements to cover benefits or pay fines kicks in. Timelines also exist for a business to comply with the law. Has your business down what is required to stay on top of its timeline? If not, then there could be a number of troubles coming down the road.

Once again, since the law is new and business owners are not versed on how to deal with it, hiring a professional accountant is a much better plan than filing messed up tax returns. If you do that, the risk of an audit increases exponentially. Even if you do not get audited, the tax return will have to be changed. How could it not be? The figures on it were wrong. When a tax return has been adjusted, you will usually find a bill showing up in the mail not too long after you have filed it. Rather than deal with such unexpected and annoying financial woes, it would be much better to have a Rochester accounting tax professional handle your business' ability to implement the program the right way.

Dealing with Late Deposits on 401(k) Plans

As the plan sponsor for your employees’ retirement benefits plan known as the 401(k), you have the fiduciary responsibility of ensuring accurate and timely deposits of the contributions, loan repayments, and other withheld deductions related to the plan. But what happens when you have been remiss in your fiduciary responsibility? Here are tips from a trusted Rochester CPA in dealing with said late deposits.

Know the Requirements

The first step is to know the general requirements for 401(k) plans in terms of the timing of their deposits. The date of deposits depends on the number of participants such that:

• If you have fewer than 100 participants in the plan, the employees’ contributions and loan repayments should be deposited by the 7th business day after the pay period pertaining to the amounts withheld.
• If you have 100 or more participants in the plan, the deposit must be made either on these two dates, whichever is earlier - (a) the date when the withheld amounts can be segregated from the assets of the business; or (b) the 15th business day of the month after the pay period pertaining to the withheld amounts.

Ask your trusted Rochester CPA about possible exceptions but the above mentioned rules apply to most plan administrators. Keep in mind, too, that a few 401(k) plan vendors will send reminder about late plan deposits but said reminder are usually worded in such a way as to exclude all fiduciary responsibility on their part. You, as the plan administrator, must assume said responsibility.

Keep Records

In most instances of late deposits, you have the option of self-correcting the issue by making the deposits and then calculating the lost earnings caused by the late deposit not being invested in a 401(k) plan. You will not be required to file the necessary paperwork with the Department of Labor and/or with the Internal Revenue Service especially when the late deposits pertained to just one to two payroll cycles. You must, however, keep records of your actions as future reference for audit work by an independent Rochester accountant, for example.

Kick the Problem

As your trusted Rochester CPA will say, a late deposit should not be cause for concern but you should kick the problem, so to speak, as early as possible. Always remember that one or two late deposits are mostly inevitable considering human nature. But when such tardiness becomes chronic, remains unresolved for several payroll cycles, and/or becomes fraudulent in nature, you will have problems with government authorities on your hands.

Why? Late deposits can trigger audits by the DOL and/or IRS, which can lead to sanctions including penalties. The DOL will determine whether the 401(k) plan deposits were accurate and timely often by looking at the earliest possible date that you, the plan sponsor, could have made the deposits but did not. This is where your meticulous records come in as well as your valid explanation for the missed deposits.

Your best plan of action: Consult with your trusted Rochester CPA about the appropriate methods to kick the problem even before it becomes an audit trigger. Keep in mind that not only will your company be subjected to a DOL audit but you may be penalized by the IRS in the form of excise taxes.