Change Management Doesn’t Have to Be Scary

Management Change

Business owners are constantly bombarded with terminology and buzzwords. Although you probably feel a need to keep up with the latest trends, you also may find that many of these ideas induce more anxiety than relief. One example is change management.

This term is used to describe the philosophies and processes an organization uses to manage change. Putting change management into practice in your company may seem scary. What is our philosophy toward change? How should we implement change for best results? Can’t we just avoid all this and let the chips fall where they may?

About that last question — yes, you could. But businesses that proactively manage change tend to suffer far fewer negative consequences from business transformations large and small. Here are some ways to implement change management slowly and, in doing so, make it a little less scary.

 

Set the Tone

When a company creates a positive culture, change is easier. Engaged, well-supported employees feel connected to your mission and are more likely to buy in to transformative ideas. So, the best place to start laying the foundation for successful change management is in the HR department.

When hiring, look for candidates who are open to new ideas and flexible in their approaches to a position. As you “on board” new employees, talk about the latest developments at your company and the possibility of future transformation. From there, encourage openness to change in performance reviews.

 

Strive for Solutions

The most obvious time to seek change is when something goes wrong. Unfortunately, this is also when a company can turn on itself. Fingers start pointing and the possibility of positive change begins to drift further and further away as conflicts play out.

Among the core principles of change management is to view every problem as an opportunity to grow. When you’ve formally discussed this concept among your managers and introduced it to your employees, you’ll be in a better position to avoid a destructive reaction to setbacks and, instead, use them to improve your organization.

 

Change from the Top Down

It’s not uncommon for business owners to implement change via a “bottom-up” approach. Doing so involves ordering lower-level employees to modify how they do something and then growing frustrated when resistance arises.

For this reason, another important principle of change management is transforming a business from the top down. Every change, no matter how big or small, needs to originate with leadership and then gradually move downward through the organizational chart through effective communication.

 

Get Started

As the cliché goes, change is scary — and change management can be even more so. But many of the principles of the concept are likely familiar to you. In fact, your company may already be doing a variety of things to make change management far less daunting. Contact us to discuss this and other business-improvement ideas.

Reduce Insurance Costs by Encouraging Employee Wellness

Reduce Insurance Costs

Protecting your company through the purchase of various forms of insurance is a risk-management necessity. But just because you must buy coverage doesn’t mean you can’t manage the cost of doing so.

Obviously, the safer your workplace, the less likely you’ll incur costly claims and high workers’ compensation premiums. There are, however, bigger-picture issues that you can confront to also lessen the likelihood of expensive payouts. These issues tend to fall under the broad category of employee wellness.

 

Physical Well-Being

When you read the word “wellness,” your first thought may be of a formal wellness program at your workplace. Indeed, one of these — properly designed and implemented — can help lower or at least control health care coverage costs.

Wellness programs typically focus on one or more of three types of services/activities:

  1. Health screenings to identify medical risks (with employee consent),
  2. Disease management to support people with existing chronic conditions, and
  3. Lifestyle management to encourage healthier behavior (for example, diet or smoking cessation).

The Affordable Care Act offers incentives to employers that establish qualifying company wellness programs. As mentioned, though, it’s critical to choose the right “size and shape” program to get a worthwhile return on investment.

 

Mental Health

Beyond promoting physical well-being, your business can also encourage mental health wellness to help you avoid or prevent claims involving:

  • Discrimination,
  • Wrongful termination,
  • Sexual harassment, or
  • Other toxic workplace issues.

If you’ve already invested in employment practices liability insurance, you know that it doesn’t come cheap and premiums can skyrocket after just one or two incidents. But, in today’s highly litigious society, many businesses consider such coverage a must-have.

Controlling these costs starts with training. When employees are taught (and reminded) to behave appropriately and understand company policies, they have much less ground to stand on when considering lawsuits. And, on a more positive note, a well-trained workforce should get along better and, thereby, operate in a more upbeat, friendly environment.

To take mental health wellness one step further, you could implement an employee assistance program (EAP). This is a voluntary and confidential way to connect employees to outside providers who can help them manage substance abuse and mental health issues. Although it will call for an upfront investment, an EAP can lower insurance costs over the long term by discouraging lifestyle choices that tend to lead to accidents and lawsuits.

 

Hand in Hand

Happy and healthy — there’s a reason these two words go hand in hand. Create a workforce that’s both and you’ll stand a much better chance of maintaining affordable insurance premiums. We can provide further information on how to reduce potential liability and lower the costs of various forms of business insurance.

Profits vs. Profitability: Why You Need to Track Profit Margins

Difference of Profit and Profitability

As a business owner, there are two things that you should already know: increase revenues or reduce costs. Smart business owners can do both implementing marketing strategies and cost-cutting measure to achieve increased revenue and reduce costs. But, there are so many business owners that believe that you must increase sales and revenue to make more money and forget about the importance of trimming the fat and end up actually reducing the profits.

 

Here are some important key points so you can see the difference between profit and profitability:

 

  • Profits Alone Can Be Deceiving

Difference of Profit and Profitability

People who know basic business on how to calculate profits. You add up total revenues less the total costs, and whatever’s left is your profit. But this is not as simple as that. For example, Company A spends $800,000 to sell $1 million in products and services, generating $200,000 in profits. Company B spends $300,000 to generate $500,000. The two companies generate the same profit ($200,000), but are they equally profitable?

The answer is NO. The more a company spends to reach the specific profit, the more vulnerable it is to minor cost shifts, which might put your business out. Let’s say Company A above spends $300,000 in health insurance costs, and those costs increase by 10 percent. That increases insurance costs by $30,000, reducing profits to $170,000. Company B spends $100,000 in health insurance costs. The 10 percent increase cuts into the bottom line by just 10,000, and profits drop to $190,000. Company B is now making $20,000 more in profit than Company A.

 

  • Profit Margins Provide a More Realistic Perspective

Difference of Profit and Profitability

It’s important for businesses to track not only profit but also profit margin. Profit margin is the percentage of revenues that is actually profit. Seltzer says, “Sales are great, but if your margins are not good and your costs are too high relative to your revenues, then you have problems.”

 

 

How to Increase Profit Margin

There are basically two ways to increase a company’s profit margin. First, you can increase the price you charge for your products and services, but you must be careful and have an analysis of the impact of those increased prices on consumer behavior and total sales. The second is to know the behavior of your expenses, the safer approach is to control costs.

 

  • The Importance of Cutting Costs

Difference of Profit and Profitability

There is a big difference between decreasing your cost and increasing your sales to be profitable. A minor decrease in cost will improve your profit margin more than a comparable increase in total sales. Look at every aspect of your business on how you can control your cost.

 

If you need help on how you can increase your profit, as well as help in getting powerful financial insights, help in achieving diligent tax compliance, and help in achieving a healthy cash flow, contact us today at admin@fas-accountingsolutions.com or 713-855-8035.

Selling Your Business? Defer & Possibly Reduce Tax with An Installment Sale

Defer And Possibly Reduce Tax with An Installment Sale

You’ve spent years building your company and now are ready to move on to something else, whether launching a new business, taking advantage of another career opportunity or retiring. Whatever your plans, you want to get the return from your business that you’ve earned from all of the time and money you’ve put into it.

That means not only getting a good price, but also minimizing the tax hit on the proceeds. One option that can help you defer tax and perhaps even reduce it is an installment sale.

 

Tax Benefits

With an installment sale, you don’t receive a lump sum payment when the deal closes. Instead, you receive installment payments over a period of time, spreading the gain over a number of years.

This generally defers tax, because you pay most of the tax liability as you receive the payments. Usually, tax deferral is beneficial, but it could be especially beneficial if it would allow you to stay under the thresholds for triggering the 3.8% net investment income tax (NIIT) or the 20% long-term capital gains rate.

For 2018, taxpayers with modified adjusted gross income (MAGI) over $200,000 per year ($250,000 for married filing jointly and $125,000 for married filing separately) will owe NIIT on some or all of their investment income. And the 20% long-term capital gains rate kicks in when 2018 taxable income exceeds $425,800 for singles, $452,400 for heads of households and $479,000 for joint filers (half that for separate filers).

 

Other Benefits

An installment sale also might help you close a deal or get a better price for your business. For instance, an installment sale might appeal to a buyer that lacks sufficient cash to pay the price you’re looking for in a lump sum.

Or a buyer might be concerned about the ongoing success of your business without you at the helm or because of changing market or other economic factors. An installment sale that includes a contingent amount based on the business’s performance might be the solution.

 

Tax Risks

An installment sale isn’t without tax risk for sellers. For example, depreciation recapture must be reported as gain in the year of sale, no matter how much cash you receive. So you could owe tax that year without receiving enough cash proceeds from the sale to pay the tax. If depreciation recapture is an issue, be sure you have cash from another source to pay the tax.

It’s also important to keep in mind that, if tax rates increase, the overall tax could end up being more. With tax rates currently quite low historically, there might be a greater chance that they could rise in the future. Weigh this risk carefully against the potential benefits of an installment sale.

 

Pluses and Minuses

As you can see, installment sales have both pluses and minuses. To determine whether one is right for you and your business — and find out about other tax-smart options — please contact us.

Following the ABCs of Customer Assessment

ABCs of Customer Assessment

When a business is launched, its owners typically welcome every customer through the door with a sigh of relief. But after the company has established itself, those same owners might start looking at their buying constituency a little more critically.

If your business has reached this point, regularly assessing your customer base is indeed an important strategic planning activity. One way to approach it is to simply follow the ABCs.

Assign Profitability Levels

First, pick a time period — perhaps one, three or five years — and calculate the profitability level of each customer or group of customers based on sales numbers and both direct and indirect costs. (We can help you choose the ideal calculations and run the numbers.)

Once you’ve determined the profitability of each customer or group of customers, divide them into three groups:

  1. The A group consists of highly profitable customers whose business you’d like to expand.
  2. The B group comprises customers who aren’t extremely profitable, but still positively contribute to your bottom line.
  3. The C group includes those customers who are dragging down your profitability. These are the customers you can’t afford to keep.

 

Act Accordingly

With the A customers, your objective should be to grow your business relationship with them. Identify what motivates them to buy, so you can continue to meet their needs. Is it something specific about your products or services? Is it your customer service? Developing a good understanding of this group will help you not only build your relationship with these critical customers, but also target marketing efforts to attract other, similar ones.

Category B customers have value but, just by virtue of sitting in the middle, they can slide either way. There’s a good chance that, with the right mix of product and marketing resources, some of them can be turned into A customers. Determine which ones have the most in common with your best customers; then focus your marketing efforts on them and track the results.

When it comes to the C group, spend a nominal amount of time to see whether any of them might move up the ladder. It’s likely, though, that most of your C customers simply aren’t a good fit for your company. Fortunately, firing your least desirable customers won’t require much effort. Simply curtail your marketing and sales efforts, or stop them entirely, and most will wander off on their own.

 

Cut costs, Bring in More

The thought of purposefully losing customers may seem like a sure recipe for disaster. But doing so can help you cut fruitless costs and bring in more revenue from engaged buyers. Our firm can help you review the pertinent financial data and develop a customer strategy that builds your bottom line.

Petty Cash Controls Best Practices on Preventing Small Business Fraud

Petty Cash Controls Best Practices

Nowadays, the most convenient way to do business is through electronic transactions. This makes the business owners focus on this aspect. What they don’t realize is that they are losing insight in taking care of the day-to-day operation. It’s not all the time electronic transactions are applicable. There are small transactions in which paying through checks, debit cards, or credit cards is impractical. For instance, fees for parking, taxi fare, reimbursing an employee, or cost of photocopying.

Petty Cash is a small amount of cash on hand that is used for paying small expenses during day-to-day operations. It’s a misconception to think that this insignificant amount won’t affect your business. Do you realize how much it would take if you add up all these small expenses or the possibility of fraud acts being committed through these?

To prevent petty cash fraud, the following internal control procedures for petty cash should be in place:

Petty Cash Controls Best Practices

  1. There should be a segregation of duties in disbursing and approving the petty cash fund. It is important that the person who approves petty cash is not the petty cash custodian to avoid incompatible duties.
  2. Petty cash is strictly for business-related expenses.
  3. Proper documentation is needed. A Petty Cash Voucher (PCV) should be used for each payment signed by an authorized officer. The PCV should be pre-numbered and in chronological order.
    • PCV should include the following:
      • Name of payee
      • Date of disbursement
      • Purpose of disbursement
      • Amount of disbursement
      • Signature of the payee, approving officer, and the custodian
      • Receipts of the expense
  4. All transactions should be recorded in the petty cash journal at the time it has occurred. This would facilitate reconciliation and would also enable the custodian to see the outstanding balance of cash on hand right after each payment. These transactions should be accompanied by supporting documents.
  5. Keep it in a locked petty cash box.
  6. Reconcile the petty cash fund by examining the amount of cash and receipts with the corresponding PCV. The total of these two should match the established petty cash fund recorded in the books. In case discrepancies occur, perform a thorough investigation to account for them for instance, looking for missing receipts and undocumented transactions. If a fraudulent act is confirmed, seek the help of your independent bookkeeper help to address this issue and strengthen your internal control.

If you need help in handling your petty cash, as well as getting powerful financial insights, help in achieving diligent tax compliance, and help in achieving healthy cash flow, contact us today at admin@fas-accountingsolutions.com or 713-855-8035.

Petty Cash Controls Best Practices

4 Pillars of A Solid Sales Process

Solid Sales Process

Is your sales process getting off-balance? Sometimes it can be hard to tell. Fluctuations in the economy, changes in customer interest and dips in demand may cause slowdowns that are beyond your control. But if the numbers keep dropping and you’re not sure why, you may need to double-check the structural soundness of how you sell your company’s products or services. Here are four pillars of a solid sales process:

Synergy with Marketing.

The sales staff can’t go it alone. Your marketing department has a responsibility to provide some assistance and direction in generating leads. You may have a long-standing profile of the ideal candidates for your products or services, but is it outdated? Could it use some tweaks? Creating a broader universe of customers who are likely to benefit from your offerings will add focus and opportunity to your salespeople’s efforts.

Active Responsiveness.

A sense of urgency is crucial to the sales process. Whether a prospect responded to some form of advertisement or is being targeted for cold calling, making timely and appropriate contact will ease the way for the salesperson to get through to the decision maker. If selling your product or service requires a face-to-face presence, making and keeping of appointments is critical. Gather data on how quickly your salespeople are following up on leads and make improvements as necessary.

Clear Documentation.

There will always be some degree of recordkeeping associated with sales. Your salespeople will interact with many potential customers and must keep track of what was said or promised at each part of the sales cycle. Fortunately, today’s technology (typically in the form of a customer relationship system) can help streamline this activity. Make sure yours is up to date and properly used. Effective performers spend most of their time calling or meeting with customers. They carry out the administrative parts of their jobs either early or late in the day and don’t use paperwork as an excuse to avoid actively selling.

Consistency.

A process is defined as a series of related steps that lead to a specific end. Lagging sales are often the result of deficiencies in steps of the sales process. If your business is struggling to maintain or increase its numbers, it may be time to audit your sales process to identify irregularities. You might also hold a sales staff retreat to get everyone back on the same page. Contact us to discuss these and other ideas on reinforcing your sales process.

Tax Free Fringe Benefits Help Small Businesses and Their Employee

Tax-Free Fringe Benefits

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

 

Insurance

Businesses can provide their employees with various types of insurance on a tax-free basis. Here are some of the most common:

Health insurance.

If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages but may be deductible on a limited basis as an itemized deduction.

Disability Insurance.

Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or other contributions to the plan) generally aren’t deductible by them or excludable from their income. However, they can make pretax contributions to a cafeteria plan for disability benefits, which are excludable from their income.

Long-term Care Insurance.

Your premium payments aren’t taxable to employees. However, long-term care insurance can’t be provided through a cafeteria plan.

Life Insurance.

Your employees generally can exclude from gross income premiums you pay on up to $50,000 of qualified group term life insurance coverage. Premiums you pay for qualified coverage exceeding $50,000 are taxable to the extent they exceed the employee’s coverage contributions.

 

Other Types of Tax-Advantaged Benefits

Insurance isn’t the only type of tax-free benefit you can provide — but the tax treatment of certain benefits has changed under the Tax Cuts and Jobs Act:

Dependent Care Assistance.

You can provide employees with tax-free dependent care assistance up to $5,000 for 2018 though a dependent care Flexible Spending Account (FSA), also known as a Dependent Care Assistance Program (DCAP).

Adoption Assistance.

For employees who’re adopting children, you can offer an employee adoption assistance program. Employees can exclude from their taxable income up to $13,810 of adoption benefits in 2018.

Educational Assistance.

You can help employees on a tax-free basis through educational assistance plans (up to $5,250 per year), job-related educational assistance and qualified scholarships.

Moving Expense Reimbursement.

Before the TCJA, if you reimbursed employees for qualifying job-related moving expenses, the reimbursement could be excluded from the employee’s income. The TCJA suspends this break for 2018 through 2025. However, such reimbursements may still be deductible by your business.

Transportation Benefits.

Qualified employee transportation fringe benefits, such as parking allowances, mass transit passes and vanpooling, are tax-free to recipient employees. However, the TCJA suspends through 2025 the business deduction for providing such benefits. It also suspends the tax-free benefit of up to $20 a month for bicycle commuting.

 

Varying Tax Treatment

As you can see, the tax treatment of fringe benefits varies. Contact us for more information.

How to Master Food and Beverage Cost Control

Food Beverage Cost Control

Exceptional food, amiable service, and a great ambiance make the perfect restaurant. But to be successful, it needs to be profitable.

A restaurant business usually spends a lot on food and beverage and labor to fuel up its operations. Furthermore, a restaurant business also incurs unnecessary costs due to mismanagement. Having these expenses in check is necessary to keep extra costs at bay. To achieve this, you need to have control over the costs that make up your business. You should be able to identify possible areas of improvement and provide solutions as a continuing commitment.

Some of the identified unique situations in the food business industry are as follows:

  • staff eating unknowingly grab and go food items in the kitchen
  • accidentally contaminated stocks
  • spilled food due to accident or rejected food from customers

All of which can cut back on your bottom line by a huge amount if left uncorrected.

So here are some strategies you can adopt to improve your bottom line.

 

  1. Conducting Food Waste Audit

Food Waste Audit Food and Beverage Cost Control

Determining the root cause of the problem is the start of finding solutions to undertake. Business owners should determine what causes food waste and how much it is cutting off from the bottom line. Monitoring the flow of waste is a continuous activity that should be done on a day in which your operations aren’t the busiest. Hiring someone solely for the job is costly so it’s best to request your staffs to cooperate as the most practical approach.

To start off, request your staffs to record where waste is coming from. This activity typically requires mindful observation. A trend of missteps and mismanagement is identified as a result of which will be the focus of improvement.

 

  1. Use a POS System to Track Inventory and More

Use POS System Food and Beverage Cost Control

Estimating the cost of wasted food would be quite difficult since the food menu consists of small amounts of ingredients such as spices. In order to save time tabulating information on spreadsheets, using a Point of Sale System is recommended. All the information needed to price each menu item is accumulated in this system. From here on it’s much easier to estimate the cost of wastage.

 

  1. Define an Inventory Intake Procedure

Inventory Procedure Food and Beverage Cost Control

Proper handling of inventory when receiving is necessary to avoid prematurely spoiling raw ingredients and impairing supplies. Staffs must be trained on how to receive and store stocks properly according to your standard set of procedures. The price of your menu items is affected if you have damaged goods due to mishandling. Therefore, make sure that the quantity, quality, and the shelf life of stocks is right to avoid losses.

 

  1. Proper Pouring Technique and the Right Glassware

Pouring Technique Food and Beverage Cost Control

There is a right glassware for different kinds of drinks. It is important to serve drinks on the right glass to preserve its quality and maintain its aromas. Proper technique in pouring is necessary to avoid spilling the beverage. Also, it is to ensure that every glass has the consistent amount of beverage. Inconsistent amount leads to underpouring or overpouring the beverage than necessary. Overpouring means that you are selling more than you should, hence you are losing profit. Whereas underpouring means selling less than you should, hence you had been unfair to your customer. Charging your customers too much for what they received puts your business in a bad position.

 

As a business owner, you are responsible for the cost of doing your business. It is your task to set standards, proper procedures and appropriate prices for your products and services.

If you need help in controlling the costs of your restaurant business, as well as help in getting powerful financial insights, help in achieving diligent tax compliance, and help in achieving a healthy cash flow, contact us today at admin@fas-accountingsolutions.com or 832-437-0385.

Contact FAS Bookkeeping and Tax Services