I got to thinking about a framework that would allow a business to take advantage of outsourced accounting and control services.
What would the framework look like?
Here are three essentials that any outsourcing accounting firm must provide.
1. ‘Subject Matter Expertise’ in industry sectors that are needed by the client in Accounting, Taxation, Payroll, Treasury, Planning and Analysis.
2. ‘Best Practice Processes' in software, document control and comport hardware. This typically includes products and services from such companies as Intuit QuickBooks Accounting and Taxation, Microsoft Office, Dell Computers. PC House Call and other task specific software for business expense reimbursement, inventory tracking and planning.
3 ‘Scaleable Resource Capability' with MBA, CPA and Degreed staff levels that current in professional development programs.
The Stenson Group combines strategies in all these areas.
Sunday, August 7, 2011
Sunday, May 15, 2011
Why you might never have considered a Fractional CFO.
You might never think that the specific Financial or Office work you need done is offered by a Fractional CFO Service or if the service is provided it is too expensive and never timely. None of this is correct.
The Fractional CFO Service can provide as little as a couple of hours of advisory each month to monthly clerical support for payment of bills, calculation compensation and the preparation of valuable financial and cash management reports.
The single most import fact is that you should always expect to receive accurate, timely, professional outputs that are available and and specifc to your business.....at a fraction of the cost of hiring.
The Fractional CFO Service can provide as little as a couple of hours of advisory each month to monthly clerical support for payment of bills, calculation compensation and the preparation of valuable financial and cash management reports.
The single most import fact is that you should always expect to receive accurate, timely, professional outputs that are available and and specifc to your business.....at a fraction of the cost of hiring.
Monday, August 23, 2010
Your business must have a detailed forecast of cash flow.
Whether your business is a pre-revenue startup or a Fortune 100 company, one of the most important skills necessary to become a high-performing manager is managing cash flow, according to Sam Thacker, a partner in Austin-based Business Finance Solutions.
Unlike a Fortune 100 company chief financial officer, however, the average entrepreneur doesn’t have a staff dedicated to managing cash.
Entrepreneurs need to know a few significant rules about cash flow management.
Philip Campbell, a Round Rock-based certified public accountant has written a book about managing cash flow. “Never Run Out of Cash,” www.neverrunoutofcash.com provides easy to understand principles that new and experienced entrepreneurs can learn from.
Campbell’s 10 rules for managing cash:
• Never run out of cash. Running out of cash is the definition of failure in business, so do whatever it takes to never run dry.
• Cash is king. No cash equals no business.
• Know your cash balance right now. As a former bank commercial loan officer, I would often ask how much cash a prospective business has right now. If my prospect could give me a good answer, they were far more likely to get a bank loan. Why? Because it meant that business owner was updating himself or herself daily on one of the most important pieces of information in his business. It is a sign of a well-run business.
• Do today’s work today. Knowing what your cash balance daily means you to make adjustments to your cash flow forecast and your accounting system as they occur. Don’t wait until tomorrow.
• Either do your work or have someone else do it for you. If you don’t have time to keep your cash balance up to date, then delegate the duty to someone who can always keep it accurately.
• Don’t manage from the bank balance. It is easy to look at your online cash balance and believe that is the amount of cash you have to spend. Your bank balance and your cash balance are not the same.
• Know what you expect the cash balance to be six months from now. Campbell recommends monthly forecasting. An alternative, is to adopt a higher degree of scrutiny on cash with a forecasts of cash flow on a 13-week rolling forecast. This requires a business owner know what his or her anticipated cash should be based on a weekly forecast. Thirteen weeks is about as far out as you need to forecast for day-to-day purposes. The further out from the current week, the less accurate your forecast is going to be. The forecast is updated weekly, balancing the current week to the penny and making adjustments four weeks out as necessary.
• Problems with cash flow don’t just happen. Campbell is dead on here. There is never a reason for a business to realize on a Monday that they aren’t going to have enough cash for a Friday payroll. Businesses should be able to forecast accurately enough 13 weeks out. For business planning purposes, six or 12 months make sense.
• You absolutely, positively must have cash flow projections. This should be No. 1 on the list, Campbell says. “It’s impossible to run your business without them,” he adds.
• Eliminate your cash flow worries so you are free to do what you do best — take care of customers and make more money.
Campbell spends the rest of his 189-page book explaining each rule in lay terms and providing real-world examples.
Many people think managing cash flow is hard, but really it just takes a little education and regular consistent forecasting.
With a forecast of cash flow in place, better plans can be developed to survive and even thrive in this economy.
Unlike a Fortune 100 company chief financial officer, however, the average entrepreneur doesn’t have a staff dedicated to managing cash.
Entrepreneurs need to know a few significant rules about cash flow management.
Philip Campbell, a Round Rock-based certified public accountant has written a book about managing cash flow. “Never Run Out of Cash,” www.neverrunoutofcash.com provides easy to understand principles that new and experienced entrepreneurs can learn from.
Campbell’s 10 rules for managing cash:
• Never run out of cash. Running out of cash is the definition of failure in business, so do whatever it takes to never run dry.
• Cash is king. No cash equals no business.
• Know your cash balance right now. As a former bank commercial loan officer, I would often ask how much cash a prospective business has right now. If my prospect could give me a good answer, they were far more likely to get a bank loan. Why? Because it meant that business owner was updating himself or herself daily on one of the most important pieces of information in his business. It is a sign of a well-run business.
• Do today’s work today. Knowing what your cash balance daily means you to make adjustments to your cash flow forecast and your accounting system as they occur. Don’t wait until tomorrow.
• Either do your work or have someone else do it for you. If you don’t have time to keep your cash balance up to date, then delegate the duty to someone who can always keep it accurately.
• Don’t manage from the bank balance. It is easy to look at your online cash balance and believe that is the amount of cash you have to spend. Your bank balance and your cash balance are not the same.
• Know what you expect the cash balance to be six months from now. Campbell recommends monthly forecasting. An alternative, is to adopt a higher degree of scrutiny on cash with a forecasts of cash flow on a 13-week rolling forecast. This requires a business owner know what his or her anticipated cash should be based on a weekly forecast. Thirteen weeks is about as far out as you need to forecast for day-to-day purposes. The further out from the current week, the less accurate your forecast is going to be. The forecast is updated weekly, balancing the current week to the penny and making adjustments four weeks out as necessary.
• Problems with cash flow don’t just happen. Campbell is dead on here. There is never a reason for a business to realize on a Monday that they aren’t going to have enough cash for a Friday payroll. Businesses should be able to forecast accurately enough 13 weeks out. For business planning purposes, six or 12 months make sense.
• You absolutely, positively must have cash flow projections. This should be No. 1 on the list, Campbell says. “It’s impossible to run your business without them,” he adds.
• Eliminate your cash flow worries so you are free to do what you do best — take care of customers and make more money.
Campbell spends the rest of his 189-page book explaining each rule in lay terms and providing real-world examples.
Many people think managing cash flow is hard, but really it just takes a little education and regular consistent forecasting.
With a forecast of cash flow in place, better plans can be developed to survive and even thrive in this economy.
Sunday, August 1, 2010
Wall Street – Don’t Count on Federal Reform
“Gain the upper hand by making smart decisions” says Neil Weinberg in the August 8, 2010 issue of Forbes.
Weinberg suggests the following:
Ignore the Chatter
To make money over the long haul stop trying to outguess the market and focus on setting up a mix of stocks, bonds and other assets that it makes sense for you to own. Then stick to it!
Invest in Indexes
Wall Street has built a large industry of managed funds, futures, and options and leveraged products that in aggregate can’t do any better than market returns. Don’t get sucked-in. Buy the whole market, via a cheap and tax efficient index fund or exchange-traded fund.
Find a Fiduciary
Make sure that the person that is giving you advice is putting your interest ahead of their own. They may tout themselves as advisors but most are salesman whose vague legal duty is merely to sell you products that are “suitable”.
A fiduciary by contrast must put your interests first. Registered retirement advisors are fiduciaries. You can also access one by switching from a commission based account to a fee account at a traditional securities firm. Get the relationship spelled out in writing – and negotiate the fees.
Admit Mistakes
Many of us have a hard time doing this. Instead capitalize on your dogs by selling them and using your losses to offset up to $3,000 of ordinary income and an unlimited amount of capital gains.
Less Tax Liability
Taxes are probably second only to asset allocation in determining in what you end up with.
Put tax-inefficient investments like bond funds and real estate investment trusts, into retirement accounts. Their income doesn’t get taxed until it is taken out.
Stocks and equity funds are best for taxable accounts where, as noted above, loses can be used to minimize, if not eliminate gains on your winners. You can also use appreciated stock as gifts to low tax- bracket relatives and bequests.
Weinberg suggests the following:
Ignore the Chatter
To make money over the long haul stop trying to outguess the market and focus on setting up a mix of stocks, bonds and other assets that it makes sense for you to own. Then stick to it!
Invest in Indexes
Wall Street has built a large industry of managed funds, futures, and options and leveraged products that in aggregate can’t do any better than market returns. Don’t get sucked-in. Buy the whole market, via a cheap and tax efficient index fund or exchange-traded fund.
Find a Fiduciary
Make sure that the person that is giving you advice is putting your interest ahead of their own. They may tout themselves as advisors but most are salesman whose vague legal duty is merely to sell you products that are “suitable”.
A fiduciary by contrast must put your interests first. Registered retirement advisors are fiduciaries. You can also access one by switching from a commission based account to a fee account at a traditional securities firm. Get the relationship spelled out in writing – and negotiate the fees.
Admit Mistakes
Many of us have a hard time doing this. Instead capitalize on your dogs by selling them and using your losses to offset up to $3,000 of ordinary income and an unlimited amount of capital gains.
Less Tax Liability
Taxes are probably second only to asset allocation in determining in what you end up with.
Put tax-inefficient investments like bond funds and real estate investment trusts, into retirement accounts. Their income doesn’t get taxed until it is taken out.
Stocks and equity funds are best for taxable accounts where, as noted above, loses can be used to minimize, if not eliminate gains on your winners. You can also use appreciated stock as gifts to low tax- bracket relatives and bequests.
Sunday, July 18, 2010
An Amended Tax Return – Did you claim every tax?
Did you claim every tax break that you were entitled to in 2009? There were a lot of tax breaks. It was easy to miss a few according to Mary Beth Franklin in this month’s issue of Kiplinger. Here is the list.
Making Work Pay credit.
This is a 6.2% payroll tax worth up to $400 for individuals and $800 for married couples. There are phase out rules for those with high income. You must file Schedule M to claim the credit and have your tax adjusted. Check your 2009 tax return and if you didn’t claim the credit but are eligible for it, amend your return.
Breaks for Non-itemizers.
You needed to file a new form - Schedule L. Taxpayers who did not itemize their deductions could claim an enhanced standard deduction for net disaster relief, sales or excise tax paid on the purchase of a new car purchased after February 16, 2009 and a property-tax deduction of up to $500 ($1,000 for married couples filing jointly). If you missed these tax breaks, file an amended return.
Home Buyer’s credit.
If you bought a house this year and qualify for either the $8,000 first-time home buyer credit or the $6,800 credit for longtime owners who bought another principal residence, you don’t have to wait to file your 2010 tax return as long as you signed a binding contract before July 1. You will need to file Form 5405 and include a copy of your settlement sheet when you file your amended return.
Education Breaks.
If you paid college education tuition and related expenses in 2009, did you pick the best tax break for your situation? For most people the American Opportunity Credit, worth $2,500 per student was the logical choice. But if you had a freshman or sophomore who attended school in one of seven midwestern states that were declared federal disaster areas, you might be eligible for an enhanced Hope Credit up to $3,000.
How to file an amended return.
You have up to 3 years from the date of your return to file an amended return, which means April 15, 2012. Do it now and get your money as soon as possible. Go to irs.gov and download Form 1040X. Explain why you need to amend your return. You don’t have to redo your entire return. Just make the necessary changes and adjust your tax liability accordingly.
Making Work Pay credit.
This is a 6.2% payroll tax worth up to $400 for individuals and $800 for married couples. There are phase out rules for those with high income. You must file Schedule M to claim the credit and have your tax adjusted. Check your 2009 tax return and if you didn’t claim the credit but are eligible for it, amend your return.
Breaks for Non-itemizers.
You needed to file a new form - Schedule L. Taxpayers who did not itemize their deductions could claim an enhanced standard deduction for net disaster relief, sales or excise tax paid on the purchase of a new car purchased after February 16, 2009 and a property-tax deduction of up to $500 ($1,000 for married couples filing jointly). If you missed these tax breaks, file an amended return.
Home Buyer’s credit.
If you bought a house this year and qualify for either the $8,000 first-time home buyer credit or the $6,800 credit for longtime owners who bought another principal residence, you don’t have to wait to file your 2010 tax return as long as you signed a binding contract before July 1. You will need to file Form 5405 and include a copy of your settlement sheet when you file your amended return.
Education Breaks.
If you paid college education tuition and related expenses in 2009, did you pick the best tax break for your situation? For most people the American Opportunity Credit, worth $2,500 per student was the logical choice. But if you had a freshman or sophomore who attended school in one of seven midwestern states that were declared federal disaster areas, you might be eligible for an enhanced Hope Credit up to $3,000.
How to file an amended return.
You have up to 3 years from the date of your return to file an amended return, which means April 15, 2012. Do it now and get your money as soon as possible. Go to irs.gov and download Form 1040X. Explain why you need to amend your return. You don’t have to redo your entire return. Just make the necessary changes and adjust your tax liability accordingly.
Sunday, March 21, 2010
If you and your business have survived this far THIS IS WHAT YOU MUST DO.
It’s about intensity and customer traction in a very short time period!
Quickly build a small war-chest of funds/people resources without hurting your base business and use this war-chest to fund a plan to sell:
1. Existing products and services to new customer groups or,
2. New products and services to existing customers.
Here are the project rules.
1. Individual project budgets must not exceed $5,000 in total including staff time,
2. take no more than 6 weeks to complete.
3. The project must require at least 75% of the project time in face-to-face contact with the targeted customers.
4. Have a project objective that is measurable. The objective has to be measured in terms of a NUMBER OF CUSTOMER ACCEPTANCES.
5. Make sure the steps to achieve the objective are broken down into daily deliverables that are very measurable and then measure them.
6. Don’t get started too soon. Wait until you have a detailed plan that is really understood by everybody and you get the sense that there is a high degree of confidence in meeting the objective.
7. Get a daily report with a RED or GREEN sticker depending on whether the daily and project miles stones are met or not. If RED, stop the project until a corrective action is agreed upon and implemented.
8. Make sure that there is a 6 week intensive concentrated effort from yourself and other those on the team.
9. Finally, get a partner to share the project costs. This could be a vender, a service provider, another business, a non-profit even an employee!
After 6 weeks or before stop the project and decide how many immediate paying customers you have and how committed they are to doing repeat business. If you have no paying customers stop the project and move on.
It is about a measurable customer based project objective, intensity, short cycle times, very detailed daily plans, critical tracking of progress daily, honest evaluation and immediate correcting actions.
Quickly build a small war-chest of funds/people resources without hurting your base business and use this war-chest to fund a plan to sell:
1. Existing products and services to new customer groups or,
2. New products and services to existing customers.
Here are the project rules.
1. Individual project budgets must not exceed $5,000 in total including staff time,
2. take no more than 6 weeks to complete.
3. The project must require at least 75% of the project time in face-to-face contact with the targeted customers.
4. Have a project objective that is measurable. The objective has to be measured in terms of a NUMBER OF CUSTOMER ACCEPTANCES.
5. Make sure the steps to achieve the objective are broken down into daily deliverables that are very measurable and then measure them.
6. Don’t get started too soon. Wait until you have a detailed plan that is really understood by everybody and you get the sense that there is a high degree of confidence in meeting the objective.
7. Get a daily report with a RED or GREEN sticker depending on whether the daily and project miles stones are met or not. If RED, stop the project until a corrective action is agreed upon and implemented.
8. Make sure that there is a 6 week intensive concentrated effort from yourself and other those on the team.
9. Finally, get a partner to share the project costs. This could be a vender, a service provider, another business, a non-profit even an employee!
After 6 weeks or before stop the project and decide how many immediate paying customers you have and how committed they are to doing repeat business. If you have no paying customers stop the project and move on.
It is about a measurable customer based project objective, intensity, short cycle times, very detailed daily plans, critical tracking of progress daily, honest evaluation and immediate correcting actions.
Wednesday, February 17, 2010
Tenants can find deals on office leases….but don’t leave it too late in Dallas!
Dallas high office vacancy rate which routinely tops 20% is now at 26% and has kept lease rates from rising. In fact they are down 11% in the last 12 months. This is one of the largest vacancy rates in a central business area of any large city in the US. Average effective lease rates in Dallas at $19.94 per-square-foot are the lowest in the 12 largest US cities.
This presents a tremendous opportunity for tenants to save.
Most economists predict Dallas will be amongst the first to rebound from the recession because of the North Texas’ growing population, low business costs and better-than-average growth outlook.
If tenants wait a year or more, it’s likely that vacancy rates will be headed back down, leaving tenants with fewer options and less leverage.
Tenants need to move relatively quickly.
Some tenants are signing short-term leases while waiting to see what happens with the economy while others are locking in low rates on long-term deals.
Landlords are still hungry in this market. There is still a lot of downsizing going on and landlords still have to be pretty aggressive to attract and retain tenants because the deal volume is down.
Naturally, landlords in buildings that have experienced a substantial increase in vacancy are offering deep discounts.
Retain a commercial estate broker to obtain comparative property lease rates and investigate ‘blend and extend” arrangements to receive the lowest possible rates. Also, don’t forget to tap into leasehold improvement incentives that can be used as to pay rents if not used.
This presents a tremendous opportunity for tenants to save.
Most economists predict Dallas will be amongst the first to rebound from the recession because of the North Texas’ growing population, low business costs and better-than-average growth outlook.
If tenants wait a year or more, it’s likely that vacancy rates will be headed back down, leaving tenants with fewer options and less leverage.
Tenants need to move relatively quickly.
Some tenants are signing short-term leases while waiting to see what happens with the economy while others are locking in low rates on long-term deals.
Landlords are still hungry in this market. There is still a lot of downsizing going on and landlords still have to be pretty aggressive to attract and retain tenants because the deal volume is down.
Naturally, landlords in buildings that have experienced a substantial increase in vacancy are offering deep discounts.
Retain a commercial estate broker to obtain comparative property lease rates and investigate ‘blend and extend” arrangements to receive the lowest possible rates. Also, don’t forget to tap into leasehold improvement incentives that can be used as to pay rents if not used.
Thursday, January 14, 2010
Wednesday, December 16, 2009
Is your business presently strapped for cash to pay existing debt, credit cards, etc? Is this a temporary problem?
If so, you may want to consider an ARC loan. This is run under the auspices of the US Small Business Administration (SBA). Signed in February 2009 the program (America’s Recovery Capital) allows small businesses to borrow up to $35,000 from an approved SBA lending bank. You have until September 2010 to apply for this loan or until the allocated funds run out (seems unlikely right now). The loan proceeds can be drawn down over a six month period from approval and be used to make payments on existing debt, credit cards, leases etc . Unfortunately proceeds cannot be used directly for operating expenses but by the nature of the ARC facility this does free up cash flow for such expenses.
After the six months the borrower has a twelve month grace period before starting repayment of the ARC loan over five years. SBA pays the monthly interest on the loan and also guarantees the whole loan. So in most cases no collateral from the borrower is required.
Now for the more complicated bits.
To qualify you must demonstrate to the lending bank that you have a viable ongoing business. Technically you must have been in business for at least two years and have shown a positive cash flow in at least one of the past two years. In addition you must also provide a projection that you are able to meet all your loan repayments and operating expenes for the next two years. Also for the not so good news, many banks are not that enthusiastic about ARC loans loans and you may have to shop around. While the ARC loan is fully guaranteed by the SBA, a bank still has to evaluate and approve the loan. Naturally banks are reluctant to approve the loan where they have doubts on a borrower’s ability to repay since they could be criticized for lower credit standards. Also by their nature the loans are time consuming.
The best way forward.
This is to work with your existing bank and get approval from them if possible. A bank has little incentive to work with an ARC loan applicant if there is no other relationship. Also try to make it as easy as possible for the bank’s credit evaluation. Along with an ARC loan application form, submit full and understandable financial information. Don’t be too optimistic on your forecast for the two years projection since the bank would probably not believe them. In any case banks don’t like surprises. Also a paragraph or two on your current situation and future plans would be very helpful.
With President Obama’s new emphasis on increased lending by banks to smaller companies your chances of getting this loan should be greatly improved.
After the six months the borrower has a twelve month grace period before starting repayment of the ARC loan over five years. SBA pays the monthly interest on the loan and also guarantees the whole loan. So in most cases no collateral from the borrower is required.
Now for the more complicated bits.
To qualify you must demonstrate to the lending bank that you have a viable ongoing business. Technically you must have been in business for at least two years and have shown a positive cash flow in at least one of the past two years. In addition you must also provide a projection that you are able to meet all your loan repayments and operating expenes for the next two years. Also for the not so good news, many banks are not that enthusiastic about ARC loans loans and you may have to shop around. While the ARC loan is fully guaranteed by the SBA, a bank still has to evaluate and approve the loan. Naturally banks are reluctant to approve the loan where they have doubts on a borrower’s ability to repay since they could be criticized for lower credit standards. Also by their nature the loans are time consuming.
The best way forward.
This is to work with your existing bank and get approval from them if possible. A bank has little incentive to work with an ARC loan applicant if there is no other relationship. Also try to make it as easy as possible for the bank’s credit evaluation. Along with an ARC loan application form, submit full and understandable financial information. Don’t be too optimistic on your forecast for the two years projection since the bank would probably not believe them. In any case banks don’t like surprises. Also a paragraph or two on your current situation and future plans would be very helpful.
With President Obama’s new emphasis on increased lending by banks to smaller companies your chances of getting this loan should be greatly improved.
Wednesday, December 9, 2009
Tax-free retirement just got a little easier - ROTH conversions
Rules on Income Limts.
The income-eligibility limit on Roth conversions disappear on January 1st 2010 for high earners. The income level of $100,000 will become nonexistent. This is a prime opportunity to convert money into the tax-free Roths for high-earners. Income eligibility limits on contributions remain in effect.
You don’t have to wait until 2010.
For wager earners that make less than $100,000 adjusted gross income, you can actually convert now. With the market being down this might be an excellent time to convert since you will be paying less income tax on the lower account value. By waiting until 2010, you may be having to pay a higher tax bill with market appreciation. If you convert too soon, you can always convert back to a traditional IRA in what is known as a recharacterization by October 15th of the year you convert.
2010 is the year but not the year the tax is due.
While 2010 is the actual year that you will be able to convert, the income to be claimed can be deferred until 2011 and 2012. The IRS has granted you the option to claim 50% of the conversion amount as income in 2011 and the remaining 50% in 2012. Keep in mind that this is only in 2010. After 2010 the taxes will all be paid in full the following year going forward.
If you elect to pay the tax over the two year period, keep in mind that the tax rate is determined for that year only. Example, in 2011 you will pay the tax based on your tax bracket for that year. If your income were to somehow sky rocket in 2012, then you will be paying more in taxes that year for the conversion.
Convert Traditional IRAs and Old 401(k)s.
The 2010 conversion is not limited to just your traditional IRA. If you have any old 401(k)s or any other retirement plans from a previous employer, those will also be allowed to convert as well. Might be a good idea to convert them all.
The income-eligibility limit on Roth conversions disappear on January 1st 2010 for high earners. The income level of $100,000 will become nonexistent. This is a prime opportunity to convert money into the tax-free Roths for high-earners. Income eligibility limits on contributions remain in effect.
You don’t have to wait until 2010.
For wager earners that make less than $100,000 adjusted gross income, you can actually convert now. With the market being down this might be an excellent time to convert since you will be paying less income tax on the lower account value. By waiting until 2010, you may be having to pay a higher tax bill with market appreciation. If you convert too soon, you can always convert back to a traditional IRA in what is known as a recharacterization by October 15th of the year you convert.
2010 is the year but not the year the tax is due.
While 2010 is the actual year that you will be able to convert, the income to be claimed can be deferred until 2011 and 2012. The IRS has granted you the option to claim 50% of the conversion amount as income in 2011 and the remaining 50% in 2012. Keep in mind that this is only in 2010. After 2010 the taxes will all be paid in full the following year going forward.
If you elect to pay the tax over the two year period, keep in mind that the tax rate is determined for that year only. Example, in 2011 you will pay the tax based on your tax bracket for that year. If your income were to somehow sky rocket in 2012, then you will be paying more in taxes that year for the conversion.
Convert Traditional IRAs and Old 401(k)s.
The 2010 conversion is not limited to just your traditional IRA. If you have any old 401(k)s or any other retirement plans from a previous employer, those will also be allowed to convert as well. Might be a good idea to convert them all.
Tuesday, November 24, 2009
Turn business loss into cash…but hurry!
What changed?
The new Stimulus Bill legislation that was signed into law on November 6, 2009 allows businesses of all sizes to carry back losses in 2008 or 2009 for five years. Previously the carry back provision was restricted to losses in 2008 and corporations with annual revenues of $15 million or less.
Congress expanded the ability for businesses to apply net operating losses (NOLs) against taxes paid on profits during the previous five years. Normally business can carry back net operating losses for only two years.
The change is a good move by the Federal Government. However, it comes too late in the 2008 tax year to be of the greatest help unless some miracle of timing is achieved on all sides.
Businesses that have lost money in the past couple of years but were profitable in previous years have the most to gain.
Retailers, manufacturers and homebuilders have been tagged as amongst those that will find this change particularly useful.
Retailers, Manufacturers and Homebuilders.
Retailers need cash to finance inventory for the Holiday Season otherwise that are forced to close stores or even go out of business. Unfortunately, most small retailers have already paid and taken delivery of the Holiday Season inventory. However, they may be some retailers where a miracle of timing will afford them to get a refund to pay for additional 2009 inventories.
Most manufacturers were too large to qualify for the Stimulus Bill’s carryback provision. Now they will qualify for the break, which is said to be urgently needed. “More than 20% of small business and medium sized National Association of Manufacturing (NAM) members reported NOLs in 2008 and we expect that number to double in 2009” says an official at NAM.
Homebuilders could generate a flurry of land sales before the end of the year to allow them to sell land in a market where housing prices have not recovered and get a tax refund on the loss. They can then use the money to build on land they own where housing is on the upswing. They must move fast!
How it works.
Businesses that use the provision would first apply current losses to profits made five years ago. They are allowed to offset only 50% of taxable income for that year. Any remaining losses would then be applied to profits made four years ago then the three years and so on. Losses carried over to these years can offset 100% of taxable income. See IRS Form 1139 for corporations and IRS Form 1045 for individuals, trusts and estates.
The new Stimulus Bill legislation that was signed into law on November 6, 2009 allows businesses of all sizes to carry back losses in 2008 or 2009 for five years. Previously the carry back provision was restricted to losses in 2008 and corporations with annual revenues of $15 million or less.
Congress expanded the ability for businesses to apply net operating losses (NOLs) against taxes paid on profits during the previous five years. Normally business can carry back net operating losses for only two years.
The change is a good move by the Federal Government. However, it comes too late in the 2008 tax year to be of the greatest help unless some miracle of timing is achieved on all sides.
Businesses that have lost money in the past couple of years but were profitable in previous years have the most to gain.
Retailers, manufacturers and homebuilders have been tagged as amongst those that will find this change particularly useful.
Retailers, Manufacturers and Homebuilders.
Retailers need cash to finance inventory for the Holiday Season otherwise that are forced to close stores or even go out of business. Unfortunately, most small retailers have already paid and taken delivery of the Holiday Season inventory. However, they may be some retailers where a miracle of timing will afford them to get a refund to pay for additional 2009 inventories.
Most manufacturers were too large to qualify for the Stimulus Bill’s carryback provision. Now they will qualify for the break, which is said to be urgently needed. “More than 20% of small business and medium sized National Association of Manufacturing (NAM) members reported NOLs in 2008 and we expect that number to double in 2009” says an official at NAM.
Homebuilders could generate a flurry of land sales before the end of the year to allow them to sell land in a market where housing prices have not recovered and get a tax refund on the loss. They can then use the money to build on land they own where housing is on the upswing. They must move fast!
How it works.
Businesses that use the provision would first apply current losses to profits made five years ago. They are allowed to offset only 50% of taxable income for that year. Any remaining losses would then be applied to profits made four years ago then the three years and so on. Losses carried over to these years can offset 100% of taxable income. See IRS Form 1139 for corporations and IRS Form 1045 for individuals, trusts and estates.
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