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Archives for December 2018

Why a big tax refund is bad business

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Most people celebrate a big tax refund. And why not? It’s the only time of year we find the government giving us money rather than the opposite.

But a sizeable refund isn’t necessarily a good thing. It means you haven’t been putting that money to good use over the last 12 months. Whether you’re a business owner or comfortably ensconced in a corporate job, you have tons of options to make that money work a lot harder for you. Consider these facts:

You’re investing your money at 0% return. Know the term “ROI”? Trust us, zero isn’t a good one. And not only are you not making any money. With average inflation hovering around 2-3% the past decade, you’re actually losing money when you park it with the government.

You’re not making payments on your business line of credit. If you’re going the interest-only route, instead of overpaying the government you could be paying back the bank. With rates around prime +1.75%, this one’s really a money-losing proposition.

You may owe state tax next year. If you overpaid on your federal income taxes and itemized your deductions, it’s likely you’ll get stuck paying state tax on your federal refund the following year. If you find form 1099-G in your mail, that’s exactly what happened.

You’re not investing in your growth. The cash you “lent” the government last year could’ve funded a variety of revenue-driving initiatives. Think upgraded technology like marketing automation, professional development for your staff, or an investment in SEO to raise your profile in a new vertical.

You’re not funding your future. Tucking money into a 401(k) or other retirement savings vehicle is never a bad idea. And unless it’s a Roth, you gain tax benefits, too.

Start thinking now about better ways to invest a few hundred bucks a month or more. Next year, when everyone’s crowing about their big refund, you’ll know you’re ahead of the game.

Tax Reform Update: Alimony

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Under the current rules, an individual who pays alimony or separate maintenance may deduct an amount equal to the alimony or separate maintenance payments paid during the year as an “above-the-line” deduction. (An “above-the-line” deduction, i.e., a deduction that a taxpayer need not itemize deductions to claim, is generally more valuable for the taxpayer than an itemized deduction.) And, under current rules, alimony and separate maintenance payments are taxable to the recipient spouse (includible in that spouse’s gross income).

However, new rules are coming soon
Under the Tax Cuts and Jobs Act rules, there is no deduction for alimony for the payer. Furthermore, alimony is not gross income to the recipient. So for divorces and legal separations that are executed (i.e., that come into legal existence due to a court order) after 2018, the alimony-paying spouse won’t be able to deduct the payments, and the alimony-receiving spouse won’t include them in gross income or pay federal income tax on them.

These new rules don’t apply to existing divorces and separations
It’s important to emphasize that the current rules continue to apply to already-existing divorces and separations, as well as to divorces and separations that are executed before 2019.

Some taxpayers may want the Tax Cuts and Jobs Act rules to apply to their existing divorce or separation. Under a special provision, if taxpayers have an existing (pre-2019) divorce or separation decree, and they have that agreement legally modified after Dec. 31, 2018, the new rules apply to that modified decree if the modification expressly so provides.

There may be situations where applying these new rules voluntarily is beneficial for the taxpayers, such as a change in the income levels of the alimony payer or the alimony recipient.

To discuss the impact of these rules on your particular situation, please call us at (973) 301-2300.

Bracing for impact: New employment initiatives hitting NJ businesses

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New Jersey Governor Phil Murphy took office earlier this year with an ambitious agenda regarding NJ employment laws. From a minimum wage increase to paid sick leave to companies’ drug and alcohol policies, Murphy’s agenda will impact the way you run your business, one way or another.

Minimum wage increase
New Jersey’s minimum wage currently stands at $8.60 per hour. During his campaign, Murphy vowed to boost it to $15 per hour. While many legislative leaders back this change, there’s still some uncertainty regarding its scope — just teenagers, or all minimum wage workers? It’s possible we’ll see a gradual implementation rather than an abrupt rise across the board. When this becomes effective, employers in minimum wage-heavy industries — fast food, retail, maintenance and personal care, to name just a few — will need to dramatically adjust their labor cost projections.

Legalization of marijuana
Nine states have already legalized recreational marijuana, with New Jersey poised to follow suit. Employers are not obligated to accommodate its use, and employees who test positive are still subject to termination based on your company policy. However, this may change if New Jersey passes an accommodation requirement for medical marijuana usage. Companies will have to review and update current drug and alcohol policies to follow the new law.

Mandated coverage of medication-assisted opioid addiction treatment
Drug addiction is covered under the New Jersey Law Against Discrimination (NJLAD). And employers are required to provide disabled employees with reasonable accommodations. If an eligible employee requests time off for drug treatment, you’ll be required to grant them leave for treatment, regardless of how business will be affected.

Statewide paid sick leave
The governor’s statewide paid sick leave ordinance, which becomes effective in late October 2018, requires employers to grant workers one hour of paid sick leave for every 30 hours worked, with an annual cap of 40 hours. Workers are entitled to time off to care for their own or a family member’s physical or mental illness or injury; when their child’s school is closed because of a public health emergency; or to address domestic or sexual violence. Employers are now in the process of modifying their leave policies to ensure compliance. Smaller companies, unfamiliar with sick leave laws, are more likely to encounter challenges along the way.

With major policy shifts like these poised to take place, it’s time to take a top-down look at how they could affect your HR policies, labor cost projections and cross-training efforts. And don’t forget compliance — failure to meet new requirements could result in severe financial penalties as well as a reputational black eye. Embrace the challenge and you just might uncover opportunities to strengthen your organization and become more competitive.

The connection between PR & profitability: How a proactive strategy can help your bottom line

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Sometimes how leaders react during a business crisis can have more of an impact than the crisis itself.

Remember when Equifax announced that the personal information of over 143 million Americans was compromised in a huge cybersecurity breach? The company claimed they learned about the attack in July 2017, but didn’t share that information with the public until September. They caught flak for not only failing to alert customers, but for a lack transparency in general — the result of a reactive, poorly executed public relations strategy.

So why are CPAs blogging about public relations? Ask Equifax CEO Richard Smith, who stepped down after 12 years at the helm. Shares of Equifax declined more than 23%, and the company logged over $87 million in costs related to the privacy breach.

PR is too often viewed as “feel good” marketing fluff. But when bad news hits the fan, a well-crafted PR strategy can help mitigate its impact on your bottom line — very much the purview of a CFO.

Not convinced? Here are four ways that first-rate PR can help protect your reputation as well as your earnings:

1. Managing media relations during a crisis. Let’s say your company is responsible for an accident that pollutes a local waterway. Now imagine that you’re in the middle of negotiating a major deal when the news breaks. The accident can hurt your company and put the deal in jeopardy. What can you do?

A skilled PR person — whether an employee of your organization or outside counsel from an established public relations firm — knows how to mitigate the potential damage to your brand and assist your organization in properly taking responsibility in a manner that engenders trust, restores brand confidence, stems sales attrition and re-establishes good will.

The problem? Many organizations first contact a PR firm in the midst (or the immediate aftermath) of a crisis, when significant brand damage has already occurred and public trust has eroded, according to Kathleen McMorrow, principal at The Communications Optic, a strategic communications and media advisory firm based in Chatham, NJ.

“The midpoint of a crisis is certainly not the ideal time to onboard a PR firm,” says McMorrow. “A far better strategy is to have established a relationship before a problem even occurs. That way, the firm can be a true partner to your organization, performing at an optimal level to contain the damaging effect of a negative incident far better than someone who just received your panicked call and knows nothing about your company.”

2. Overseeing relationships during litigation. Some types of legal actions, like those involving insurance coverage, for example, are between companies that have ongoing, profitable business relationships. A skilled professional can help balance your lawyer’s strong advocacy on your behalf with sensitivity to the business relationships that keep your company financially healthy.

Here’s where having an established relationship with a PR pro can also pay dividends, according to McMorrow. “When your PR firm is already your trusted advisor, fully engaged with your business strategy and market position, they’ll understand the nuances of your other business relationships and will act to protect them, along with your public image.”

3. Boosting employee morale during tough times. Sometimes, reaching out to the media can help with employee morale. Here’s an example: Your company is forced to make cutbacks, and remaining employees are losing confidence in their future with the firm.

Of course, establishing or maintaining professional development or other performance incentive programs can help keep staff engaged and productive. But think how much more effective your effort would be if a PR professional helped you relay this positive story to the media. Impartial media coverage would go a long way toward reassuring current employees and helping to attract talented candidates in the future. In addition, your strategic partners and vendors might have greater confidence and enthusiasm in their dealings with your organization.

4. Presenting a consistently positive image of your company. The court of public opinion is a powerful force in today’s justice system. Crisis management strategies can be enhanced by a consistently positive image of your company.

We’ve all seen the trend toward frivolous lawsuits and noticed the skepticism toward corporations in light of well-publicized abuses by a few firms. If people see that a company is investing in the community, giving back at charitable events or providing generous volunteer opportunities for employees, they might be less likely to sue for minor injuries or infractions. At the very least, they may accept a reasonable settlement if offered.

CFOs can’t afford to ignore reputation management in today’s litigious world. Rather than viewing a strategic PR plan as fluff, you might want to huddle with your marketing team and learn about the relationships and resources they have in place to prevent bad news from turning into a bottom-line nightmare.

Sleepless in the C-suite: What’s keeping CFOs up at night?

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A recent study by Robert Half found that the financial reporting process keeps 97 percent of CFOs awake at night. What’s more, three out of four CFOs expect their stress levels will rise over the next two years.

Why the insomnia? You’ve got more on your plate than managing your company’s financials. From unrealistic business expectations to increasing workloads to lack of staff, dealing with workplace stress is all in a day’s work for today’s CFOs:

  • Data management — With constant streams of data churning out of your organization, you’re expected to make sense of it all. The pressure is on to draw meaningful insights for critical business decisions, despite the massive data overload and margin of error for misinterpretation.
  • Resource drain — Staff woes and time spent on low-value administrative tasks divert many CFOs from tackling bigger goals. Without the right systems and processes in place, it may seem impossible to operate efficiently. The logical solution may be to outsource to a team with the expertise to handle specific finance-related tasks.
  • Cybersecurity — Regardless of your role within the IT department, CFOs deal with cyber criminals who are after company funds. To prevent cyber hacks, you’re expected to implement the tightest controls and most effective anti-fraud technology. But is it enough? CFOs everywhere are wondering.

Alleviating the pressure

As a CFO, there are steps you can take to help you rest easy. With the right people, technologies and processes in place, you might actually find time to focus on C-level strategic goals.

Recruit the right team
Play an active role in hiring and building a skilled finance team. It may be time to revisit your organization’s recruiting and hiring practices, fine-tuning specific job requirements, onboarding and training for each position.

Motivate staff
According to a recent Gallup poll, just 15% of employees worldwide are engaged in their work. So reward a job well done, and watch the effect it has on employee performance. Also, meet with your team regularly and listen carefully to the issues they raise. Think of these meetings as the foundation for making process improvements across your department.

Assess technology needs
What are the skill limitations of your team members? How effective is the software that you depend on daily? What manual processes can be automated? Take the time to analyze your finance and accounting operations to determine where change is needed.

Be proactive
Planning ahead will help your team anticipate challenges that can disrupt workflow. When your team is in a better position to handle the unexpected, you’ll feel more confident and less stressed as issues come your way.

Identify where you are…and where you want to be
How will your actions today impact the cash flow outcomes tomorrow? Financial forecasting capabilities will help to ensure your company’s viability in the future while giving you a strategic edge now.

Get the company on board
When every employee can understand how their role plays into the big picture, they’ll be more committed to helping the company achieve success.

It’s time to gain control of your role — and get some sleep at night. When positive changes are made, your company and your well-being will reap the benefits.