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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.

How will federal tax law changes impact your NJ business?

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The federal Tax Cuts and Jobs Act, which represents the first major U.S. tax code overhaul in 30 years, seems to provide small businesses everywhere with a break on their taxes. For NJ business owners and managers, it’s critical to understand how the new mandates will affect your organization.

Pass-through business deduction
Pass-through companies account for 95 percent of all U.S. businesses. These entities allocate corporate income among the owners, rather than paying income taxes at the corporate level. Effective this year, pass-through companies will receive a 20 percent tax deduction. This deduction lowers a business’s taxable income by 20 percent, providing small business owners with more financial breathing room and freeing up money for hiring new workers and expanding operations.

There is one limitation: Married individuals who own service-based businesses (e.g. law firms or doctor’s offices) can only claim the deduction if their annual income is below $315,000 ($157,500 if single).

First-year bonus depreciation
This depreciation deduction is increasing from 50 to 100 percent. This allows businesses to deduct the full amount of eligible equipment and property purchases, rather than writing off a portion. Lawmakers hope this change will encourage business owners to put more money back into their companies — increasing R&D, expanding staff or branching out into new geographic markets.

Net operating loss window
Previously, net operating losses (NOL) — when a business’s tax deductions are greater than its taxable income — could be carried back for two years. Now, they can be applied for an indefinite amount of time. Net operating losses occur when a business’s tax deductions are greater than its taxable income. While this can only be applied to 80 percent of taxable income, it can help businesses to take risks and spend more money, essentially lowering the cost of failure.

Elimination of transportation fringe benefits
Businesses must now do without the transportation fringe benefits and entertainment expense deduction — tax-free employee commuter plans and reduced-rate entertainment plans. These perks can still be provided by employers, but can’t be written off as business expenses.

Lower corporate tax rate
The corporate tax rate is decreasing from 35 to 21 percent. That means corporations may be more inclined to set up shop and stay put, and less likely to move overseas. The new tax rate gives companies an opportunity to make more money, and can give the U.S. a competitive edge on a global level.

Keep in mind, this is just a general summary of new tax laws and should not be considered financial or legal advice. Be sure to consult with your CPA or tax advisor for advice specific to your business.

Tax reform 2018: What you need to know now

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Congress has ushered through the biggest tax reform law since 1986, when President Reagan signed major legislation for corporations and individuals. The new law will affect the way you, your family and your business calculate your federal income tax bill — and the amount of federal tax you will pay.

As we prepare for the changes in 2018, here are a few highlights of the new law to keep in mind:

  • Lower tax rates are coming. The Tax Cuts and Jobs Act will reduce tax rates for many taxpayers. Additionally, many businesses, including those operated as pass-through, such as partnerships, may see cuts in their tax bill.
  • Seven tax brackets for individuals will remain, but rates will change. Rates will be lowered to: 10%, 12%, 22%, 24%, 32%, 35% and 37%, respectively.
  • The child tax credit has nearly doubled. Parents will receive $2,000 for each child under 17, and the entire credit can be claimed by single parents who make up to $200,000 or married couples who make up to $400,000.
  • There’s a new tax credit for non-child dependents. Taxpayers may now claim a $500 temporary credit for non-child dependents, such as children over age 17, elderly parents or adult children with a disability.
  • Expect disappearing or reduced deductions, and a larger standard deduction. Beginning next year, the Tax Cuts and Jobs Act will also suspend or reduce many popular tax deductions in exchange for a larger standard deduction.
  • The itemized deduction for charitable contributions will remain. But because most other itemized deductions will be eliminated in exchange for a larger standard deduction, charitable contributions may not yield a significant tax benefit.
  • The new law temporarily boosts itemized deductions for medical expenses. For 2017 and 2018 these expenses can be claimed as itemized deductions to the extent they exceed a floor equal to 7.5% of your adjusted gross income (AGI). However, next year many individuals will have to claim the standard deduction because many itemized deductions have been eliminated.
  • The standard deduction has nearly doubled. For single filers, the standard deduction has increased from $6,350 to $12,000; for married couples filing jointly, it’s jumped from $12,700 to $24,000.

This is a general summary of the new law and should not be considered tax advice. Be sure to consult with your CPA or tax advisor for advice specific to your situation.

The best places to “park” excess company cash

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Business owners face a constant balancing act when it comes to deciding how much cash to keep in their everyday checking account.

On one hand, the money in these accounts is available in case of an emergency or unexpected business opportunity. However, federal law prohibits banks from paying interest on business accounts. Congress often discusses changing the law, but in the meantime, you have to get creative to earn a decent rate of return on your temporary excess cash.

Certificates of Deposit
CD are normally single-deposit investments with maturity options ranging from seven days to several years. They can pay a set or variable interest rate, which is usually higher than other bank deposit investments. The reason is simple: The bank feels comfortable that the funds will stay in your account until the maturity date.

The drawback is that withdrawals from a CD before maturity generally result in a penalty. Therefore, look for promotions with no early withdrawal penalties. In some cases, this no-penalty option can be exercised after a certain length of time — sometimes as brief as two weeks. In other cases, you can withdraw money periodically over the term of the CD.

It’s smart to stagger maturity dates on several CDs, rather than having one deposit make up a single CD. That way, you get access to your cash on a rolling basis if you need it. In any event, keep in mind that interest rates may be negotiable based on the strength of your banking relationship.

Money Market Accounts
Money Markets pay interest and give you some access to your funds. With these accounts, you can write checks and make deposits whenever additional funds become available. However, you can usually make only a limited number of transactions during a given period.

That limitation means money market accounts aren’t designed to handle all of your checks or withdrawals. But with basic cash management, they can be an easy way to earn interest and have access to funds on a limited basis.

Sweep Accounts
These are essentially checking accounts in which you give the bank permission to invest or “sweep” funds into an interest-bearing account on a day-to-day basis. These accounts aren’t always promoted by banks, so you may have to ask if they’re available.

Here’s an example of how they work: Let’s say your company routinely keeps large amounts of cash on deposit for short periods. With a sweep account, you instruct the bank to transfer any amounts exceeding, for example, $25,000 into investments such as overnight paper or repurchase agreements. In essence, you transformed a no-interest account into one that pays you interest.

A word of caution: Sweep accounts may not be federally insured. This happens when your excess funds are swept from an insured bank or credit union account to an investment that isn’t covered by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). If the financial institution fails, you may lose some of your money. With a traditional account, federal insurance generally only covers the first $250,000 on deposit at each institution.

Before making any moves, ask your accountant or financial advisor which of these short-term solutions for excess cash might be wise for your business.

Tax reform opportunities to consider as 2017 winds down

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Congress is enacting the biggest tax reform law in 30 years — one that will fundamentally change the way your federal income tax bill is calculated. Since most of the changes will go into effect next year, there’s still a narrow window before year-end to soften or avoid the impact and best position yourself for the tax breaks that may be heading your way.

Here are 7 last-minute moves to consider as 2017 comes to a close:

  1. If you’re about to convert a regular IRA to a Roth IRA, postpone the conversion until next year. That way, you’ll defer income from the conversion until next year and have it taxed at lower rates.
  2. If you’re not subject to the Alternative Minimum Tax (AMT), pay the last installment of your 2017 estimated state and local taxes no later than December 31, 2017, rather than on the 2018 due date.
  3. Charitable contributions after 2017 may not yield a tax benefit because you won’t be able to itemize deductions, so consider accelerating some charitable giving into 2017.
  4. Consider accelerating “discretionary” medical expenses into this year. For example, get new glasses or contacts, or see if you can squeeze in expensive dental work such as an implant.
  5. If a higher alternative minimum tax (AMT) exemption in 2018 means you won’t be subject to the 2018 AMT, it may be worthwhile to push such deductions into next year, such as exercising an incentive stock option (ISO).
  6. Under the new law, alimony payments aren’t deductible by the payor or includible in the income of the payee, generally effective for any divorce decree or separation agreement executed after 2017. So if you’re in the middle of a divorce or separation agreement and anticipate winding up on the paying end, it would be to your advantage to wrap things up before year end. On the other hand, if you’ll likely wind up on the receiving end, it would be worth your while to wrap things up next year.
  7. The new law suspends the deduction for moving expenses after 2017 (except for certain members of the Armed Forces), as well as the tax-free reimbursement of employment-related moving expenses. So if you’re in the middle of a job-related move, try to incur your deductible moving expenses before year-end. Or, if the move is connected with a new job and you’re getting reimbursed by your new employer, press for reimbursement before year-end.

These are just some of the general year-end moves that should be considered in light of the new tax law. As always, this should not be considered tax advice. Be sure to consult with your CPA or tax advisor for advice specific to your situation.

New lease accounting standards: Planning ahead to protect your organization

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The Financial Accounting Standards Board (FASB) is gearing up to align U.S. standards with global accounting standards, increasing transparency in financial reporting and altering the way companies account for their leases.

The mandate will become effective for most businesses in January 2019 — a date that might seem far into the future, but preparing to comply might take more time and resources than you think. In fact, 31% of executives feel their organizations are unprepared, according to a recent Journal of Accountancy article.

What’s so complicated about new lease accounting standards?

Under the new rules, you’ll be required to report your leases as both assets and liabilities on your balance sheet. This applies to real estate, vehicles and equipment. What’s more, the rent obligations that your leases reflect are essentially recognized as debt — which could pose a danger to your credit and bottom line.

Current lease accounting treats leases as either capital or operating leases, and there are specific rules as to their classification. But under the new law, the FASB has mandated all leases whether Type A (financing or capital) or Type B (operating) be capitalized on the balance sheet, including the related lease liability.

For example, consider your debt covenants with banks. Many loan documents include various debt covenants, such as debt to equity ratio or debt service coverage ratio as well as prohibitions against incurring new debt. But operating leases, which are currently included only in footnote disclosure, are nowhere to be found on the typical balance sheet.

FASB standards will also require Type B leases to be recorded as an available-for-use asset with a corresponding lease payable. What does that do to your bank covenants, or better yet, for nonprofit organizations? How do you explain the rent in your current grants being reflected as interest?

There’s no better time than the present

Companies will have to take a closer look at what they classify — or fail to classify — as lease agreements. Keep in mind, this includes options to lease for future expansion, which you’ll be required to treat as if they’re reflected on the books right away. It may even motivate tenants to purchase their buildings outright since they’ll be handled the same way as renting — another obligation on the balance sheet.

By preparing now, you’ll gain a clearer idea of what to expect in the coming months, and ultimately, save money and gain peace of mind without the last-minute scramble as the deadline nears. If you haven’t already, set up a meeting with bankers and funding sources and begin a dialogue regarding the possible effects of the new accounting standard on your grant funding and loan covenants. Act now and avoid any surprises from your accountant or auditor in 2020.