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Operating Challenges: Clogged Supply Chains and Higher Costs of Doing Business

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Most business leaders expect revenues to rise throughout 2022, despite serious challenges.

The COVID-19 pandemic is winding down, but still interrupting supply chains. Energy prices are increasing, partially because of the Russian-Ukrainian War. Inflation is rising, and taming it may involve some economic pain for everyone.

Yet despite all this, there is good news.

Growth is expected to continue. In fact, 95% of business leaders expect their revenues to increase or hold steady, while 88% expect profits to grow or hold steady, according to JP Morgan Chase & Co. economists. The best bet for small and midsize business owners is to focus on the following:

  • Take a look at a new talent strategy. Many small and midsize companies are struggling to find and retain people. You may need a combination of outsourcing some business processes, engaging 1099 contractors or upgrading a benefits and salary strategy to attract high-quality talent.
  • Stay optimistic. Economists expect the U.S. economy to grow 2.4% through the third and fourth quarters of 2022 — and they expect growth to continue (albeit slower) throughout 2023, around 1-4%. They key thing to remember is you’ll be operating in a growing economy.
  • Supply chain problems continue to be rough, so you’ll need a risk mitigation strategy. The silver lining is this is an opportunity to see where you are vulnerable and where you need to source additional suppliers. (And on the business-growth side, where you can provide added value to your customers.)
  • Monitor costs closely, especially the impact of inflation. Energy costs are skyrocketing, affecting the entire supply chain. The federal government is looking to raise interest rates to tame inflation, and they expect it will cause economic pain. Devise a plan to protect your margins.

The good news: Despite a lot of vivid rhetoric in the headlines (i.e., “shattered” supply chains), supply chains are operating and the economy is expected to continue growing. And rest assured, there are plenty of options in talent, cost control, supply chains and growth.

Enlist the experts at Magone & Co

With our forward-looking Business Advisory services, we can help you identify the levers that will most impact your growth and success. Contact us for a free consultation.

 

The Right Time to Build a Banking Relationship? Right Now

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If you think about it, running a business is largely about building relationships. And establishing a solid banking relationship is one of the most critical moves you can make as a business owner.

When is the appropriate time to begin forming this relationship? According to CPA Nick Magone, Managing Partner of Magone & Company, “Immediately — before you need the money.”

Get the ball rolling on the relationship

Banks typically offer three levels of financing:

  • Branch level – up to $250K
  • Small business lending – $1-5 million
  • Middle marketing lending – Over $5 million

To get started, reach out to your branch manager, and they’ll introduce you to the correct contact for your future lending needs.

Become the ideal borrowing candidate

What are banks looking for? First and foremost, if your business isn’t profitable, or isn’t able to show a track record of profitability, the bank will not loan you money. Remember, the bank is not your business partner.

Banks also need to have a clearcut understanding of your business and what it brings to the table for them. For example, how many of their services will you use? Will you need their treasury or cash management services in the future? In other words, they are looking for a profitable relationship. Bankers are more than accommodating to get to know you, especially if there is business to be had.

The first meeting

While in-person meetings are preferable, a video meeting can be just as effective for introducing yourself and your business. A typical presentation may include:

  • An overview of your business and management team, including who you are and the number of years in business overall.
  • The market your business serves, including the top 10 suppliers and customers.
  • Your high-level budget for the year, e.g. cost of goods sold, wages, administrative costs, etc.
  • The performance of the budget, as well as the trend for expected revenue and profitability throughout the year.
  • Future plans for growth, acquisition or inventory that may require financing.

The takeaways

Says Magone, “The three main points to keep in mind: Get to know your banker before you need the money; invite your banker to a meeting before you need the money; and, profitability and performance are key to having your loan approved.”

30 years of experience and expertise

In celebration of our 30th year in business, we’re rolling out a series of educational videos to help busy executives, families and business owners meet their accounting and tax needs and achieve their financial goals. Check out the latest on our YouTube channel.

Return to the Office: Managing Employee Pushback on In-person Work

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The pandemic fueled a massive work-from-home trend that many non-essential businesses have maintained for the past 18 months or more. But despite the current surge in COVID-19 cases, more and more employers are asking employees to return — causing a fair share of anxiety and fear, especially among the unvaccinated. As employers receive pushback from their teams, what can be done to ease employee comfort and peace of mind around colleagues, customers and clients after an extended hiatus?

A heavy-handed request?

With the FDA fully approving the vaccine beyond emergency use, employers may increasingly be making vaccination a requirement for returning to the office.

As an employer, you have options up to and including termination (in some circumstances) if employees refuse to return to the office or get vaccinated. But will on-site work directly impact or negate your success?

Here are some potential reasons to reconsider a blanket return-or-quit policy.

  • Employees may be genuinely reluctant for legitimate health reasons.
  • It may cause more stress for employees whose lives have already been turned upside down by COVID-19.
  • You risk damaging morale across the workforce.
  • You may have wrongly assessed the legal risks of doing so.
  • It might be harder than expected to recruit replacements for terminated employees.

The first step in formulating a return-to-work strategy is uncovering why your employees are reluctant to stop working from home. Consider conducting a survey, but avoid giving the impression that simply preferring to work at home is a compelling enough reason to allow it.

Coaxing tips

Reassuring employees of your commitment to maintaining a safe environment may help alleviate concerns. Here are some tips to help them get on board:

  • Give a generous heads up. Set the onsite work deadline a month or two into the future to give employees time to adjust and plan head.
  • Have a conversation. If feasible, have one-on-one conversations with employees who express worry about returning to work. They’re more likely to come around if they know you respect their concerns and want to understand them. A reasonable compromise might emerge.
  • Educate, educate, educate. Inform employees about the Centers for Disease Control and Prevention (CDC) workplace safety standards and the scientific basis for those practices, as well as your compliance practices.
  • Enact a policy phase-in period. Instead of setting an all-or-nothing date of return, allow employees to slowly acclimate. You may ask them to return for one or two days a week initially, adding more days over time.
  • Be flexible and fair. Cutting deals with individual employees may create resentment from others. While doing your best to accommodate individual needs, it’s important to ensure that your practices are reasonable for everyone.

Help from Uncle Sam

If you’re considering a mandatory vaccination policy to accompany your return-to-work policy, you may consider incentivizing hesitant employees to get their jab.

One possible solution is to offer paid time off for COVID-19 vaccine appointments. Some employers take this a step further, offering a financial bonus on top of regular pay.

A little compassion goes a long way

No matter how you approach the task at hand, be aware of the many health conditions that may make people more vulnerable to contracting or having an acute case of COVID-19. The CDC’s list includes cancer, chronic kidney disease, COPD, heart conditions, obesity, pregnancy, smoking and diabetes. And some employees with these conditions might worry about COVID-19-related health risks at the workplace, even if they’ve been vaccinated.

In all cases, be sure to review how federal, state and local statutes may impact the approaches you can take.

Just Married? Financial and Legal To-dos for Newlyweds

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Wedding season is upon us. September and October are typically the most popular months to tie the knot. And despite the pandemic still raging in many parts of the country, the wedding industry is forecasting a temporary boost in revenue, with the number of fall weddings scheduled already close to pre-pandemic levels for now.

Many engaged couples and their families are remaining hopeful and cautiously planning for their big day. Whether you’re preparing for a wedding celebration now or later, it’s important to remember the administrative tasks to address when you say, “I do.”

 Housekeeping chores for name changes

The majority of pre-marital tasks relate to taking your spouse’s name or vice versa. If your name is changing, here’s the protocol after you’re legally wed:

  • Visit your local SSA office. Notify the Social Security Administration (SSA) after you’re married to protect Social Security benefits and credit ratings. To get a new Social Security card, you need to complete an application and provide proof of identification with your old and new names, such as a driver’s license and a marriage certificate. If you were born outside the United States, you’ll also need proof that you’re a citizen or legally in the country. Keep in mind, the SSA doesn’t accept photocopies, notarized copies or your old Social Security card as evidence of identity.
  • Update IRS records. The SSA informs the IRS about name changes, and the tax agency’s records are generally updated 10 days later. If you don’t notify the SSA and file a tax return with your new married name, IRS computers won’t be able to match the new name with the Social Security number.
  • Spread the word. Once your name is officially changed with the SSA, share the good news with everyone else. To avoid confusion, also be sure to update your driver’s license, passport, tax records, voter registration, vehicle registration, utility records, retirement plans and more.

When you get back to work, consult your company’s HR department to evaluate how your change in marital status affects your benefits options. For example, you might save money by eliminating duplicate healthcare or life insurance coverage.

Joining your finances

Are you combining your savings, checking and credit card accounts into one? Even if you decide to maintain separate accounts, it may be helpful to have at least one joint account to pay for shared expenses, such as rent, mortgage costs, household expenses or childcare.

A joint account can also help avoid trouble in certain situations. When a spouse or common law partner dies and there are separate accounts, the survivor will be excluded from the separate account if the estate goes into probate. That could take months. CPAs often help newlyweds establish joint financial goals, including annual budgets and contingency plans in case a spouse passes away, becomes disabled or gets laid off.

Managing legal matters

From a legal perspective, you’ll need to update deeds, wills and power of attorney documents. Your attorney can also discuss the full array of estate planning tools, such as various trusts, that might be relevant now that you’re married.

People who have been previously married bring additional financial issues to the table, especially if there are children, alimony payments and child support involved.

  • Do you have business debts or obligations with your former spouse?
  • Are you required to keep a former spouse on your insurance?
  • Does a former spouse have a claim on your employer-sponsored retirement account?
  • If you’re entitled to assets from a former spouse (for example, an inheritance or other financial interest) will your remarriage end that entitlement?

Marriage is a celebration — but it also involves a lot of paperwork. Don’t let administrative chores prevent you from living happily ever after. Contact the CPAs at Magone & Company at (973) 301-2300 to help tackle the critical tasks head on.

IRS Installments Agreements — When You Can’t Pay Your Taxes in Full

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Despite the IRS being slammed right now due to the pandemic, millions of Americans still owe back taxes for previous years. And they are increasingly finding themselves unable to pay up all at once. An installment agreement is just one of many tax relief options that may help you settle with the IRS or lower your amount owed.

COVID-19’s impact on collections
The current pandemic has forced many businesses to shut down or modify how they do business —including the IRS. Not only is the agency busy processing their usual tax returns, it’s also tasked with processing the stimulus payments for millions of Americans. To top it all off, the IRS is scrambling to adjust to the new filing deadline (July 15, 2020), while a large portion of its workforce is working from home, making things slower than usual.

As a result, the IRS announced its “People First Initiative”, taking unprecedented actions to ease the burden on Americans facing tax issues. These new changes range from postponing certain payments related to installment agreements and Offers in Compromise, to limiting certain enforcement actions.

When the bill comes due
Despite their immediate actions, the IRS will soon flip the enforcement switch back on. Come July 15th, a lot of people who made higher income in 2019 will likely owe back taxes. Failure to pay your tax bill immediately may result in penalties and interest on the balance due after July 15th. If you find yourself unable to pay in full, an installment agreement may help you settle your tax burden over a period of time.

How installment agreements work
The IRS divides their installment plans by taxpayers who owe more than $50,000 and less than $50,000:

Taxpayers owing less than $50,000 may request an installment agreement via the IRS website, by mailing Form 9465-FS Installment Agreement Request or by phone at (800) 829-1040. You’ll need to provide your Social Security number, date of birth, caller ID from your recent IRS notice, PIN number or AGI, bank address, employer address and the proposed monthly payment amount.

Taxpayers owing more than $50,000 may request an installment agreement by filling out form 433-F Collection Information Statement. This form requires information regarding your bank accounts, lines of credit, real estate, total number of dependents, assets, credit cards, wages, non-wage household income, monthly living expenses, down payment amount and proposed monthly payment.

Installment agreements require a minimum monthly payment of $25, and can vary from 120 days to 60 months, depending on your ability to repay. Installment agreements that take more than 120 days also require a set-up fee. You may be eligible for a decreased fee if you meet their low income guidelines. Also note that the IRS charges a reinstatement fee if you don’t pay your bill and your agreement goes into default.

Help is a call away
At Magone & Company, we can help you navigate the IRS maze and help ensure that you’re on the right payment plan. Don’t hesitate to reach out at (973) 301-2300 to schedule a no-obligation, confidential consultation to explain your options to permanently resolve your tax issue.