Hiring full-time employees to execute business-essential functions can become extremely expensive. Businesses looking to optimize their capital should consider business support services. Outsourcing critical functions can save money and time for your organization.

Bookkeeping

Making an accounting mistake or payroll error results in confusion and wasted time. If you’re not skilled in leading the accounting and financial tasks, then you will benefit from bookkeeping services.

Essential Functions

What functions can they fulfill? A professional service will cover these areas:

• Accounting and bookkeeping
• Payroll
• Budgets
• General ledger entries and reconciliation
• Forecasts, projections, and analysis
• Training
• Limiting costs

Choose how you want to optimize your capital. A support service can take over the financial operations and scale as you grow, or you can have them advise employees to become the managers.

Executive support will formulate a cost-saving strategy that transitions operations back to you or evolves as your business does.

Save Money

Pouring over the numbers and books against tight deadlines at tax time can create undue hassle and stress.

If you get the numbers wrong, you can end up being audited and pay hefty fines. Focus your energies on operations, sales, or engagement.

Save your organization money by outsourcing the financial operations. You can eliminate costly benefits packages, but you can also save your organization from internal fraud.

An external audit or CFO will have the knowledge and experience to prevent and detect internal fraud. They can also implement checks and balances to keep everyone honest.

Know Your Finances

It’s important to know you don’t have to completely give up financial operations. It’s recommended you stay current on your books.

If something doesn’t look right or add up, then ask the accountant to explain. They should understand every single line on the profit and loss statement.

All of your management decisions depend on the numbers. Are you making money? Is there an unnecessary expense?

Having a business management support service can be the difference between your or organization folding and or enjoying success.

Taxes

Making sure your numbers are correct for tax time is half the battle. The federal, state, and local governments want their due payment.

Law

Do you know every exemption and loophole in the tax code? Not knowing the tax law is a detriment that could cost your business thousands of dollars a year.

New tax laws are added every year and trends shift with legislation at every level of government. A professional service can advise you on financial and political climate as it pertains to tax codes.

Planning

Like the accounting portion, letting a business support service handle your taxes will save money and time. Hiring a friend or someone not completely qualified is a critical mistake.

Skilled professionals will make sure you pay everything you owe on time and help you avoid government audits and penalties that can ruin a profitable year.

With your taxes straightened out, you can start planning for the following year. Rate increases from vendors can be capitalized and passed to your clients. You will know exactly how much money you’re paying in taxes per transaction.

In conjunction with your team, business support services can develop cost-containment strategies that avoid unnecessary waste and taxes.

Assets

Tax preparation will be especially helpful as you prepare to purchase or sell large assets or holdings. Capital gains taxes and assets might concern someone who is not familiar.

Luckily, capital gains taxes are at rates much lower than income tax; however, it can be extremely complicated.

Business support services understand the rules and separate forms needed to define capital asset transactions.

This is a perfect solution if your business is too small to hire a full-time accountant or you’re too busy.

Audits

You may want your company audited to discover information flow breakdowns or weak financial controls.

A business support service should have a customized approach to your business. No two businesses are exactly the same. An audit service should treat yours uniquely.

Conducting an audit to ensure compliance is a great way to avoid the government conducting its own audit.

Mergers & Acquisitions

Audits don’t have to be just to improve processes or find mistakes. They can be used in the evaluation of a possible merger or acquisition.

A potential buyer wants to know if the numbers they see have another story behind them. It’s possible a business owner may be hiding losses, hemorrhaging money, or have weak financial controls.

The profits and margins may be great for a company you’re looking to merge with, but it’s possible they owe back-taxes. Many times business owners do not know they are going to be hit with a penalty.

You are entitled to know if the company you’re joining or acquiring is financially and legally set for the future.

Valuation

If you are preparing for a sale, it’s important to know the valuation of your company. What is a fair price for your robust business?

Maybe you’re on the other side of the coin and want to know how much a company is worth versus what they are asking.

Audits examine more than revenue and expenses. They will examine items such as an aging trial balance and hunt down bad debt to factor it into the total valuation.

It’s hard to put a price tag on a name, but if Nike were to sell its company the name alone would have a significant price. Professional audits do their due diligence by figuring out what the name brand means to the market.

There are inevitably going to be subjective numbers during valuation. Someone wanting to sell a business will value brand name and reputation a little more than someone buying that same business for its distribution channels.

Optimize Your Capital

Your capital should work for you. Hiring business support services eliminates hiring in-house departments and paying salaries and benefits.

The money and hassle you save can be used to expand operations, increase sales, or develop brand loyalty.

If you need a professional business support service, contact us to serve all your needs.

Tax season is upon us. Although filing taxes has been known to bring on stress, frustration, and even confusion, tax planning can alleviate these woes. 

By arranging and analyzing your financial situation, you can minimize your tax liabilities and maximize your tax breaks. 

Navigating the tax system in America can be a harrowing experience. But, with proper preparation, you can make the whole process go a lot smoother and even save money as well.

Interested in learning more? Continue reading, and we’ll walk you through the top tax planning strategies you should know about. 

Understand Your Tax Bracket

You can try to stay informed about all the loopholes and tax breaks, but if it’s not relevant to your tax bracket, it’s not going to help you much.

The very first step to tax planning is knowing which federal tax bracket you’re in. Here in the United States, we have what’s known as a progressive tax system. This means that people with higher incomes will also pay higher tax rates. 

There are seven income tax brackets to know: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, no matter the bracket you’re in, you most likely won’t end up paying that tax rate on your entire income. 

There are two main reasons for this. First, you’re not taxed simply by multiplying your taxable income with your tax rate. The IRS splits your income into pieces and then taxes each piece at the corresponding rate. 

Second, you’ll have the opportunity to subtract deductions from your income. This is why your salary isn’t the same as your taxable income. 

Let’s look at an example:

Imagine you are a single filer who has a taxable income of $32,000. For the tax year 2019, that would put you in the 12% tax bracket. However, you don’t actually pay 12% on the entire $32,000.

Instead, for the first $9,700, you will pay 10%. Then you’ll pay 12% on the rest of the taxable income. 

Know the Difference Between Tax Credits and Tax Deductions

Tax credits and tax deductions may be the most fun part of preparing your tax returns. Both will lower your tax bill. Although they work in different ways. 

Knowing the difference between a tax credit and tax deduction will help you better implement your overall tax strategy.

A tax credit is when the government gives you a reduction in your tax bill, dollar-for-dollar. So a tax credit valued at $2,000 will lower your tax bill by $2,000.

A tax deduction is a specific expense that you had to pay that can be deducted from your taxable income. They reduce how much of your income can be taxed. These are extremely valuable, although tax deductions might not save you as much money as tax credits.  

Know Which Tax Records to Keep

Although many people may be reluctant to do it, holding onto the documents that you use to complete your tax returns is extremely important. In general, the IRS has three years to decide if they’re going to audit your tax return. So you want to keep your documents for at least that many years. 

Also, if you file a claim for a refund or credit after you filed a return, then you should hang onto those tax records. There are some circumstances where the IRS has a longer window of time to decide to audit you. Those circumstances include: 

• Six years if you reported that your taxable income was at least 25% less than it actually was
•  Seven years if you wrote off a loss from a worthless security
• Indefinitely if you didn’t file a tax return or you committed tax fraud

Make sure you keep your records organized and in a safe and private location.

Consider Putting Money in a 401(k) or IRA

Check with your employer to see if they offer a 401(k) plan that can give you a tax break on the money that you save for retirement. If you divert money from your paycheck directly to your 401(k), then that money can’t be taxed. 

For the tax year 2019, you can put at most $19,000 a year into a 401(k) account. People aged 50 or older can funnel up to $25,000.

Even though employers usually sponsor these accounts, a person who is self-employed can also open a 401(k). And if your employer matches your contributions, you’ll get free money added to the account. 

When it comes to IRAs, you have until the tax deadline in April to fund your IRA for the previous tax year. There are two types of IRAs: a traditional IRA and a Roth IRA. 

The main difference between these two retirement account types is the tax advantage. If you open a traditional IRA account, then you only pay taxes when you take your money out of the account. With a Roth IRA, you pay taxes upfront but don’t have to pay taxes when you finally take the money out of the account. 

The Importance of Knowing Top Tax Planning Strategies

Hopefully, after reading this article, you’ll feel like you have a better understanding of tax planning. Although filing your taxes may seem complicated at first, knowing what to look out for can make the whole process more enjoyable while also working in your favor.  

Hiring a CPA is a great way to make sure that your taxes will be filed properly and with the best chance for saving the most money. 

Need help with your taxes? Contact us today and see what we can do for you!

Mergers and acquisitions are an important part of the strategic long-term management of a company. So just what is a mergers and acquisition strategy?  A company merger is defined as the consolidation of companies or assets into one where the acquired company ceases to exist, and a company acquisition is when one company purchases another and the acquired company remains in place. The complexity of these strategies requires planning, deliberate process and thorough analysis.

Organizations use the M&A process for a number of reasons, including:

• Improving cost efficiencies/economies of scale
• Reducing or elimination of competition
• Increased market share & growth
• Diversification of risk
• Adding core competencies

Because mergers & acquisitions can be a complex and challenging process, it is important that a company has a well thought out strategy in place to help ensure that the objectives of the organization are going to be met. A mergers and acquisitions strategy is a specific plan that lays out a company’s developmental goals, identifies target acquisition candidates, evaluates those candidates, and once a merger or acquisition deal is completed, integrates the organizations seamlessly.
An important component of any successful M&A strategy is to identify the team of professional business and financial advisors that will assist management in the process.  This team should include a strong M&A attorney, banking or financial resources, and CPAs who can assist with financial due diligence and tax planning.

The First Step in Developing an M&A Strategy

Initially, the first thing you’ll want to do is to consider an organization’s overall corporate goals and objectives. The overall strategic plan should detail an organization’s current and desired profitability, product capabilities, market positioning, sales and distribution channels. Having clarity on your broader plan will help assure that strategic objectives are achieved through mergers or acquisitions. Your overall strategic business plan should be the foundation for all M&A initiatives.
The broader corporate strategy will help you to determine your target market, as well as your desired share of that market. After making these determinations, you can more easily identify the criteria of a potential transaction and the ways a merger or acquisition can help you achieve desired objectives. For example, when merging to achieve economies of scale, transactions will most likely result in a reduction of personnel where redundancy may exist. However, when merging to expand competencies, management may wish to retain the talent that comes with the targeted business.

The Next Moves in Building Your M&A Strategy

After the first initiatives are completed, you will next want to determine the enterprise value of the organization and identify potential sources for funding a planned transaction, which may include cash, equity, or debt. There are a variety of methodologies for determining valuation and the ultimate cost of a transaction. This is where a professional financial consulting firm can be worth its weight in gold. Understanding if your target business’ value is best based on a multiplier of EBITDA, Discounted Cash Flow, Multiple of Annual Recurring Revenue, etc. is essential to negotiating the best acquisition price or merger valuation.
Next, it is time to create a list of potential acquisition targets. For each candidate, it is necessary to determine the organization’s target market, main products or services, financial performance, and corporate value. Creating a model of your acquisition accounting including the estimated cost of acquisition and potential return on investment is the next step in developing your game plan. After the valuation and return models are developed, the candidates should be organized based on their potential merits and business impacts.
These can be complex transactions. Once a target has been identified and approached, it is important to identify and address any potential concerns at the front end of the deal. Avoiding hurdles downstream is the best way to keep a deal from imploding.

Closing the Deal on your Merger or Acquisition

The finalizing of a deal doesn’t mean the process is over. In fact, it may just be the beginning. The care and planning put into integrating an acquired company into the acquiring or surviving organization is often the key to determining the ultimate success or failure of M&A transactions. The benefits of integration may not be immediately apparent, and could potentially take up to a year or longer to be realized.
Without a strategy in place, mergers & acquisitions often fail to perform to their potential or worse, can be extremely costly. Careful planning related to mergers and acquisitions strategies is essential to M&A success, as it provides a process whereby any obstacles, concerns or potential issues can be addressed from the start. Putting the time and effort into carefully developing your M&A strategy will increase your chances of completing a successful transaction, and achieving corporate objectives through mergers and acquisitions activities.

At White Nelson Diehl Evans, we assist our clients in successful M&A transactions by providing advisory services such as business valuations, quality of earnings analysis, due diligence assistance and strategic planning associated with the potential tax ramifications of a planned transaction.  When considering the merger and acquisition process, consult your WNDE professional for help navigating these areas.

U.S. businesses and individuals are, for the most part, hopeful of tax reform legislation this year as both the White House and U.S. Congress are focused on improving productivity and growth.  With the GOP in control of the White House and both the House and Senate, it appears that comprehensive tax reform may be within reach.  Some pundits are hopeful that we may see tax reform legislation by mid-to-late spring, and a bill on the President’s desk before the August recess.
 
Paul Treinen, a tax accountant and partner with White Nelson Diehl Evans LLP, agreed that tax reform may actually become a reality in the near future.  Paul offered the following thoughts on pending tax reform:

• President Trump’s tax plan published in November 2016 was vague.  This was preceded by a House Republican plan in June 2016.  Both the President’s and the GOP plans attempted to reduce individual tax brackets into three main brackets. The top bracket was targeted at 33% for federal purposes.  This is 6.9% lower than the current highest federal rate of 39.6%.
• While President Trump has discussed lowering corporate tax rates from 35 to 15%, the GOP plan was “a little less lofty,” seeking to reduce corporate tax rates from 35% to 20%.
• Both President Trump and the GOP have discussed a specific tax rate on “pass through” income.  Under President Trump’s proposal, there is a proposed 25% tax rate on “pass-through income”.  Business income was broadly defined as income earned by small businesses, including sole proprietorships and other pass-through businesses (partnerships, limited liability companies and S corporations). Paul said that “reasonable compensation would probably be at the forefront of discussion as it pertains to this carve out.”
• There has been some “chatter” about repealing the Alternative Minimum Tax (AMT), this would probably be music to the ears of our clients.
• If lower tax rates were to become a reality, a reduction of some sort would potentially occur with itemized deductions.
• The fact that President Trump, Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell have all put tax reform at or near the top of their priority list is very encouraging for our clients.  The fact that this is not a split House or Senate suggests it may actually come to fruition.  However, new tax reform will not come without its challenges, as evidenced by the recent Democratic Party push back on Cabinet nominees and executive orders.
• There has been a fair amount of talk about using budget reconciliation to pass the president’s and GOP’s agendas.  This process calls for expedited considerations of tax, spending, and debt limit items.  In the Senate, reconciliation is not subject to filibuster.  This is interesting because it would allow the Senate to quickly pass reconciliation bills with a simple rather than a three-fifths majority.
• In early February, after the GOP leaders’ Congressional retreat, they indicated they wanted a repeal of the ACA by March or April 2017. Speaker Ryan said that Republicans would tackle tax reform in the spring of 2017.  Paul observed, “It seems that there has been more talk about focusing on repealing the ACA than there has been about tax reform, at least of late.”

Paul concluded, “Although nothing definitive has been released, it appears that there is more of a concentrated effort than ever to engage in meaningful tax reform in 2017.”