Businesses have had to grapple with unprecedented changes over the last couple years. Think of all the steps you’ve had to take to safeguard your employees from COVID-19, comply with government mandates, and adjust to the economic impact of the pandemic. Now look ahead to the future — what further changes lie in store for 2022 and beyond?
One hopes the transformations your company undergoes in the months ahead are positive and proactive, rather than reactive. Regardless, the process probably won’t be easy. This is where change management comes in. It involves creating a customized plan. This plan ensures that you communicate effectively and provide employees with the leadership, training and, coaching needed to change successfully.
Employees resist change in the workplace for many reasons. Some may see it as a disruption that will lead to loss of job security or status (whether real or perceived). Other staff members, particularly long-tenured ones, can have a hard time breaking out of the mindset that “the old way is better.”
Still others, in perhaps the most dangerous of perspectives, distrust their employer’s motives for change. They may be listening to — or spreading — gossip or misinformation about the state or strategic direction of the company’s future.
It doesn’t help the situation when certain initial changes appear to make employees’ jobs more difficult. For example, moving to a new location might enhance the image of the business or provide more productive facilities. But a move also may increase some employees’ commuting times or put them in a drastically different working environment. When their daily lives are affected in such ways, employees tend to question the decision and experience high levels of anxiety.
Often, when employees resist change, a company’s leadership can’t understand how ideas they’ve spent weeks, months or years carefully deliberating could be so quickly rejected. They overlook the fact that employees haven’t had this time to contemplate and get used to the new concepts and processes. Instead of helping to ease employee fears, leadership may double down on the change, more strictly enforcing new rules and showing little patience for disagreements or concerns.
It’s here that the implementation effort can break down and start costing the business real dollars and cents. Employees resist change in many counterproductive ways, from intentionally lengthening learning curves to calling in sick when they aren’t to filing formal complaints or lawsuits. Some might even quit — an increasingly common occurrence as of late.
By engaging in change management, you may be able to lessen the negative impact on productivity, morale and employee retention.
The content of a change-management plan will, of course, depend on the nature of the change in question as well as the size and mission of your company. For major changes, you may want to invest in a business consultant who can help you craft and execute the plan. Getting the details right matters — the future of your business may depend on it.
Businesses have had to grapple with many changes over the last couple years, with more likely in store for 2022. When a company implements change, the process is rarely easy. Some employees might think it compromises their job security or status. Others could distrust the motives behind the change, a particularly dangerous mindset. Meanwhile, you and your leadership team may quickly grow frustrated and tighten enforcement of new rules. But doing so often reduces productivity, worsens morale and increases turnover. To change successfully, learn about change management. It can help you communicate more effectively and provide employees with the support needed to change successfully.
In the year ahead, businesses will need to continue transforming in response to public health and economic developments. Change management can help your company handle the challenge. If you need help developing a management plan make sure to contact David Mills CPA!
Years ago, it may have seemed like only government agencies with top-secret intel or wealthy international banks had to worry about hackers. Nowadays, even the smallest businesses could see their reputation ruined by a data breach. At the same time, larger companies could have their sensitive data taken hostage in a ransomware attack that costs millions to resolve. A cybersecurity assessment can help ensure that your business is taking the proper steps to protect itself. It can also give you a competitive edge by demonstrating to customers and prospects that you take data privacy seriously.
Many of today’s companies are taking advantage of technologies that allow them to analyze customer and financial data. This includes software for mission-critical activities such as payroll, accounts receivable and payable, supply chain management, HR and benefits, and on-site security.
These systems are often cloud-based, meaning the information is stored online so users can access it remotely at any time. The convenience and analytical power are breathtaking, but they also create a tempting target for cybercriminals and raise the stakes of exposure exponentially.
In truth, the risk of a breach goes far beyond the disclosure of confidential, personal, or financial information. It also raises serious concerns about potential personal injuries, property damage, and work stoppage. Imagine the harm a hacker could cause by tampering with a building’s security or fire systems, or remotely manipulating vehicles or equipment.
Conducting a formal cybersecurity assessment helps you:
An assessment can also enable you to develop an incident response plan to mitigate the damage of a breach.
There are several recognized cybersecurity standards and frameworks available to guide these efforts. This includes those developed by the National Institute of Standards and Technology and the International Organization for Standardization. The U.S. Small Business Administration also offers cybersecurity assessment tips and best practices on its website.
If you’re particularly concerned, you might want to shop around for a qualified IT consultant to conduct a customized risk assessment. This may make sense if you’re in an industry subject to specific risks.
Cybersecurity is essential for every size and type of company. It may be comforting to think that the bad guys only go after the big guys, but hackers don’t always go after businesses with deep pockets. Sometimes they attack the easiest target. Make sure you’re well-protected.
The convenience and analytical power of today’s cloud-based business technology are breathtaking, but it creates a tempting target for hackers. A cybersecurity assessment can help ensure that your company is protecting itself. A properly conducted assessment involves taking inventory of hardware and software, identifying potential vulnerabilities, and implementing internal controls and other protections. It can also help you develop an incident response plan to mitigate the damage in the event of a breach. There are various free frameworks for conducting a self-assessment but, if you’re particularly concerned, you could engage a qualified consultant to conduct a customized assessment.
Business owners: Cybercriminals are on the prowl right now for your sensitive data. That’s why you should seriously consider a cybersecurity assessment. Contact us to find out how we can help!
Most of us are taught from a young age never to assume anything. Why? Well, because when you assume, you make an … you probably know how the rest of the expression goes.
A dangerous assumption that many business owners make is that, if their companies are profitable, their cash flow must also be strong. But this isn’t always the case. Taking a closer look at the accounting involved can provide an explanation.
What are profits, really? In accounting terms, they’re closely related to taxable income. Reported at the bottom of your company’s income statement, profits are essentially the result of revenue less the cost of goods sold and other operating expenses incurred in the accounting period.
Generally Accepted Accounting Principles (GAAP) require companies to “match” costs and expenses to the period in which revenue is recognized. Under accrual-basis accounting, it doesn’t necessarily matter when you receive payments from customers or when you pay expenses.
For example, inventory sitting in a warehouse or retail store can’t be deducted — even though it may have been long paid for (or financed). The expense hits your income statement only when an item is sold or used. Your inventory account contains many cash outflows that are waiting to be expensed.
Other working capital accounts — such as accounts receivable, accrued expenses and trade payables — also represent a difference between the timing of cash flows. As your business grows and strives to increase future sales, you invest more in working capital, which temporarily depletes cash.
However, the reverse also may be true. That is, a mature business may be a “cash cow” that generates ample dollars, despite reporting lackluster profits.
The difference between profits and cash flow doesn’t begin and end with working capital. Your income statement also includes depreciation and amortization, which are non-cash expenses. And it excludes changes in fixed assets, bank financing, and owners’ capital accounts, which affect cash on hand.
Suppose your company uses tax depreciation schedules for book purposes. Let say, in 2020, you bought new equipment to take advantage of the expanded Section 179 and bonus depreciation allowances. Then you deducted the purchase price of these items from profits in 2020. However, because these purchases were financed with debt, the actual cash outflows from the investments in 2020 were minimal.
In 2021, your business will make loan payments that will reduce the amount of cash in your checking account. But your profits will be hit with only the interest expense (not the amount of principal that’s being repaid). Plus, there will be no “basis” left in the 2020 purchases to depreciate in 2021. These circumstances will artificially boost profits in 2021, without a proportionate increase in cash.
It’s dangerous to assume that, just because you’re turning a profit, your cash position is strong. Cash flow warrants careful monitoring. At David Mills CPA, LLC, our team can help you generate accurate financial statements and glean the most important insights from them. Contact us today or call (309) 266-5700.
Some might say the end of one calendar year and the beginning of another is a formality. The linear nature of time doesn’t change, merely the numbers we use to mark it.
Others would say that a fresh 12 months — particularly after the arduous, anxiety-inducing nature of 2020 — creates the perfect opportunity for business owners to gather their strength and push ahead with greater vigor. One way to do so is to ring in the new year with a systematic approach to renewing everyone’s focus on profitability.
Without a system to discover ideas that originate from the day-in, day-out activities of your business, you’ll likely miss opportunities to truly maximize the bottom line. What you want to do is act in ways that inspire and allow you to gather profit-generating concepts. Then you can pick out the most actionable ones and turn them into bottom-line-boosting results. Here are some ways to create such a system:
All too often, managers become trapped in their own information silos and areas of focus. Consider asking everyone in a leadership position to submit ideas for growing the bottom line.
Leaving your employees out of the conversation is a mistake. Ask workers on the front lines how they think your business could make more money.
As suggestions come in, use robust discussions and careful calculations to determine which ones are truly worth pursuing.
When you’ve picked one or more concepts to pursue in real life, identify which metrics will accurately inform you that you’re on the right track. Track these metrics regularly from start to finish.
Every business needs its champions! Be sure each profit-building initiative has a defined leader and team members.
Ideas that ultimately do build the bottom line in a meaningful way generally take time to identify, implement and execute. Don’t look for quick-fix measures; seek out business transformations that will lead to long-term success.
A carefully constructed and strong-performing profitability idea system can not only grow the bottom line but also upskill employees and improve morale as strategies come to fruition. Our firm can help you identify profit-building opportunities, choose the right metrics to evaluate and measure them, and track the pertinent data over time.
Contact David Mills, CPA, LLC for more information. Also, check out our Facebook page
It’s been estimated that there are roughly 5 million family-owned businesses in the United States. Annually, these companies make substantial contributions to both employment figures and the gross domestic product. If you own a family business, one important issue to address is how to best weave together your succession plan with your estate plan.
Transferring ownership of a family business is often difficult because of the distinction between ownership and management succession. From an estate planning perspective, transferring assets to the younger generation as early as possible allows you to remove future appreciation from your estate, minimizing any estate taxes. However, you may not be ready to hand over control of your business or you may feel that your children aren’t yet ready to run the company.
There are various ways to address this quandary. You could set up a family limited partnership, transfer nonvoting stock to heirs or establish an employee stock ownership plan.
Another reason to separate ownership and management succession is to deal with family members who aren’t involved in the business. Providing such heirs with nonvoting stock or other equity interests that don’t confer control can be an effective way to share the wealth with them while allowing those who work in the business to take over management.
An additional challenge to family businesses is that older and younger generations may have conflicting financial needs. Fortunately, strategies are available to generate cash flow for the owner while minimizing the burden on the next generation.
For example, consider an installment sale. These transactions provide liquidity for the owner while improving the chances that the younger generation’s purchase can be funded by cash flows from the business. Plus, so long as the price and terms are comparable to arm’s-length transactions between unrelated parties, the sale shouldn’t trigger gift or estate taxes.
Or, you might want to create a trust. By transferring business interests to a grantor retained annuity trust (GRAT), for instance, the owner obtains a variety of gift and estate tax benefits (provided he or she survives the trust term) while enjoying a fixed income stream for a period of years. At the end of the term, the business is transferred to the owner’s children or other beneficiaries. GRATs are typically designed to be gift-tax-free.
There are other options as well, such as an installment sale to an intentionally defective grantor trust (IDGT). Essentially a properly structured IDGT allows an owner to sell the business on a tax-advantaged basis while enjoying an income stream and retaining control during the trust term. Once the installment payments are complete, the business passes to the owner’s beneficiaries free of gift taxes.
Family-owned businesses play an important role in the U.S. economy. We can help you integrate your succession plan with your estate plan to protect both the company itself and your financial legacy. For more information, contact David Mills, CPA, LLC today.
Starting a new business is an exciting venture, but with so many business structures, deciding the legal structure of your company can seem overwhelming. Will it be a sole proprietorship? A corporation? Is it an LLC?
Trying to figure out the various business legal structures can seem complex. However, the experts at David Mills, CPA, LLC have the experience and knowledge to provide expert advice and guidance.
The Internal Revenue Service (IRS) says there are five primary types of business structures. Which one you chose will affect which income tax return form you have to file.
The five most common business legal structures are:
In a sole proprietorship, the individual who owns the business is an unincorporated business by themselves.
This type of business structure is sometimes known as the sole trader, individual entrepreneurship or proprietorship. There is no legal distinction between the owner and the business entity.
According to the U.S. Small Business Administration, a sole proprietorship is “the simplest and most common structure chosen to start a business.”
A partnership is when two or more individuals join together to create a business. According to the IRS, in a partnership “each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.”
Within a partnership, there are two common types: limited partnerships (LP) and limited liability partnerships (LLP).
The U.S. Small Business Administration notes a limited partnership has one partner with unlimited liability and all others with limited liability.
In a limited partnership, the partners with limited liability tend to have limited control over the company. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.
A limited liability partnership (LLP) gives limited liability to every owner. This structure protects each partner from debts against the partnership.
When a corporation is formed, prospective shareholders exchange money, property or both, for the corporation’s capital stock.
Sometimes called a “C-corp” a corporation is a legal entity separate from its owners.
The Small Business Administration notes corporations offer “the strongest protection to its owners from personal liability” but “the cost to form a corporation is higher than other structures.”
Operating a corporation requires more extensive record-keeping and reporting.
The IRS says S Corporations “are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.”
Becoming an S Corporation requires a business to meet certain qualifications including being a domestic corporation and having no more than 100 shareholders.
Businesses must file with the IRS to earn S Corporation status.
A limited liability company, more commonly referred to as an “LLC” combines the advantages of both the corporation and partnership business structures.
An LLC can protect an individual from personal liability in most instances.
Owners of an LLC are known as “members” and the members can be individuals, corporations, other LLCs or foreign entities. Most states, including Illinois, permit “single-member” LLCs, in which there is only one owner.
The professionals at David Mills, CPA, LLC, have offices in both Morton and East Peoria. They work with business clients in the Tri-County (Peoria, Woodford and Tazewell) area as well as beyond.
When establishing a business, contact David Mills, CPA, LLC to ensure the legal entity you select best matches your professional goals.
Small businesses need budgets, but too often, they don’t have one. The staff at David Mills CPA, LLC can assist with your budgeting needs.
Creating a business budget can seem overwhelming. One survey found as many as two-thirds of all small businesses don’t have a budget.
Without a budget, though, your company’s financial health is at risk. Small businesses face challenges every day. A budget helps mitigate those difficulties.
The experts at David Mills CPA will show you how budgeting can grow your profits. Interpreting the numbers is key, but we understand making sense of those figures can feel overwhelming.
We can help you answer the critical questions:
A smartly planned budget will include flexibility to help you navigate any troubled waters your business may face.
A budget should be more than just a yearly chore. It’s a tool to help you tackle short-term obstacles while planning for the long-term future.
We will teach you the questions to ask when looking at your budget versus actual numbers. In this way, your budget becomes a valuable tool to manage cash flow and build your business.
Budgets help make your business more efficient. They can help keep your company out of debt while developing a roadmap for future growth or expansion.
Planning your business budget will make it more efficient to operate your company.
Let the staff at David Mills CPA assist you with all your business budgeting needs. Contact us today for more information.
Exciting news! David Mills CPA has officially opened our East Peoria location. We can provide your business with accounting and financial services. Our office is open Monday-Friday from 8:00 AM until 5:00 PM. We are excited to be a part of the small business community that is located in East Peoria, Illinois.
In order to best serve our customers, we offer a wide variety of services. We can assist your business with the financial aspects so you can focus on what is most important to you. A list of our services include:
Our East Peoria location is now booking appointments. We are also available for video conference meetings if needed! For all of your financial needs, contact David Mills CPA today. We look forward to working with you and serving our customers in East Peoria.