Bank of America is offering loan deferment for home owners with mortgages through them. You have to call your local bank and they will set up a phone conference to see if you qualify. The deferred payments will be added onto the end of their mortgage payments. Currently it is unknown how many payments will be deferred. Contact your local Bank of America today!
Regardless of whether interest rates are high or low, the ability to borrow is an important factor in running a successful business. Whether you need to borrow money now or in the future, it’s good business practice to know what information a banker or other lender will need in order to grant your loan request.
This information falls into two broad categories. The first is general information about you, your business product or service, and your plans for the business. While some banks will gather this information from a loan application, it’s wise to prepare a clear, written presentation of the general facts about you and your business.
You’ll probably be asked to supply some of this information on the loan application form, but you can often provide additional facts that will have a favorable impact on a lender. That’s why it’s good strat-
egy to prepare a written presentation that gives a lender a clear description of you and the business you are in.
Here’s a checklist for the general information you should include in your written presentation:
- Your management background, abilities, and accomplishments as well as those of your key management personnel.
- A general description of the nature of the industry or business you are in.
- The sales potential of your product or service. This should include your short-term and long-term marketing plans and how you intend to handle any problems or opportunities which your business faces.
- An explanation of exactly how the money you are borrowing will be spent, whether the amount is sufficient for your immediate or long-term purposes, and how the borrowed funds will contribute to your firm’s well being.
In short, your general information presentation should tell the lender who you are, what your business has done and what you expect to do, how you intend to reach your goals, and, of course, how the money you are borrowing will help you achieve those goals. If you make a logical presentation of this general information, you’ll set the table for a clear understanding of your financial information.
It’s critical that you present all financial information in a formal, professional manner. A sloppy financial presentation is almost certain to result in the rejection of your loan request. The following financial documents should be prepared by your accountant:
- A personal financial statement for you and other principals of the business or other guarantors of the loan. Be sure that your personal financial statement includes the amount of money that you yourself have at risk in the business.
- A balance sheet which shows your company’s assets and liabilities for your most recent accounting period. It’s important that the balance sheet includes the amount of the company’s present indebtedness and the terms of repayment of any outstanding loans. Copies of recent company tax returns should be attached to the balance sheet as supporting material.
- An income statement which shows the company’s profit performance over a specific period of time.
- A cash flow projection which includes the prospective loan funds and other sources of money and shows how the money will be used.
- A sales forecast which projects and preferably allocates sales by type of customer over a given period of time.
- A current ratio position which shows the relationship between the company’s current assets and current liabilities.
The role of your accountant
It’s important to involve your accountant in both the preparation of all financial documents and in your meetings with the lender. Your accountant can supply whatever degree of assurance about the financial information that your lender may require. The degree of assurance will vary, depending on matters such as the lender’s previous experience with you, the size of the loan you’ve applied for, and how well the bank knows your business.
For example, audited financial statements may be required if you are requesting a large loan and the lender has not had any previous experience with your company. In other situations, a review of the financial information by your accountant may be sufficient, particularly if the lender has had previous dealings with your company.
It’s generally recognized that banks credit standards vary among banks, some banks have tighter credit standards than others. But if you’re properly prepared and make a solid presentation, your chances of getting that vital business loan will be greatly improved.
Most financial planners agree about the ten most common financial planning errors people make. Here’s the list.
- Failing to plan retirement financing.
- Failing to carry an “umbrella” policy to protect against risks not covered in other policies.
- Investing too much in one stock, usually the employer’s stock.
- No disability insurance or too little disability insurance.
- Holding investments which are not productive.
- No will or an outdated will.
- Failing to use a short term trust to save taxes.
- Investing in unwise or unnecessary tax shelters.
- Relying on variable income to meet fixed expenses.
- Failing to coordinate estate planning with personal financial planning.
STATE OF MICHIGAN
REGULAR SESSION OF 2014
Introduced by Senator Richardville
ENROLLED SENATE BILL No.934
AN ACT to fix minimum wages for employees within this state; to prohibit wage discrimination; to provide for a wage deviation board; to provide for the administration and enforcement of this act; to prescribe penalties for the violation of this act; and to repeal acts and parts of acts.
The People of the State of Michigan enact:
Sec. 1. This act shall be known and may be cited as the “workforce opportunity wage act”.
Sec. 2. As used in this act:
(a) “Commissioner” means the director of the department of licensing and regulatory affairs.
(b) “Employ” means to engage, suffer, or permit to work.
(c) “Employee” means an individual not less than 16 years of age employed by an employer on the premises of the employer or at a fixed site designated by the employer, and includes a minor employed subject to section 15(1) of the youth employment standards act, 1978 PA 90, MCL 409.115.
(d) “Employer” means a person, firm, or corporation, including the state and its political subdivisions, agencies, and instrumentalities, and a person acting in the interest of the employer, who employs 2 or more employees at any 1 time within a calendar year. An employer is subject to this act during the remainder of that calendar year.
Sec. 3. An employer shall not pay any employee at a rate that is less than prescribed in this act.
Sec. 4. (1) Subject to the exceptions specified in this act, the minimum hourly wage rate is:
(a) Before September 1, 2014, $7.40.
(b) Beginning September 1, 2014, $8.15.
(c) Beginning January 1, 2016, $8.50.
(d) Beginning January 1, 2017, $8.90.
(e) Beginning January 1, 2018, $9.25.
(2) Every January beginning in January 2019, the state treasurer shall adjust the minimum wage by an amount determined by the state treasurer at the end of the preceding calendar year to reflect the average annual percentage change in the consumer price index for the most recent 5-year period for which data are available. As used in this subsection, “consumer price index” means the most comprehensive index of consumer prices available for the midwest region from the bureau of labor statistics of the United States department of labor. The wage and hours division of the department of licensing and regulatory affairs shall post the adjusted minimum wage on its website by February 1 of the year it is calculated, and the adjusted rate is effective beginning April 1 of that year. An annual increase under this subsection shall not exceed 3.5%.
(3) An increase in the minimum hourly wage rate as prescribed in subsection (2) does not take effect if the unemployment rate determined by the bureau of labor statistics, United States department of labor, for this state is 8.5% or greater for the year preceding the year of the prescribed increase. Sec. 4a. (1) Except as otherwise provided in this act, an employee shall receive compensation at not less than 1-1/2times the regular rate at which the employee is employed for employment in a workweek in excess of 40 hours.
(2) This state or a political subdivision, agency, or instrumentality of this state does not violate subsection (1) with respect to the employment of an employee in fire protection activities or an employee in law enforcement activities, including security personnel in correctional institutions, if any of the following apply:
(a) In a work period of 28 consecutive days, the employee receives for tours of duty, which in the aggregate exceed
216 hours, compensation for those hours in excess of 216 at a rate not less than 1-1/2 times the regular rate at which the employee is employed. The employee’s regular rate shall be not less than the statutory minimum hourly rate.
(b) For an employee to whom a work period of at least 7 but less than 28 days applies, in the employee’s work period the employee receives for tours of duty, which in the aggregate exceed a number of hours which bears the same ratio
to the number of consecutive days in the employee’s work period as 216 bears to 28 days, compensation for those excess hours at a rate not less than 1-1/2 times the regular rate at which the employee is employed. The employee’s regular rate shall be not less than the statutory minimum hourly rate.
(c) If an employee engaged in fire protection activities would receive overtime payments under this act solely as a result of that employee’s trading of time with another employee pursuant to a voluntary trading time arrangement, overtime, if any, shall be paid to employees who participate in the trading of time as if the time trade had not occurred.
As used in this subdivision, “trading time arrangement” means a practice under which employees of a fire department voluntarily substitute for one another to allow an employee to attend to personal matters, if the practice is neither for the convenience of the employer nor because of the employer’s operations.
(3) This state or a political subdivision, agency, or instrumentality of this state engaged in the operation of a hospital or an
establishment that is an institution primarily engaged in the care of the sick, the aged, or the mentally ill or developmentally disabled who reside on the premises does not violate subsection (1) if both of the following conditions are met:
(a) Pursuant to a written agreement or written employment policy arrived at between the employer and the employee before performance of the work, a work period of 14 consecutive days is accepted instead of the workweek of 7 consecutive days for purposes of overtime computation.
(b) For the employee’s employment in excess of 8 hours in a workday and in excess of 80 hours in the 14-day period, the employee receives compensation at a rate of 1-1/2 times the regular rate, which shall be not less than the statutory minimum hourly rate at which the employee is employed.
(4) Subsections (1), (2), and (3) do not apply to any of the following:
(a) An employee employed in a bona fide executive, administrative, or professional capacity, including an employee employed in the capacity of academic administrative personnel or teacher in an elementary or secondary school.
However, an employee of a retail or service establishment is not excluded from the definition of employee employed in a bona fide executive or administrative capacity because of the number of hours in the employee’s workweek that the employee devotes to activities not directly or closely related to the performance of executive or administrative activities, if less than 40% of the employee’s hours in the workweek are devoted to those activities.
(b) An individual who holds a public elective office.
(c) A political appointee of a person holding public elective office or a political appointee of a public body, if the political appointee described in this subdivision is not covered by a civil service system.
(d) An employee employed by an establishment that is an amusement or recreational establishment, if the establishment does not operate for more than 7 months in a calendar year.
(e) An employee employed in agriculture, including farming in all its branches, which among other things includes: cultivating and tilling soil; dairying; producing, cultivating, growing, and harvesting agricultural or horticultural commodities; raising livestock, bees, fur-bearing animals, or poultry; and a practice, including forestry or lumbering operations, performed by a farmer or on a farm as an incident to or in conjunction with farming operations, including preparation for market, delivery to storage, or delivery to market or to a carrier for transportation to market or processing or preserving perishable farm products.
(f) An employee who is not subject to the minimum hourly wage provisions of this act.
(5) The director of the department of licensing and regulatory affairs shall promulgate rules under the administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, to define the terms used in subsection (4).
(6) For purposes of administration and enforcement, an amount owing to an employee that is withheld in violation of this section
is unpaid minimum wages under this act.
(7) The legislature shall annually appropriate from the general fund to each political subdivision affected by subsection (2) an
amount equal to the difference in direct labor costs before and after the effective date of this act arising from any change in existing law that results from the enactment of subsection (2) and incurred by the political subdivision.
(8) In lieu of monetary overtime compensation, an employee subject to this act may receive compensatory time off at a rate that
is not less than 1-1/2 hours for each hour of employment for which overtime compensation is required under this act, subject to all of the following:
(a) The employer must allow employees a total of at least 10 days of leave per year without loss of pay and must provide the compensatory time to the employee under either of the following:
(i) Applicable provisions of a collective bargaining agreement, memorandum of understanding, or any other written agreement between the employer and representative of the employee.
(ii) If employees are not represented by a collective bargaining agent or other representative designated by the employee, a plan adopted by the employer and provided in writing to its employees that provides employees with a voluntary option to receive compensatory time off for overtime work when there is an express, voluntary written request to the employer by an individual employee for compensatory time off in lieu of overtime pay before the performance of any overtime assignment.
(b) The employee has not earned compensatory time in excess of the applicable limit prescribed by subdivision (d).
(c) The employee is not required as a condition of employment to accept or request compensatory time. An employer shall not directly or indirectly intimidate, threaten, or coerce or attempt to intimidate, threaten, or coerce an employee for the purpose of interfering with the employee’s rights under this section to request or not request compensatory time off in lieu of payment of overtime compensation for overtime hours, or requiring an employee to use compensatory time. In assigning overtime hours, an employer shall not discriminate among employees based upon an employee’s choice to request or not request compensatory time off in lieu of overtime compensation. An employer who violates this subsection is subject to a civil fine of not more than $1,000.00.
(d) An employee may not accrue more than a total of 240 hours of compensatory time. An employer shall do both of the following:
(I) Maintain in an employee’s pay record a statement of compensatory time earned by that employee in the pay period that the pay record identifies.
(ii) Provide an employee with a record of compensatory time earned by or paid to the employee in a statement of earnings for the period in which the compensatory time is earned or paid.
(e) Upon the request of an employee who has earned compensatory time, the employer shall, within 30 days following the request, provide monetary compensation for that compensatory time at a rate not less than the regular rate earned by the employee at the time the employee performed the overtime work.
(f) An employee who has earned compensatory time authorized under this subsection shall, upon the voluntary or involuntary termination of employment or upon expiration of this subsection, be paid unused compensatory time at a rate of compensation not less than the regular rate earned by the employee at the time the employee performed the overtime work. A terminated employee’s receipt of or eligibility to receive monetary compensation for earned compensatory time shall not be used by either of the following:
(i) The employer to oppose an employee’s application for unemployment compensation under the Michigan employment security act, 1936 (Ex Sess) PA 1, MCL 421.1 to 421.75.
(ii) The state to deny unemployment compensation or diminish an employee’s entitlement to unemployment compensation benefits under the Michigan employment security act, 1936 (Ex Sess) PA 1, MCL 421.1 to 421.75.
(g) An employee shall be permitted to use any compensatory time accrued under this subsection for any reason unless use of the compensatory time for the period requested will unduly disrupt the operations of the employer.
(h) Unless prohibited by a collective bargaining agreement, an employer may terminate a compensatory time plan upon not less than 60 days’ notice to employees.
(1)As used in this subsection:
(i) “Compensatory time” and “compensatory time off” mean hours during which an employee is not working and for which the employee is compensated in accordance with this subsection in lieu of monetary overtime compensation.
(ii) “Overtime assignment” means an assignment of hours for which overtime compensation is required under this act.
(iii) “Overtime compensation” means the compensation required under this section.
Sec. 4b. (1) An employer may pay a new employee who is less than 20 years of age a training hourly wage of $4.25 for the first 90 days of that employee’s employment. The hourly wage authorized under this subsection is in lieu of the minimum hourly wage otherwise prescribed by this act.
(2) Except as provided in subsection (1), the minimum hourly wage for an employee who is less than 18 years of age is 85% of the general minimum hourly wage established in section 4.
(4) A person who violates subsection (3) is subject to a civil fine of not more than $1,000.00.
Sec. 4c. On petition of a party in interest or on his or her own initiative, the commissioner shall establish a suitable scale of rates for apprentices, learners, and persons with physical or mental disabilities who are clearly unable to meet normal production standards. The rates established under this section may be less than the regular minimum wage rate for workers who are experienced and who are not disabled.
Sec. 4d. (1) Before September 1, 2014, the minimum hourly wage rate is $2.65 per hour and, beginning September 1, 2014, the minimum hourly wage rate is 38% of the minimum hourly wage rate established in section 4 if all of the following occur:
(a) The employee receives gratuities in the course of his or her employment.
(b) If the gratuities described in subdivision (a) plus the minimum hourly wage rate under this subsection do not equal or exceed the minimum hourly wage otherwise established under section 4, the employer pays any shortfall to the employee.
(c) The gratuities are proven gratuities as indicated by the employee’s declaration for purposes of the federal insurance contributions act, 26 USC 3101 to 3128.
(d) The employee was informed by the employer of the provisions of this section.
(2) As used in this section, “gratuities” means tips or voluntary monetary contributions received by an employee from a guest, patron, or customer for services rendered to that guest, patron, or customer and that the employee reports to the employer for purposes of the federal insurance contributions act, 26 USC 3101 to 3128.
Sec. 5. (1) The governor shall appoint, with the advice and consent of the senate, a wage deviation board composed of 3 representatives of the employers, 3 representatives of the employees, and 3 persons representing the public. One of the 3 persons representing the public shall be designated as chairperson. Members shall serve for terms of 3 years, except that of the members first appointed, 1 from each group shall be appointed for 1 year, 1 for 2 years, and 1 for 3 years. The commissioner shall be secretary of the wage deviation board.
(2) A majority of the members of the board constitute a quorum, and the recommendation or report of the board requires a vote of not less than a majority of its members. The business which the wage deviation board may perform shall be conducted at a public meeting of the board held in compliance with the open meetings act, 1976 PA 267,
MCL15.261 to 15.275. Public notice of the time, date, and place of the meeting shall be given in the manner required by that act.
(3) A writing prepared, owned, used, in the possession of, or retained by the wage deviation board in the performance of an official function shall be made available to the public in compliance with the freedom of information act, 1976
PA442, MCL 15.231 to 15.246.
(4) The per diem compensation of the board and the schedule for reimbursement of expenses shall be established annually by the legislature.
(5) The wage deviation board may request data of any employer, subject to the provisions of this act, as to the wages paid and hours worked by the employer’s employees and may hold hearings as necessary in the process of obtaining this information.
(6) The wage deviation board shall submit its report to the commissioner, who shall file it in his or her office as a public record together with the regulations established by the board.
(7) At any time after a deviated wage rate has been in effect for 6 months or more, the wage deviation board may reconsider the rate.
Sec. 6. The commissioner may promulgate rules necessary for administration of this act under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.
Sec. 7. An employer who is subject to this act or any regulation or order issued under this act shall furnish each employee with a statement of the hours worked by the employee and of the wages paid to the employee, listing deductions made each pay period. The employer shall furnish the commissioner, upon demand, a sworn statement of the wage information. These records shall be open to inspection by the commissioner, his or her deputy, or any authorized agent of the department at any reasonable time. An employer subject to this act or any regulation or order issued under this act shall keep a copy of this act and regulations and orders promulgated under this act posted in a conspicuous place in the workplace that is accessible to employees. The commissioner shall furnish copies of this act and the regulations and orders to employers without charge.
Sec. 8. The commissioner shall administer and enforce this act and, at the request of the wage deviation board, may investigate and ascertain the wages of employees of an employer subject to this act. The commissioner and the commissioner’s employees shall not reveal facts or information obtained in the course of official duties, except as when required by law, to report upon or take official action or testify in proceedings regarding the affairs of an employer subject to this act.
(1) If an employer violates this act, the employee affected by the violation, at any time within 3 years, may do any of the following:
(a) Bring a civil action for the recovery of the difference between the amount paid and the amount that, but for the violation, would have been paid the employee under this act and an equal additional amount as liquidated damages together with costs and reasonable attorney fees as are allowed by the court.
(b) File a claim with the commissioner who shall investigate the claim.
(2) If the commissioner determines there is reasonable cause to believe that the employer has violated this act and the commissioner is subsequently unable to obtain voluntary compliance by the employer within a reasonable period of time, the commissioner shall bring a civil action under subsection (1)(a). The commissioner may investigate and file a civil action under subsection (1)(a) on behalf of all employees of that employer who are similarly situated at the same work site and who have not brought a civil action under subsection (1)(a). A contract or agreement between the employer and the employee or any acceptance of a lesser wage by the employee is not a bar to the action.
(3) In addition to bearing liability for civil remedies described in this section, an employer who fails to pay the minimum hourly wage in violation of this act, or who violates a provision of section 4a governing an employee’s compensatory time, is subject to a civil fine of not more than $1,000.00.
(1) This act does not apply to an employer that is subject to the minimum wage provisions of the fair labor standards act of 1938, 29 USC 201 to 219, unless those federal minimum wage provisions would result in a lower minimum hourly wage than provided in this act. Each of the following exceptions applies to an employer who is subject
to this act only by application of this subsection:
(a) Section 4a does not apply.
(b) This act does not apply to an employee who is exempt from the minimum wage requirements of the fair labor standards act of 1938, 29 USC 201 to 219.
(2) Notwithstanding subsection (1), an employee shall be paid in accordance with the minimum wage and overtime compensation requirements of sections 4 and 4a if the employee meets either of the following conditions:
(a) He or she is employed in domestic service employment to provide companionship services as defined in 29 CFR 552.6 for individuals who, because of age or infirmity, are unable to care for themselves and is not a live-in domestic service employee as described in 29 CFR 552.102.
(b) He or she is employed to provide child care, but is not a live-in domestic service employee as described in 29 CFR 552.102. However, the requirements of sections 4 and 4a do not apply if the employee meets all of the following conditions:
(i) He or she is under the age of 18.
(ii) He or she provides services on a casual basis as defined in 29 CFR 552.5.
(iii) He or she provides services that do not regularly exceed 20 hours per week, in the aggregate.
(3) This act does not apply to persons employed in summer camps for not more than 4 months or to employees who are covered under section 14 of the fair labor standards act of 1938, 29 USC 214.
(4) This act does not apply to agricultural fruit growers, pickle growers and tomato growers, or other agricultural employers who traditionally contract for harvesting on a piecework basis, as to those employees used for harvesting, until the board has acquired sufficient data to determine an adequate basis to establish a scale of piecework and determines a scale equivalent to the prevailing minimum wage for that employment. The piece rate scale shall be equivalent to the minimum hourly wage in that, if the payment by unit of production is applied to a worker of average ability and diligence in harvesting a particular commodity, he or she receives an amount not less than the hourly minimum wage.
(5) Notwithstanding any other provision of this act, subsection (1)(a) and (b) and subsection (2) do not deprive an employee or any class of employees of any right that existed on September 30, 2006 to receive overtime compensation or to be paid the minimum wage.
Sec. 11. An employer that discharges or in any other manner discriminates against an employee because the employee has served or is about to serve on the wage deviation board or has testified or is about to testify before the board, or because the employer believes that the employee may serve on the board or may testify before the board or in any investigation under this act, and any person who violates any provision of this act or of any regulation or order issued under this act, is guilty of a misdemeanor.
Sec. 12. Any employer that consistently discharges employees within 10 weeks of their employment and replaces the discharged employees without work stoppage is presumed to have discharged them to evade payment of the wage rates established in this act and is guilty of a misdemeanor.
(1) An employer having employees subject to this act shall not discriminate between employees within an establishment on the basis of sex by paying wages to employees in the establishment at a rate less than the rate at which the employer pays wages to employees of the opposite sex for equal work on jobs, the performance of which requires equal skill, effort, and responsibility and that is performed under similar working conditions, except if the payment is made under 1 or more of the following:
(a) A seniority system.
(b) A merit system.
(c) A system that measures earnings by quantity or quality of production.
(d) A differential based on a factor other than sex.
(2) An employer that is paying a wage differential in violation of this section shall not reduce the wage rate of an employee to comply with this section.
(3) For purposes of administration and enforcement, any amount owing to an employee that has been withheld in violation of this section is considered unpaid minimum wages under this act.
Sec. 14. An employer operating a massage establishment as defined in section 2 of former 1974 PA 251 that violates
this act is guilty of a misdemeanor punishable by imprisonment for not more than 1 year or a fine of not more than $1,000.00, or both.
Enacting section 1. The minimum wage law of 1964, 1964 PA 154, MCL 408.381 to 408.398, is repealed.
This act is ordered to take immediate effect.
Secretary of the Senate
Clerk of the House of Representatives
Michigan’s Workforce Opportunity Wage Act, Public Act 138 of 2014
Michigan’s Minimum Wage:
Effective May 27, 2014, Public Act 138 of 2014, the Workforce Opportunity Wage Act, repealed and replaced Public Act 154 of 1964, as amended, the Minimum Wage Law.
Tipped employees may be paid $2.65 per hour May 27, 2014 through August 31, 2014; effective September 1, 2014, tipped employees may be paid 38% of the Section 4 Minimum Hourly Wage Rate. If the gratuities plus the tipped employee minimum hourly wage rate under subsection 4d do not equal or exceed the minimum hourly wage otherwise established under section 4, the employer pays any shortfall to the employee.
A training wage of $4.25 per hour may be paid to employees 16-19 years of age for the first 90 days of their employment.
Minors 16-17 years of age may be paid 85% of the minimum hourly wage rate.
The rates are as follows:
| Tipped Employee
Hourly Wage Rate
|85% of Minimum
Hourly Wage Rate
|Before September 1, 2014||$7.40||$2.65||$7.25*|
|September 1, 2014||$8.15||$3.10||$7.25*|
|January 1, 2016||$8.50||$3.23||$7.25*|
|January 1, 2017||$8.90||$3.38||$7.57|
|January 1, 2018||$9.25||$3.52||$7.86|
*The state 85% rate of $6.29 per hour from 5/27/2014 through 8/31/2014, and the $6.93 from 9/1/2014 through 1/1/2016, and the $7.23 from 1/1/2016 through 1/1/2017; is lower than the federal minimum wage of $7.25. Section 10(1) of Public Act 138 of 2014, as amended, states: “. . . This act does not apply to an employer that is subject to the minimum wage provisions of the fair labor standards act of 1938, 29 USC 201 to 219, unless those federal minimum wage provisions would result in a lower minimum hourly wage than provided in this act..”
Call us at 734-464-3660 for questions regarding Michigan’s Minimum Wage.
- Paying more taxes than you have to. Keep good records so you get all deductions you’re entitled to. Shift income to a year when you’ll be in a lower tax bracket. Shift deductions to a year when you’ll be in a higher tax bracket.
- Not preparing for the unexpected. Set aside at least two months income to protect yourself and your family from serious cash flow problems in the event of an emergency.
- Not putting your money to work. Take all excess funds out of no-interest checking and savings accounts. Put the money to work in liquid but higher yielding places such as mutual funds.
- Not setting financial goals. If you don’t have goals, you can’t make a plan to achieve them. Write down where you want to be and when. Then start making a plan.
- Making investments based on tips. No matter how well-intended, a tip is the worst reason to make an investment. Investment decisions made under pressure are also unwise.
- Failing to have your will updated. Your situation changes along with that of your heirs. Your will should always reflect your present circumstances.
- Not establishing credit in the name of each spouse. No one likes to think about death or divorce, but not having credit can be much more than a minor inconvenience.
- Borrowing money when it’s not necessary. Not all interest is fully deductible. Interest deductions have been sharply curtailed. Don’t assume tax benefits when you consider borrowing.
- Not keeping organized financial records. Poor recordkeeping can cost you significant tax savings, cause you to make bad financial decisions, and leave your family with unnecessary problems if you become ill or die.
- Failing to put a yearly tax plan to work as early as possible. Year-end tax planning can be costly. The sooner you put your tax plan to work, the greater your savings.
With an uncertain economy on the horizon and unpredictable interest rates ahead, improving a company’s cash position should be a major priority for any business. In most cases, the answer to this challenge is better control of accounts receivable.
Tuning up your collection system
Too often, companies allow their receivables to age to a point where the business is strapped for cash. It’s not uncommon for four or five months to pass before management takes action to collect past due accounts, usually because the company doesn’t have a clear collection policy.
Effective receivable control is based on a regular review of the company’s receivables. Ninety days from the date a receivable becomes past due is the point at which your company should decide whether it wants to continue to do business with a late-paying customer.
If a customer is important, a mutually satisfactory schedule for payment of past due balances should be set up together with an understanding that covers payment for future purchases. It’s important to resolve both of these issues at the same time to avoid future problems while the customer is paying off past due amounts.
If you can’t work out a satisfactory schedule for payment of the past due balance within a reasonable amount of time, or if it becomes apparent that the customer is in real financial trouble, it’s time to bite the bullet and turn the matter over to a collection agency.
An ounce of prevention…
Although there’s no guarantee that better control over accounts receivable will result in the timely payment of all receivables, there are several other steps that a company can take to reduce the age of its accounts receivable.
- Credit checking. It’s surprising how many businesses will accept orders from new customers without doing a thorough credit check. It’s the obvious way to head off future problems. And it’s just as important to make occasional credit checks for large existing customers to make sure that their credit ratings aren’t slipping.
- Applications for credit. A credit application is another basic technique to reduce collection problems. At the least, a company should know the names of its customers, owners, banks, and major suppliers. Not only is this information useful for immediate credit decisions, but it can be essential if a collection problem arises in the future.
- Customer communications. There’s no better way to assure improved collections than to make certain that a new customer understands that your company must be paid in a timely manner. If a customer doesn’t get a clear message to that effect, you can give the impression that prompt payment isn’t really important to your company.
It’s just as critical to keep in touch with new customers to find out if they are satisfied with your product. Make every effort to do this before payment is due, to avoid future excuses for delayed payments because of problems you didn’t know about.
Invoice discounts and late payment charges
Offering customers a discount for prompt payment usually won’t speed up your collection. In fact, it can often backfire because customers take the discount but don’t fulfill the terms. It’s much better to bill a net amount and clearly indicate terms of payment on the invoice.
Some companies charge a penalty for past due payments, but unless a customer is made aware of this in advance, the customer is not legally obligated to pay late charges. It’s best to stick with conventional invoicing and tighten up your internal controls over receivables.
Most people realize that they should put aside enough cash to protect themselves against an emergency or a sudden loss of income. If the unexpected happens and an adequate cash reserve is not readily available, you may be forced to sell investments or real estate for less than they might be worth at another time under less pressing circumstances.
That’s why it’s wise to plan your emergency cash needs carefully. Here’s how to go about it.
How Much Cash is Enough
Step 1: Estimate your living expenses. It’s fairly simple to estimate your annual living expenses, but be careful not to forget anything. Rent or mortgage payments, food, clothing, car maintenance, utilities, and monthly debt payments are seldom overlooked, but people tend to forget insurance premiums (car, life, medical, homeowner’s, etc.) and payments which are made quarterly or semi-annually.
To determine how long your cash reserves should last, a good rule-of-thumb is to set aside enough cash to pay your expenses for six months if your household has only one wage-earner. If your household has two wage-earners, a three month cash reserve is adequate in most cases.
Modify these time periods by considering how long it might take you to find new employment if you lost your present job, and how long it would take your disability insurance to take effect if you couldn’t work because of illness or injury.
When you calculate how much cash you’ll need, don’t count on certain kinds of income to provide that cash. For example, you might be tempted to include anticipated dividends from equity investments as part of your cash reserves. That’s a mistake because income from stocks is not guaranteed.
Step 2: Establish your inner comfort level. Everyone is different and you should consider whether you’ll really feel secure that your cash reserve is adequate. If you’re uncomfortable about only having enough money to meet expenses, then put aside a specific amount beyond and above those expenses.
Keep in mind that your needs will vary depending on your circumstances. For example:
- If there’s a new baby in your family, you should increase your emergency cash level.
- If you are young, single, and without debt, you may not need to maintain a high level of cash – particularly if you have skills that make you easily employable.
- If you are about to retire, chances are that you’ll feel insecure in what will be an entirely new way of life. A cash reserve that’s well above regular expenses may be called for, at least until you feel comfortable about living as a retiree.
- If you’ve started a new business, don’t count on it to produce immediate personal income. Instead, increase your emergency cash until you’re certain that the business will generate a steady income. In some cases, this can take a few years.
Put Your Cash in the Right Place
Security and liquidity are the major criteria for where to keep your cash reserves. Put your money where it will be readily available to you when you need it. The two most common choices are:
- A savings account. You’ll earn a low interest rate, but if you’re very conservative you’ll know your money is completely safe.
- A money market fund. Bank money market funds are federally insured, but other money market funds earn a higher interest rate and are usually quite safe. Look for funds that have check-writing or telephone withdrawal privileges.
Wherever you put your emergency cash, make sure it earns compound interest. It’s possible that you may never have to use your cash reserves and over a period of time, the power of compound interest can build a tidy nest egg for you.
Five Great Reasons to E-file
Are you still doing your taxes on paper? If so, join the 122 million taxpayers who e-filed last year. They already know that IRS e-file is the best way to file a federal tax return.
Here are five great reasons why you should e-file your tax return:
1. Accurate and complete. E-file is the best way to file an accurate and complete tax return. The tax software does the math for you, and it helps you avoid mistakes.
2. Safe and secure. IRS e-file meets strict guidelines and uses the best encryption technology. The IRS has safely and securely processed more than 1.2 billion e-filed individual tax returns since the program began.
3. Faster refunds. E-filing usually brings a faster refund because there is nothing to mail and your return is less likely to have errors, which take longer to process. The IRS issues most refunds in less than 21 days. The fastest way to get your refund is to combine e-file with direct deposit into your bank account.
4. Payment options. If you owe taxes, you can e-file early and set an automatic payment date anytime on or before the April 15 due date. You can pay by check or money order, or by debit or credit card. You can also transfer funds electronically from your bank account.
5. E-file’s easy. Ask your tax preparer to e-file your return.
IRS Offers Tips for Year-End Giving
Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. Some of these changes include the following:
Special Tax-Free Charitable Distributions for Certain IRA Owners
This provision, currently scheduled to expire at the end of 2013, offers older owners of individual retirement arrangements (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, first available in 2006, can be used for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.
To qualify, the funds must be transferred directly by the IRA trustee to the eligible charity. Distributed amounts may be excluded from the IRA owner’s income – resulting in lower taxable income for the IRA owner. However, if the IRA owner excludes the distribution from income, no deduction, such as a charitable contribution deduction on Schedule A, may be taken for the distributed amount.
Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats amounts distributed to charities as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.
Rules for Charitable Contributions of Clothing and Household Items
To be tax-deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.
Donors must get a written acknowledgement from the charity for all gifts worth $250 or more that includes, among other things, a description of the items contributed. Household items include furniture, furnishings, electronics, appliances and linens.
Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.
To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:
- Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2013 count for 2013. This is true even if the credit card bill isn’t paid until 2014. Also, checks count for 2013 as long as they are mailed in 2013.
- Check that the organization is eligible. Only donations to eligible organizations are tax-deductible. Exempt Organization Select Check, a searchable online database available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in the database.
- For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2013 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
- For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
- The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
- If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
- And, as always it’s important to keep good records and receipts.