Watch out for these early warning signs from credit customers

Watch out for these early warning signs from credit customers

Once you have extended credit to a customer, you have a stake in continuing the relationship even if you suspect trouble is brewing. You don't want to crack down on a good customer too hard too soon; yet you don't want to be "taken" by a debtor who has become unable or unwilling to pay. The problem is distinguishing between slow payers and no-payers.

What you need is an early warning system to detect a credit problem in the making so you can stop additional sales to that customer and begin collection procedures in earnest. Here are some telltale signs of an account that is turning sour.

●    The debtor has begun paying erratically, settling up on smaller invoices while larger ones get older.

●    The debtor fails to return your phone calls or shows unusual annoyance at your inquiries.

●    Your requests for information, such as updated financial statements, are ignored.

●    The debtor places jumbo orders and presses you for a higher credit limit.

●    Despite the problems you are having, the debtor tries to coax you into providing a good credit report to another supplier.

Any one of these hints of trouble can mean it's time to turn up the heat on your collection efforts with this debtor, and make no more sales unless they're cash on delivery. Contact us for more tips.

Designate beneficiaries to avoid unintended consequences

Designate beneficiaries to avoid unintended consequences

After your death, the disposition of retirement accounts, life insurance policies, annuities, and accounts at financial institutions are governed by beneficiary designations. If those designations are outdated, unspecific, or wrong, your assets may not be distributed the way you would like. Here are items to consider.

 

Be specific and stay current. When you name a beneficiary, your assets can pass directly to that person or entity without going through a legal process called probate. Update the designations for life events such as divorce, remarriage, births, deaths, job changes, and retirement account conversions.

Think about unexpected outcomes. Be alert for the effect of taxes and unintended consequences. For example, if the money in your accounts is distributed directly to your heirs, they may be stuck with a large unexpected tax bill. For wealthier heirs, estate tax may also play a role. In 2016, the estate tax exclusion is $5.45 million and the top estate tax rate is 40%. Another concern: If one of your designated beneficiaries is disabled, government benefits may be reduced or eliminated by the transfer of assets. You may want to consult an attorney to establish a special needs trust to ensure your loved one is not adversely affected.

Name contingent beneficiaries. If your primary beneficiary dies or is incapacitated, having a backup, or contingent, selection will ensure that your assets are properly distributed. In some cases, a primary beneficiary may choose to disclaim, or waive, the right to the assets. In that case, contingent beneficiaries can step up to primary position.

Practice good recordkeeping. Keep your beneficiary designation forms in a safe location, and maintain current copies with your financial institution, attorney, or advisor.

Beneficiary designations are an important part of estate planning. Contact us for more information.

Returning home as an adult

Returning home as an adult

Are you thinking of returning to your childhood home to live with your parents? Although heading home after graduation or a divorce may feel like a setback, a temporary return to living with your parents can present opportunities to improve your financial situation.

For example, living with your parents means you can share the cost of rent, utilities, and food, resulting in reduced expenses. By establishing a realistic budget, you can make the most of these lower costs, and repay student loans or other debt more quickly. You can also build up savings for emergencies and long-term goals, such as buying a home of your own. A sound plan is to avoid additional debt while you're working toward your financial independence. You also might consider paying expenses in cash to reduce your reliance on credit and help you stick to your budget.

For best results, establish clear expectations for both you and your parents before you move in together. Consider a written agreement that outlines the financial responsibilities of everyone in the household, and what the consequences will be for not living up to your promises. In addition, determine specific milestones you want to reach before you move out, and communicate them clearly. Goals could include accumulating $5,000 in savings, or reaching a six-month work anniversary at your job.

Contact us for suggestions about how to create an achievable financial plan.

What's the difference between a credit card and a debit card?

What's the difference between a credit card and a debit card?

When you pay for clothes in a store or dinner at a restaurant, you might use either a credit card or a debit card. In your mind, they may be the same. But there are differences to be aware of.

                                                

For example, with a credit card, the money is not immediately withdrawn from your bank account. As long as you pay back the issuer within the stated period, you won't be charged interest on the money you owe. But you don't want to make a late payment – interest can build up quickly on credit cards.

In contrast, debit cards are linked to your personal bank account, so you're using your own money and the charges are automatically deducted from your account. Because you don't carry a balance on the card, you're more likely to stick with your budget and not overspend. However, you might be charged extra fees on top of interest for any overdrafts.

Another consideration: Federal laws protect you in the event you need to dispute credit card charges and usually cap your liability at $50. Debit cards offer fewer protections than credit cards, including a sliding scale of liability depending on when you notify your financial institution.

Which card is best for you? Generally, a mix of the two is a good compromise. You can use a credit card judiciously to bolster your credit, while still paying for everyday purchases with a debit card. Contact us for answers to your financial questions. We're here to help.

Work-related education costs may be deductible

Work-related education costs may be deductible

Are you going to school this fall to earn an advanced degree or to brush up on your work skills? If so, you might be able to deduct what you pay for tuition, books, and other supplies.

If you're self-employed or working for someone else, you may be able to claim a deduction for out-of-pocket educational costs if the training is necessary to maintain your skills or is required by your employer.

Just remember that even when the education meets those two tests, if you're qualified to work in a new trade or business when you've completed the course, your expenses are personal and nondeductible. That's true even if you do not get a job in the new trade or business.

Work-related education expenses are an itemized deduction when you're an employee and a business expense when you're self-employed. You may also be eligible for other tax benefits, such as the lifetime learning credit.

For more information, please contact our office.

Make better business decisions with simplified data

Make better business decisions with simplified data

As a manager, you're no doubt swimming in a constant stream of information. Fortunately, you can keep your head above water by boiling down the data into a format that's relevant, concise, and user-friendly. For instance, significant indicators can typically be gathered on a single sheet of paper. Examples include revenues by product or service line, cash and accounts receivable balances, gross profit ratios by product line for retail and wholesale businesses, and productive salaries and benefits for service businesses. If you'd like help developing a simplified system tailored to your specific needs, contact our office.

Prepare for new wellness plan notifications

Prepare for new wellness plan notifications

Wellness programs, when provided as a fringe benefit as part of a cafeteria plan, can benefit both your company and your employees. But you may be collecting information about your employees that is regulated by several federal statutes, including rules on confidentiality and nondiscrimination. Beginning in January 2017, you'll need to provide your employees with a notice stating what information you collec

t, and how it will be used, along with other details.

Review health insurance marketplace notices promptly

Review health insurance marketplace notices promptly

Health insurance marketplaces are sending notices to employers this year when employees receive advance premium tax credits to help pay health insurance premiums. The notice itself does not assess a penalty, but if you get a notice, you'll want to make sure the information is correct. You have 90 days to appeal if you believe you provide employees with qualified coverage. Contact us for assistance.

Get serious about catching up

Get serious about catching up

If you're age 50 or older, tax law has a permanent provision that lets you make extra contributions to your retirement plans. These "catch-up" contributions vary depending on the type of retirement plan. For example, if you participate in a SIMPLE, you can make a catch-up contribution of up to $3,000 in 2016, over and above the maximum $12,500 salary reduction contribution. For IRAs, both Roth and traditional, the 2016 catch-up contribution is $1,000.

Saving for a comfortable retirement is up to you

Saving for a comfortable retirement is up to you

If your employer offers a 401(k) plan, participating can mean the difference between having a sufficient nest egg and worrying about your expenses after you stop working. Tips for making the most of your 401(k) include contributing at least enough to receive the amount your company will match, and allocating your contributions between different types of investments in a way that meets your tolerance for risk while still allowing for the growth rate you need. The retirement clock is ticking. Contact us for more suggestions about ways you can save.

Who pays for Social Security and Medicare?

Who pays for Social Security and Medicare?

According to the 2016 Summary of Annual Reports by the trustees, the major source of funding for the Social Security and Medicare programs is the payroll tax you and your employer pay, or that you pay as a self-employed worker. In addition, about 13% of the funding comes from the taxation of social security benefits – those taxes you pay with your federal income tax return when you collect social security benefits and your income is above a certain amount. Other sources of funding come from the interest earned from the Treasury on the program assets, monthly premiums paid for Medicare benefits, and general tax revenue.