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Monthly Archives: February 2015

Your Quick Guide to Dumping Bad Business Debt

Last week, I talked about dumping your worries in the right place. Well, there’s another thing to get rid of this week.

I hate sitting down with a business owner who got in over their head with financing. Unfortunately, it’s sometimes too late when I do — and the potential solutions end up being moot.

It’s a scary economic world right now. And it’s also a world in which good lines of credit are increasingly difficult to come by for the business owner.

If you don’t watch out, you can get into some hot water with the credit you use. I’ve seen it more times than I’d like, with my business-owner clients and friends.

I don’t want that to happen to you. It’s true, I have helped execute some near-miraculous rescues from situations like this for clients in the past, but sometimes it’s just too late when I have the opportunity to help.

So, I’ve put together a short primer on the subject, in hopes that I might be an effective resource for you in more ways than one.

Your Quick Guide to Dumping Bad Business Debt
“The man who makes no mistakes does not usually make anything.” – Edward Phelps

There’s a lot of discussion going on around the world about debt instruments and interest rates. We’re all seeing the consequences of the dangers of municipal debt.

And it’s true: most growing companies need to take on some amount of debt to fund growth, though debt at exorbitant interest rates is obviously “the wrong kind” of debt.

But choosing the wrong kind of debt for your business (or having too much debt) can be a killer to your business’ lifespan and success.

So, what is the “wrong” kind of debt to amass in business?

The following would make the list:

* Credit card debt
* Car-dealership vehicle loans/leases
* Personal loans at high rates
* A high mortgage balance

But in reality, the wrong kind of debt should be thought of as any debt that is either not necessary — or which could be refinanced at terms which are more favorable.

To remove bad debt from your business, you must plan to systematically review every outstanding loan … and try to find a way to either pay it off (without compromising growth, of course), or refinance it at a lower rate.

It will take time to organize your debts and search for alternative options that are more attractive for your business, but it will pay off in the long run.

If you have expensive debt (such as credit card balances), you should work to determine what other financing options are available to your business. If your company is profitable — or is showing strong signs of coming profitability — it’s likely that lenders will work with you to refinance at a lower rate.

And a tip: don’t think of this as a “favor” they are doing for you.

Rather, think of it as good business for the lender. These financial companies are in business to make money from loans. If you bring a good credit history and a viable business record to them, they’ll seriously consider lending you money at better terms and getting you out of the unnecessarily high payments you’re making.

Doing so will make your company all the more profitable.

Feel very free forward this article to a Waukesha County business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Waukesha County families and business owners. And we always make room for referrals from trusted sources like you.

Warmly (and until next week),

Dale Hammernik
(414) 545-1890

Hammernik & Associates

Dale Hammernik’s Key to Getting Rid of Worry Over Your Small Business

You ever lie awake at night, thinking about your business?

Yeah, me too.

Tax season, especially, keeps me and my team running a little crazy, and the adrenaline of handling so many clients, and doing it well, sometimes lasts into the night for me.

(Also, the adrenaline high we get when we find mistakes made by other preparers, or by software. Not to mention helping clients avoid this unfolding saga: http://onforb.es/1L572Kw )

But when I “wake up” in the morning after a bout of *worry*-fueled sleeplessness, splash some water on my face and grab a cup of coffee … I am often reminded that what I was worrying about just didn’t make sense.

I’ve lost too many hours of sleep as a business owner, frankly. But I’ve slept much better when I worked through this simple exercise for my worries. It’s from the American Institute for Cognitive Therapy, but I’ve modified it a bit for my own use.

So, here’s how I think you can stop worrying …

Dale Hammernik’s Key to Getting Rid of Worry Over Your Small Business
“Remember you will not always win. Some days, the most resourceful individual will taste defeat. But there is, in this case, always tomorrow – after you have done your best to achieve success today.” – Maxwell Maltz

For many people, worrying about things can become more vexing than the original problem they were grappling with in the first place.

I’m an accounting professional — so I’ll use an image I can understand: Imagine that you are facing a terrible tax situation and facing six figures of possible tax obligation. You’ve hired a good accountant in Waukesha County, and you’re praying she’s going to be able to help you. She leans over and says, “Don’t worry. I never do. I never worry about a thing. Instead, I just try to think positively.”

Now ask yourself: “Is this the person I want representing me? Someone who doesn’t worry about anything — not even what’s going to happen to her client?”

The answer, of course, is a resounding NO. You want an accountant who’s going to worry over details. And cover everything that needs to be covered, so you don’t end up in hock for multiple six figures! What you want is for your accountant to worry, and then take appropriate action so that she is prepared.

Now imagine an accountant who leans over and whispers to you, “Wanna know my secret? I never prepare for my client matters — I just worry. It’s why I’m known as such a great accountant. All I do is worry. As a matter of fact, a lot of times I actually worry myself sick and have to go into the restroom and throw up.”

Do you want this person representing you? NO! What you want is an accountant who can help you solve your problems. And that’s exactly what your worry should do for you: help you solve your problems. If it doesn’t, you’re probably participating in unproductive worry, which is unlikely to get you anywhere, except on your way to becoming overly anxious and probably depressed.

So here is the exercise which has kept me from worrying needlessly — but rather, doing it productively. I start by asking these two questions to keep worry in its proper place …

1. Is the problem plausible or reasonable? If you’re getting ready to take a trip to a national park, for instance, it’s appropriate to worry about getting accurate directions and your car tuned-up before you go. Worrying about being shot by a sniper along the way, which is unlikely, is probably a waste of time.

2. Can something be done about the problem immediately? If you answer yes to this question, then you can probably come up with an action plan to get something done that will alleviate your worry. If your cashflow is down, how can you INCREASE it by selling more, and obtaining more new clients — rather than worrying about the expense side of the coin. If your production has suffered recently, what are the positive steps you can take … rather than fixating on who to blame?

You get the idea.

Use these questions, and start sleeping better at night. I know I do…

Feel very free forward this article to a Waukesha County business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Waukesha County families and business owners. And we always make room for referrals from trusted sources like you.

Warmly (and until next week),

Dale Hammernik
(414) 545-1890

Hammernik & Associates

Dale Hammernik Reviews The Almighty KPI

Before I get to my business intel, you should know that the personal tax world was roiling late last week over some fraud detected from within TurboTax.

Here is the story: http://onforb.es/1DNkQot

Essentially, the makers of the software detected a level of fraud occurring in state tax return submissions that made them decide to completely shut down submission of those returns for a period of time. Eventually, they determined that the apparent source of the fraud was outside of their system, and have resumed filing state tax returns. It does seem that TurboTax did everything by the book, and should be (relatively) safe to use.

This doesn’t, perhaps, affect business returns overmuch (especially if we handle them for you). Again, TurboTax seems to have handled this fairly well, all things considered. But when there’s a problem or question — would you rather sit on hold with the IRS, deal with online chat help, navigate through instructional videos, etc. etc. — or deal with a human who knows you?

Worth pondering.

Now — as we move more steadily into 2015, I think we should have a clear picture of what we’re shooting for in our businesses, yes?

Peter Drucker once said “what gets measured gets managed,” and it continues to remain true — regardless of advances in technology, and the multiplicity of tools we now have.

You see, accurate measurements provide feedback and it’s (only) with this information that you can make informed calls.

Think about your own personal goals (assuming you have them!). Perhaps last year you wanted to lose 20 pounds — so what would you do? One option would have been to get on the scales this week last February (back in 2014), and then to simply compare your weight at that time to your weight this week, one year later. I doubt you’d have had much success.

Instead you’d take regular measurements of your weight between the start and end date and make informed adjustments to your diet and exercise regimen according to what the measurements told you. You’d manage the process.

Let’s take a look together at what that can look like…

Dale Hammernik Reviews The Almighty KPI
“Get a good idea and stay with it. Do it, and work at it until it’s done right.” -Walt Disney

As we think about what it would look like for us to manage our bodies, there are all kinds of connections to other areas of our lives.

You see where I’m going here: It’s exactly the same for your business. If you measure your key metrics you can manage their performance. Each and every business has key performance indicators (KPI’s), some of which are common to other businesses, some which are industry-specific, and perhaps some which the company created for itself.

These sorts of things are our bread and butter, when working with local small businesses. A sampling of financial metrics…

* Average transaction value.
* Gross profit margin.
* A measurement of a company’s efficiency during the production process.
* How much is left over after COGS.
* Gross Profit divided by Total Revenue.
* Net profit percentage.
* The amount of profit for every $1 of revenue generated.
* Net Profit divided by Total Revenue multiplied by 100.
* Debtor days or receivable turn days.
* How long your customers take to pay you. (The sooner your customers pay, the sooner you can get that cash working for you.)
* 365 (days in the year) divided by (Sales on credit or invoice divided by Average Accounts Receivable).

More industry-specific KPI’s might include:
* Table turns per night.
The number of times a restaurant is able to sit customers at a table.
* Utilization.
The number of hours a machine in the production line can run.
* Rejection rate.
The number of defects rejected in an assembly line.

Non-specific KPIs might include:
* Customers won/lost.
* Customer complaints/product returns.
* Staff sick days.

You must absolutely integrate the RIGHT measurements to provide proper feedback on your business’ performance.

I hope this gets your juices flowing. Many of these financial indicators are things that WE can help you to implement … if you let us!

Feel very free forward this article to a Waukesha County business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Waukesha County families and business owners. And we always make room for referrals from trusted sources like you.

Warmly (and until next week),

Dale Hammernik
(414) 545-1890

Hammernik & Associates

Hammernik’s 2015 Tax Time Document Chase List

Well, our offices have officially started jumping.

(Not literally, of course.)

The IRS started accepting electronically-filed returns about two weeks ago, and we have already been working long hours to thoughtfully and thoroughly serve the clients with whom we’ve already met.

Today, I have something that will help that be YOU.

As I’ve mentioned before, if you are one of our business clients, we are also glad to handle the preparation of your personal tax return. Depending on your business entity, we may not be able to file your personal return until your books are in order. Start that process now.

[And, of course, this is also something we are glad to help you with. Don’t try to “go it alone” in these areas … it can be a 4-5 figure mistake!]

Filing your taxes on your own is becoming much less fun for regular taxpayers, even with nice-looking softwares on the market which purport to make it “easy” for you. This is ESPECIALLY true for business owners.

I truly do pity those inexperienced ones who try to muddle through all of the different codes and forms on their own, without devoting even a week’s labor to the transaction. It really doesn’t pay to “go it alone” for certain tasks.

So, I’ve put together a handy little list of what you’ll need to bring in, which is something I make a point to provide each year. There may be certain situations where we’ll need other documentation to get you even more deductions. But, of course, we’ll let you know about that, should the situation arise!

Let me know your thoughts … and of course, if you’d like to talk this over with us, we’re here for you: (414) 545-1890 (our phone number) is your friend.

Hammernik’s 2015 Tax Time Document Chase List
“My ability to concentrate and work toward that goal has been my greatest asset.” – Jack Nicklaus

Yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our clients. Really, this is for ensuring that we’re able to help you keep every dollar you can keep under our tax code.

Even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…

Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number

Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation

Health Insurance Information (New for 2015)
* All 1095-A Forms from marketplace providers (if you purchased insurance through a Marketplace)
* Existing plan information (policy numbers, etc.)
* If claiming an exemption, your unique Exemption Certificate Number
* Records of credits and/or advance payments received from the Premium Tax Credit (if claiming)

Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses

Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses

Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits

Automobiles
Personal property tax information
Department of Motor Vehicles fees

Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees

Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income

Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions

We hope this helps, and we really look forward to seeing you in here in 2015!

Feel very free forward this article to a Waukesha County business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Waukesha County families and business owners. And we always make room for referrals from trusted sources like you.

Warmly (and until next week),

Dale Hammernik
(414) 545-1890

Hammernik & Associates