BIDaWIZ Blog » FINANCIAL ADVICE

Preparing For Rising Business Costs In 2015

The BIDaWIZ Team — Fri, 10 Oct 2014 21:07:35 +0000

In the upcoming year, most businesses will face higher costs for shipping, insurance, health-care, and labor. The economy is expected to grow at a 3.1% rate versus 1.9% in 2013, which should offset some of these rising costs. What costs can you expect to rise the most in 2015?

Shipping costs to rise with a growing economy
If you’re shipping using trucks, expect a 6-7% increase as companies need to meet new regulations and the demand is currently outweighing the supply. Rail freight will also increase, albeit closer to 5%. The cheapest option for shipping in bulk internationally will continue to be via sea. However, shipping via sea may cause additional delays as there is further congestion in the ports. Regular mail costs should also rise by 3% with overnight delivery rising closer to 4%.

Health-care costs to rise the most for prescriptions
Employers can expect to pay at least 3% more this year than they did in the previous year as a result of rising health care costs. The health care exchanges will keep costs from rising at a higher rate in future years. Higher co-payments and deductibles will also offset the rising expense. Employers and employees should also anticipate that prescription drug costs will increase at a whopping 10%+ as the cost for specialized medicines faces supply constraints.

Modest increases to labor costs
Salary costs should increase in step with the annual expected pay raises or 2.5% as the labor market continues to improve. IT and professional services should experience the highest rise in wages. Office rents should increase in-line with salary increases or 2.5%. However, it’s important to note that office rents can vary drastically by business location.

General & administrative expenses
Property and casualty insurance premiums should rise about 3%. However, business interruption and cyber liability insurance should increase between 3% and 5% due to the growing popularity of these policies. Directors and officers insurance will also rise, but much less than in the prior year or closer to 5%.

As for professional services, accounting fees may rise as increased regulations will demand more time on company engagements as was the case this year. Legal rates should remain flat.

Travel and entertainment expenses should increase around 2-5%. Hotel supply issues and new fees may result in closer to a 5% increase. Airfare should only modestly increase as fuel costs are expected to fall in 2015 and carriers continue to streamline expenses.

More Questions? Ask your business planning questions or find a good accountant online.

The Best Travel Apps For Business Travelers

The BIDaWIZ Team — Fri, 05 Sep 2014 14:58:47 +0000

Business travel in the U.S. is expected to grow again in 2014 or up 6.6% to $289.9 billion globally as it did in 2013. This projection provided by the Global Business Travel Association (GBTA) should gain the attention of frequent business travelers as their employers may be sending them on more trips throughout the rest of 2014 and into 2015. Whether you love it or hate it, you should be should be using these great apps to help you manage your trip.

An easy way to impress business colleagues
In many instances, actual work is only part of business travel. You may need to impress existing or prospective clients with exciting activities. There’s a new app called Peek that directly addresses this important need. The app walks you through a personality quiz taking into consideration user preferences such as museums, sporting events, and restaurants. The quiz can easily be tailored to any individual, such as an important client. The app has real-time booking options, and users can search a calendar for events on specific days and review recommendations from top chefs and famous personalities.

Getting compensated for cancelled or delayed flights
An app called AirHelp, helps travelers determine what they’re entitled to when their travel plans are cancelled or disrupted. The company has a whole team of attorneys that will work on your claims for you and it’s typically resolved within six to eight weeks. The payout typically averages $600 per claim.

Book a last minute flight at a reasonable price
Whether you’re the business owner or simply an employee, you’re not going to want to spend an arm and leg to book last minute travel. Luckily, there’s an app called Flight Tonight that makes it very easy to book last minute flights at a relatively low cost. The application pools together discounted fares from your departure airport within the next 24 hours.

An instant business itinerary
This is one of those apps that you probably heard about or saw it mentioned by one of your connections on Linkedin, but never bothered to check it out. Let’s just say, you’re missing out. This application is considered to be a “life saver” to some as it creates an organized itinerary based on your flights, ground transportation, hotel reservations, and meetings. Basically, you’re able to forward all of those confirmation emails to your TripIt account which creates an itinerary for you. You can also add several alerts related to your travel. It’s a free app unless you sign up for the Pro edition (additional services) which costs $49 annually.

Tracking your flight
These are two apps that are great for tracking your flight. The apps provide very useful data such as departure and gate changes as well as baggage claim numbers. They also have statistical information for each flight (expected takeoff & landing times) so you have an idea of what to expect in terms of real delays. FlightTrack also offers a premium version at $4.99 with additional features. Of the two apps, FlightTrack has the friendlier user interface.

Lost at the airport?
Unless you’re flying into a Caribbean island, it’s not all that hard to get lost at the airport and not know where that bathroom or nearest Starbucks is before you takeoff. Gateguru (part of TripAdvisor) solves that problem and provides a comprehensive listing of amenities and services at over 150 airports.

Getting through customs quicker
The U.S. Customs and Border Protection Agency recently released a Mobile Passport Control app, which speeds up the long dreaded customs process. Specifically, U.S. and Canadian citizens will be able to utilize a self-created profile within the app that will generate a QR coded receipt to present to the customs officer. This new app is in addition to the Automated Passport Control self-service kiosks located at many airports.

More Questions? Browse Answers or ask your business questions online.

Tags: business travel questions, business questions, business tax questions, Ryan Himmel

Are You Following The Rules When Paying Terminated Employees?

The BIDaWIZ Team — Fri, 08 Aug 2014 21:07:47 +0000

All businesses go through employee turnover at one point or another. Employees either voluntarily quit, are laid off or fired, or tragically pass away. In all instances, the business is ultimately responsible for when and how each employee is paid for their time at the firm.

Employees that quit
Employees that voluntarily leave your company are still required to be paid for the services that are rendered. In addition, payment is not necessarily always required to be paid within the normal pay cycle. Certain states such as California require payment within 72 hours from the time the employee announces their resignation from the job. Employers in California that don’t follow these rules may find themselves paying penalties in an amount that assumes the employee is still employed. For instance, the waiting time penalty is an amount equal to the employee’s daily rate of pay for each day the wages remain unpaid, up to a maximum of 30 calendar days.

Did you fire or layoff employees?
Most states require that employers pay employees that are involuntarily terminated as soon as possible. Some states even require that the employer remit payment within the same day. States with this policy include California, Colorado, Illinois, Massachusetts, Missouri and Montana.

What about unused vacation pay?
State rules also vary as it relates to unused vacation pay. Certain states such as California require that employers reimburse employees for unused vacation accruals at termination. Other states (Alaska, Arkansas, Arizona, Connecticut, Delaware, Hawaii, Iowa, Idaho, Kansas, and Kentucky) allow the company to set their own policy as it relates to unused vacation pay.

What if an employee passes away?
This situation isn’t nearly as black and white as is the case if the employee is voluntarily or involuntarily terminated. Many states have specific dollar limits in how much can be paid as per the regular pay cycle even if additional funds are due. For instance, Massachusetts limits payment on behalf of a deceased employee to $100. Please also note that FICA is still supposed to be deducted from payments on behalf of the deceased employee in the current year. However, future calendar year payments are not subject to FICA. In case you’re wondering, the recipient of the payment is usually determined by court order or by state provision.

More questions? Browse answers or ask business questions online.

Tags: business questions, firing employee questions, small business, Ryan Himmel

Why You Need A Succession Plan For Your Business

The BIDaWIZ Team — Wed, 30 Jul 2014 05:17:44 +0000

The fate of many small businesses often lies in the hands of only a small number of individuals. Despite this fact, many owners do not have a succession plan. This is also troubling given that recent census bureau data suggests that a third of small business owners are 55 or older and about a quarter is family-owned. How should you be thinking about succession planning for your business before it is too late?

Do you have a family-owned business?
Succession planning with family-owned businesses may appear to be fairly straight forward. However, that may not always be the case as the children inheriting the business may not necessarily have the key leadership qualities to continue to move the company forward. In addition, these owners sometimes intentionally overlook their children’s weaknesses to avoid what they believe will be an awkward future conversation. However, planning ahead and communicating these weaknesses to your successors are recommended to ensure a smooth transition. Successors will have the opportunity to properly address these weaknesses with training before it is too late. In addition, there may be an opportunity to collectively identify key personnel to mentor your successors. In the instance that multiple children are inline to take over the business, hiring an independent consultant can increase the chances for a seamless transition.

Succession planning for other closely held businesses
Businesses that do not have a direct successor by blood may need to do more work in planning for the future. In many instances, the owner of the company may own a significant portion of the business with the intention to sell. Unfortunately, most employees will not have sufficient capital to purchase the business. There are ways around this issue such as instituting an employee stock ownership plan (ESOP). However, that may not be an option for businesses in which the valuation is difficult to determine and hiring an appraiser is too costly.

Selling your business or merging with an external party should also be considered if you cannot identify the right person to lead the business internally. You should be prepared well in advance to determine the right acquirer both from a cultural and financial perspective. You may not have to go very far to identify the right acquirer. For instance, they may be a company that you’ve developed a relationship with over time and the actual acquisition is an extension of the collaboration work that your two companies are already working on together. Typically, this is the best case scenario as the time to close will be short and there is an existing meeting of the minds.

More Questions? Ask your business questions or find a bookkeeper online.

Tags: business questions, succession planning, small business, Ryan Himmel

Is Your Business Setting Prices Too Low?

The BIDaWIZ Team — Fri, 25 Jul 2014 20:20:56 +0000

Companies that are not actively exploring, testing and implementing new prices for their products or services may have difficulty sustaining their business over the long-term. Specifically, businesses that price their products or services too low will have difficulty reaching profitability. Those that raise prices too high will struggle to achieve their customer growth goals set forth in their business model. Finding the right price requires constant evaluation.

Explore your current prices
If you set your prices once and never explore changing it again, then it’s more likely than not that they aren’t set correctly. Furthermore, it’s likely that your prices are too low for the product or service you’re offering. For instance, if you’re expanding your business and increasing headcount, then the added resources should be reflective in the value of the product and thus higher prices. It may even be that your prices are so low right now that you’re turning away customers that suddenly believe you’re selling a low quality product or service.

Evaluate your opportunity to change prices
After taking stock of your current prices, the next step is to evaluate them as it relates to both internal and external factors. From a company-specific perspective, you need to examine your current and projected costs across product and service lines. For instance, if your business typically generates 50% gross margins and headcount costs will increase by 10%, you’ll want to try to account for that difference with higher prices.

Businesses must also take note of the key external factors that impact their pricing strategy such as current market conditions and the competitive environment. If you’re providing professional services and the competition is shifting to offer more services for a lower total cost as compared to traditional hourly pricing, you may want to experiment with new prices. We’re not suggesting that you necessarily follow the market, but rather adjust your prices to reflect the value of your services as compared to the competition.

Implementing new prices
In many cases, it is not very difficult to reach the conclusion that you need to adjust prices. Implementation on the other hand requires a thoughtful approach and a clear channel to receive feedback. Your clients will understand the price increase if you can explain the thought process and the benefits they will receive from the change. In that way, you need to be very careful in how you send the news to your clients. In addition, you may want to survey your clients for their feedback, document it and analyze the responses over time.

More Questions? Ask your pricing strategy questions or find an accountant online.

Tags: business questions, pricing strategy questions, small business, Ryan Himmel

What Forms Do I Need To File To Hire Employees?

The BIDaWIZ Team — Fri, 13 Jun 2014 21:02:46 +0000

There are a whole host of administrative tasks that you will need to consider as you begin to hire employees. It varies by state, but we’ve provided a list of legal and tax requirements that you should start to think about to ensure compliance at the federal and state levels. Please note that there are payroll and professional employer organizations that can assist with these requirements.

Employer Identification Number (EIN) – To obtain an EIN, you must file Form SS-4 with the IRS. You can easily download the form from the IRS website or apply online here.

Workers’ Compensation Insurance – You should have workers’ compensation coverage to protect your employees who might suffer on-the-job injuries. Workers’ compensation insurance is required in most states unless you meet an exception.

Payroll & Withholding – You’ll need to withhold a portion of employee income and deposit it with the IRS. You will need to file Forms 941, 944 and 945 for federal withholding as detailed here.

W-4 Forms – You need to have your employees complete IRS Form W-4, Withholding Allowance Certificate. In addition, you should ask employees to fill out a new W-4 form each year if they want to change their allowances.

Form I-9 – U.S. Citizenship and Immigration Services requires employers to use this form to verify that every employee they hire is eligible to work in the United States.

This list should provide you with a framework of the administrative tasks that lie ahead as you grow your business and hire employees. Keep us posted on your progress.

More Questions? Ask your payroll questions or find an accountant online.

Tags: business questions, payroll questions, small business, Ryan Himmel

Tips For Forming a Board of Directors For Your Business

The BIDaWIZ Team — Fri, 30 May 2014 20:14:50 +0000

Many companies need guidance and support from the board of directors in order to survive. It’s up to the management team and specifically the CEO to come up with the best possible combination of directors to become part of the board. Yet, many CEOs, including Steve Jobs, failed to identify the most appropriate board members to govern the management team.

Who should be on your board?
It’s typically the CEO of the company, substantial outside investors, a highly respected advisor with industry expertise/contacts, and a noted accounting or financial executive. It should always be an odd number of members to account for ties when voting on matters. That’s the basic foundation of who should be on your board of directors, but there are many other factors to consider.

Make sure the board members will be committed
For early stage companies, only elect directors that can commit to a least 5 hours of in-person meetings per month. However, most director meetings will last 2 to 3 hours. It is also critical to have very productive meetings in that only the most critical items are addressed and discussed. It’s never a good sign if the management team is more interested in impressing the directors with fancy charts and graphs, then actually addressing the areas that the directors can provide the most value.

In addition, if the company is in a period of crisis or there is a deal on the table, the meetings may be more frequent. This should not be the norm though. When the company reaches profitability, the board may then elect to meet bi-monthly and later quarterly. Thus, it’s important to explain to the prospective directors that the commitment will be front-end loaded.

Understand all of the duties of the board
The board of directors will be primarily responsible with overseeing the management of the company. This includes: monitoring organizational performance, corporate strategy initiatives, capital deployment, new investments, the company road-map, reviewing the SWOT analysis, advising and mentoring the CEO, overseeing board nominations, and reviewing corporate governance/policy.

Provide the appropriate financial incentives
The company insiders and professional investors aren’t compensated for their time on the board; at least in the early stages. Independent directors will typically receive 0.25% to 2% of equity that vests of 2 years and sometimes longer. The reason 2 years is typically used is because most of the time and work that the directors will need to commit to, occurs within the first two years. However, that can vary by company and largely depends on the road-map.

Elect a board that won’t be afraid to challenge you
The CEO reports to the board of directors. As such, the CEO should be ready for board members to challenge company proposals when necessary. This is encouraged as it fosters a culture of embracing the collective wisdom of the group and enhances discipline.

More Questions? Ask your corporate governance questions or find a startup advisor online.

Tags: corporate finance, corporate governance, small business, Ryan Himmel

Do You Have The Best 401K For Your Employees?

Ryan Himmel, CPA — Fri, 16 May 2014 19:16:50 +0000

Retirement accounts are typically your employees’ most valuable financial asset, with the exception of their homes. Yet, employers don’t always select a 401(k) plan that provides the most value and has the lowest fees. The consequences can be devastating to your employees’ retirement accounts as was recently illustrated in a study conducted by the Center for American Progress. The findings suggested that even modest fees of 1% of assets can wipe out $70,000 in retirement account savings. Fortunately, there are low-cost 401(k) providers in the market that specifically target small businesses. Last week, we had a chance to meet with Robby Forsythe, from The Online 401(k), to learn more about their low-fee based 401(k) plans.

Please explain your company’s value proposition to small businesses?
The Online 401(k) provides low-cost, easy to use, web-based 401(k) plans for small businesses. By sponsoring a 401(k) through our company, businesses attract and retain talented employees and save on corporate taxes. Furthermore, we work with each business separately to design a plan to meets their needs.

We also have a transparent flat-fee pricing structure and we don’t require minimums or employer matching. There are no hidden fees and we don’t charge a percentage of your 401(k) balance for plan administration. This helps to keep your investment costs very low.

What specific types of companies are well suited for your service?
We focus exclusively on serving small businesses. Of our 7,000+ clients, most have between 1 and 30 employees. We work with everyone from medical offices, to software developers, to corner stores. As long as the employees have internet access to view their 401(k), the company is a great fit.

What levels of support do you provide your clients?
We’re an online service, but all of our clients have a dedicated support specialist here at The Online 401(k). That means that whether you’re an employer or employee, you’ll be able to reach the same human being by phone or email each time you have a question.

How is your company able to provide flat-fee pricing?
The fact that we only charge flat fees, and never make any money through asset fees makes us very different from other 401(k) providers. We’ve managed our cost structure in such a way and grown quickly enough that we’re able to provide flat-free pricing.

What types of investment options are available to plan participants?
Our investment platform gives you access to over 26,000 mutual funds, index funds, and ETFs. We also offer turnkey options that help to make things easy and limit the employer’s fiduciary responsibility. If your company would prefer to work with a local investment advisor, we can accommodate that as well.

Can you provide an example of a business that benefited from your service?
I’ll provide two examples. I recently helped a tech startup company who was aggressively recruiting talent. The fact that they didn’t offer a 401(k) was becoming an obstacle. We designed a simple plan that keeps costs low and helps them land excellent candidates.

I also just worked with an orthodontist who had a huge tax bill each year. We designed a plan that allows him to efficiently reach his maximum personal benefit of $52,000 in tax deferred savings annually.

How should a business contact you if their interested in learning more?
They can contact me directly. I’d love to learn about their business and help to design a 401(K) solution to meet their needs. My name is Robby Forsythe and I’m a Senior Retirement Plan Consultant. My direct number is 415-593-5832 and my email address is rforsythe@theonline401k.com. You can also visit us here.

Tags: retirement planning, 401(k), small business, Ryan Himmel

Cash Flow Optimization To Purchase Capital Equipment

The BIDaWIZ Team — Fri, 07 Feb 2014 23:01:05 +0000

You’re facing a common problem for businesses that need to invest in capital equipment to grow. You know your business will grow if you purchase additional equipment to meet demand, but you simply can’t afford it because you don’t have enough cash flow. Most businesses in this situation should explore these three options: 1) Optimize revenue opportunities, 2) Streamline costs and/or 3) Seek outside financing/capital.

Optimize revenue opportunities
New equipment may certainly add to your revenue over time. However, there may also be ways to increase revenue using your existing equipment. Specifically, evaluate your clients and list them in order of profitability to your business. Those at the bottom or the least profitable clients, should be replaced with better clients. This strategy will increase the revenue per client or profitability for the business and thus you’ll have more cash flow for future capital equipment purchases.

Streamline costs
This would mean reducing non-essential expenses such as certain administrative and redundant costs. You’ll need to review all of the costs in your business to complete this process. Please note though that this cost-cutting strategy may not provide enough cash flow to purchase new equipment right away. Usually, cost cutting programs take time to provide substantial savings.

Seek outside financing/capital
If you’ve explored the two above options and still don’t have enough capital to invest in new equipment, you can always seek financing from a lender. There are many banks and financing companies that provide equipment loans to businesses. You’ll just need to make sure the terms of the loan are favorable when considering the return on investment for purchasing the new equipment. Another option is to seek an equity investor such as a strategic partner. There may very well be someone in your supply chain such as a supplier or client that will invest in your business to fund the purchase.

More Questions? Ask your questions about funding capital equipment purchases.

How Can Small Business Owners Save On Health Insurance?

Dave Bennet — Thu, 05 Dec 2013 21:00:57 +0000

If you’re running a small business, you know how important it is to save money. You can conserve funds on office supplies by getting them for free from major retailers by way of rewards programs. Social media marketing is also a great, low-cost way to save on advertising. In addition, there are plenty of free software options that perform just as well as the big brand names, but at a fraction of the cost. One area that’s not so easy to conserve money in, however, is health insurance. There’s a lot of uncertainty surrounding the Affordable Care Act for small businesses, and even though the employer mandate has been delayed for a year, it’s a reality you’re eventually going to have to deal with. Here are five ways to cut healthcare costs at your business.

1. Take Advantage of Affordable Care Act Discounts
Although criticisms of the Affordable Care Act have gotten a lot of press recently from individuals and business owners alike, there are a few nuggets that small business owners can certainly enjoy. For one, you get a health insurance credit of as much as 50% of the cost for your employees in 2014 as long as you pay at least 50% of the employee premium. This is good for all businesses with fewer than 25 employees whose average wages are under $50,000.

2. Offer Fewer Benefits
Instead of eliminating healthcare entirely, which may make you less able to attract qualified candidates, consider offering fewer benefits. You could eliminate or reduce vision or dental coverage, both of which are appealing to employees, but by no means considered standard. According to a survey conducted by Savitz, an employee benefits group, it costs a business $646 on average annually to offer family dental coverage in 2012, but only $249 to offer individual coverage. With small tweaking to your benefits arrangement, you can still be appealing to employees, while significantly cutting costs.

3. Raise Premiums
Raise the employee contribution for your health insurance plan by asking your staff to pay, for instance, 50% of coverage costs instead of 35%. Just be sure to inform your staff well before you plan to implement the change and keep the increase minimal. Partner this change with other changes that add value for staff, but won’t significantly affect your bottom line. For example, you could offer telecommuting or flexible work hours. Announce both changes simultaneously so as to minimize push-back and complaints.

4. Encourage Your Employees to Get Healthy
Encourage employees to get healthy with an employee wellness program, which can reduce costs by decreasing the number of times your staff visit the doctor. A wellness program may focus on dietary and nutrition advice or include a free or discounted fitness center membership. You can even start off simply by providing a healthy choice of snacks in the break room. Organizing a group exercise or jogging program is another effective and low-cost idea as well. The website Wellsource reports that the average cost for a wellness program per employee is $160. However, according to research conducted by Harvard University, businesses saw medical expenses go down $3.27 for each dollar spent on a wellness program and the cost of absenteeism fell by $2.73 for each dollar spent.

5. Participate in a Purchasing Cooperative
You can also cut health insurance costs by participating in an existing health insurance purchasing cooperative run by your state; 22 currently have them. This is a better alternative than setting one up on your own, which can be time and cost-prohibitive. Participating in a cooperative allows you to pool your purchasing power with other small business owners in your state in order to procure health insurance for your staff at lower rates. The cost to provide plans to employees through a cooperative will depend on how many employees you have, the type of coverage you want to provide, and the state you live in. You might find yourself with more plan options as well.

Final Remarks
By choosing not to offer any health insurance to your staff members, you face several risks. If you employ more than 50 people, a health insurance penalty of $2,000 per employee (after the first 30) is imposed in 2015. Not to mention the fact that qualified candidates may choose to work where benefits are available, instead of at your business. Since the road ahead is still a bit unclear, your best bet is to provide insurance for your staff, but cut its costs wherever you can.

Do you know of any other ways small business owners can save on health insurance?

More Questions? Ask your business health insurance questions or find a cpa online.