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Tax planning: keep priorities in focus to ensure success

“When a CPA simply files your tax return and doesn’t provide strategic tax planning or advice, you may not be getting your money’s worth.” – Forbes

I couldn’t agree more. Unfortunately, far too often our priorities get buried in the pace of business today. Financial planning is muddled, tax planning opportunities are missed, and tax return filing becomes a hassle. It doesn’t have to be that way!

Follow these four simple principles to keep priorities in perspective in focus and ensure your success:

1) Financial planning should always be the first driving force of personal and business financial transactions. Plan first; take action later.

2) Tax planning is an important part of overall financial planning. Recognize that effective tax planning contributes a significant portion of your accumulated net wealth over the long term.

3) Solid record-keeping is the essential management tool to ensure success. Today’s software now makes this easy and inexpensive.

4)  The tax return is an easy and natural part of the record-keeping process. The tax return is a management report produced by well designed accounting software with little extra effort.

If you’ve been feeling “stuck” in your tax and financial planning, you are not alone.

I invite you to open a discussion, without obligation, on what it would take to get back on track toward your financial success.

Client Relationship Management (CRM) platform for sole practitioner

Two years ago I wrote a short product review article for CPAs on the topic of Client Relationship Management Software (CRM) that was based on my own experience trying to find a suitable platform for my own sole practitioner financial advisory business. The article titled Tech Product Review: Client Relationship Manager (CRM) Software was published in July 2012 by the New Jersey Society of CPAs. Since then, I’ve reported that the field remains unsettled and that I am personally not satisfied with any of the available solutions.

Apparently I am not alone in my discontent. The following passage comes from an undated white paper at “A recent Butler Group report found that 70 percent of CRM implementations fail. A Gartner study found that approximately 55 percent of all CRM projects failed to meet software customers’ expectations. In a Bain & Company survey of 451 senior executives, CRM ranked in the bottom three categories among 25 popular tools evaluated for customer satisfaction. The findings of a poll of 100 SME organisations with CRM implementations revealed that while 60% of sales directors insist that CRM is fundamental to their sales processes, a quarter have lost customers directly through their ineffective use of CRM technology”.

My conclusion for the sole practitioner: Better organization of business information would help any professional in any occupation but CRM platforms are “overkill”.

Now I am focused on bringing a practical working solution into a Microsoft Office 365 platform. It shouldn’t be so difficult yet I find little evidence that this has been done successfully by others already. The goals are relatively simple:

  • A system that is Outlook contact-centric but links to other documents
  • Cloud-based and available across platforms
  • Allows for occasional sharing of specific items as needed (but not full time team access or collaboration)
  • Record details of interactions for easy retrieval later
  • Allow for easy future calendar prompts that link to the contact and the prior tasks/notes
  • Incorporates a financial planning “fact finder” that is easy to access as a core component
  • Does not require launching another program just to see basic information
  • Does not slow down basic Outlook functionality
  • Does not involve another monthly fee (I have enough of those already)

Investing an inheritance

Yesterday I handled a consumer question about investing an inheritance and published the Q&A after-the-fact. The amount of money being passed to the baby boomer generation is phenomenal and it is a huge impact on many people’s lifetime financial success.

One recent study by the Bureau of Labor and Statistics indicated almost 1 in 3  American households could expect to receive a wealth transfer through inheritance that on average, will eventually account for 40 percent of their net worth. Yet preparation for this major financial life event is lacking or missing entirely. We can surmise why this is the case; planning for an inheritance may seem greedy or in poor taste. Yet the lack of planning is clearly a disaster with 90% of all collective inheritance money disappearing within 3 generations.

What can be done to get mass affluent families to be more efficient in planning for wealth transfers in advance? I don’t know but I’ll keep reading what others write on the topic.

How to fix the small business accounting fiasco

The IRS has long known that small business record-keeping is so bad that if all of these tax returns were audited, more than half of 401(k) plans would be disqualified. At a recent CPA convention, a speaker noted that he had not yet heard of a firm that could meet the IRS requirements to qualify for the small business health insurance tax credit. Instead, the focus on addressing the symptoms – deficiency notices, penalties, complaints and lawsuits. Accountants know that small business and non-profit records are a mess but that these clients are not willing to pay an accountant to fix the problem just to satisfy the government or their bank. We continue to operate in a state of denial or ignorance of the impact of our sloppy work. Meanwhile, hidden from view, overall business performance suffers.

What is the solution? How could small business owners be convinced that it in their best interest to keep better records? The answer may simply be in demonstrating that better accounting is directly linked to improved performance and increased profits. As soon as business managers view accurate data as a tool to their success the resistance evaporates and accurate accounting becomes a core part of the organization’s mission. Even one person businesses routine gain transformational insights simply by having more reliable information about the details of their own operations.

Examples are everywhere. One unprofitable retail firm came to me for help in late 2012. I suspected internal theft but the owner did not. Within months of upgrading their record keeping system the store swung back into profitability and continues to improve with better inventory management, pricing policy and purchase management almost a year later.

Another business performed services for online insurance agencies. It relied on data provided by third party Internet service providers but was having trouble reaching the performance levels of earlier periods. By adding an additional layer of management review of data we quickly discovered that they were not receiving credit for some of the business they processed.

How could better information and internal performance data improve your results? As soon as this possibility becomes clear the steps to improve record keeping and management reporting follow naturally. Accountants who take the extra time to show clients how to transition the accounting function from an expense to an investment in future profitability are doing their clients an enormous service. Tomorrow’s cloud-based small business accounting systems lend themselves to this role while allowing efficient data analysis and cross-platform application to extract maximum value with minimal effort.

Thought vs. action

One of the most qualified financial advisers I’ve known was such a perfectionist that he spent most of his time researching, critiquing, testing, revising different business concepts that he almost never got around to actually doing anything that would build his business. On the opposite side of the spectrum, I am inclined to jump right in and learn as I go along. Those who work with me may become frustrated by sudden and often dramatic changes in business strategy triggered by gains in the learning curve.

We live in an “action beats inaction” culture. Leadership in our society requires that we heed the call “Don’t just sit there, do something!” Yet I try to give ample weight to the counter eastern philosophy that says “Don’t do something, just sit there”. There is a third philosophy that says thought and action are one and the same once we reach a state of spiritual transcendence; I don’t have enough grasp to even comment further on that.

Underlying the action/thought discussion for me are two core values that often seem to be in conflict. Being a force of positive disruptive societal change seems to require plenty of action ahead of the curve. It means going it alone on untested positions; testing and adjusting positions as you go along. Yet a core value of tolerance and acceptance of diversity requires restraint. Keeping quiet and uninvolved often turns out to be the smartest thing we could do. I would go as far as to say that most of the professional recognition and financial success I’ve had is directly attributable to the action principle and that most off the goodwill and perception of leadership skill is attributable to times I’ve demonstrated the thought principle.

The important thing – and the purpose of this post – is to acknowledge that somewhere there must be an optimal balance between thinking and doing. Finding that balance is likely to remain a long term challenge for some of us.

A small business’ most valuable asset

When I speak with a small business owner, the topic of managing their most valuable asset often comes up. Usually, I’ll provoke the discussion: What really is your most valuable asset? What are you doing to protect it? What are you doing to grow it?

At first, they are surprised to learn that I’m talking about the company’s data; their customer data, performance data, market behavior data, etc. Small business owners are more accustomed to hearing about the business risks tied to the value of their employees or the risks to the business if the owner is unable to perform. Yet for an increasing number of businesses, the value of the data they possess outweighs every other asset.

I then point out that a number of other firms are already making a living capitalizing on your data: Google is the best example but there are plenty of others: Yahoo, Yelp, Patch, Bing, etc.. I emphasize that you and you company’s data are the assets that makes Google valuable. But what about capitalizing it for yourself? It is surprising how many of us have not thought about this.

The art and science of small business data management is obviously in its infancy. But there are things a small business owner can do – right here, right now – to lock in and grow the value of this phenomenal asset. The basic steps are to recognize what’s there, capture and store it, and then find ways to mine it. Beyond that, it makes sense to look at the software platforms and internal structure that develops and uses this information, and the most obvious ways that it might be improved.

I expect to write much more on the topic of scientific data management for small businesses. For now, perhaps just introducing the concept is enough to get things moving in a positive direction.


A funny thing happened on the way to the forum, the NJSCPA forum

A funny thing happened on the way to the forum. That’s the NJ Society of Certified Public Accountant’s online discussion forum. I was involved in an online discussion about the unauthorized practice of law and how that affected me. What I discovered instead was how rapidly the positions of the U.S. bar associations have changed, largely in response to increased public involvement in social media. The fact is that less than three years ago the legal profession was still attempting to keep do-it-yourself services at bay and had taken a series of actions to protect this domain. Now it is clear that the industry must embrace, and perhaps even heed the lead role of some segments to web-based platforms.

It is clear to me – although not yet documented as plainly in public media – that our courts will not be able to successfully prosecute a web-based firm for the infraction of impeding on the realm of it own state-authorized lawyers. While there is still some doubt remaining in the mind of sitting judges, the fact it that this world has fundamentally changed and most lawyers are already on-board with the new realities.

I expect we will be reading more about this in mainstream media over time. Meanwhile, I am likely to include some specific examples in my coverage of the employee benefits practice in upcoming articles. The new post is a working sample.


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