Acuity Advisors

Manageable Growth Should Be a Strategic Planning Focus

When a company’s leadership engages in strategic planning, growing the business is typically at the top of the agenda. This is as it should be — ambition is part and parcel of being a successful business owner. What’s more, in many industries, failing to grow could leave the company at the mercy of competitors.

However, unbridled growth can be a dangerous thing. A business that expands too quickly can soon run out of working capital. And the very leaders who pushed the business to grow beyond its means might find themselves spread too thin and burned out.

That’s why, as your company lays out its strategic plans for the coming year(s), it’s important to focus on manageable growth.

A Common Scenario

Among the biggest challenges that many “high-growth” businesses face is finding enough financing for their expansion plans. Their owners often think, “If we want to double sales, we’ve got to double assets.” Buying equipment, hardware, software, raw materials and other assets usually requires debt or equity financing — which can be good for a lender but perilous for a borrower.

Overzealous asset acquisition strategies can cause repayment problems if cash flow projections fall short. There’s often a delay between:

• When a growing company buys inventory, makes products or provides services, and pays employees (cash outflows), and
• When it receives customer payments (cash inflows).

The faster the growth, the bigger the gap. Businesses typically fund the shortfall with a credit line. And as they take on more and more debt, loan repayments can eventually consume most or even all the company’s cash flows.

Warning Signs

It’s easy to get swept up in the whirlwind of rapid growth, but it’s not inevitable. You and your leadership team can watch for common warning signs that you may be at risk of becoming a victim of your own success. These include:

An increasing debt-to-equity ratio. High-growth businesses tend to burn through cash at an alarming rate, if given the opportunity. If your strategic plan will likely drive you to consume an entire credit line, and then ask for more, watch out. Closely monitor your ratio of debt to equity. A consistent upward trend is cause for concern — even if it’s within loan restrictions.

Quickly declining profit margins. Leadership teams overly obsessed with growth tend to focus on the top line and lose sight of expenses. Low prices and an undisciplined approach to taking on any and every customer can further erode profits.

Rising complaints. High-growth companies are often inclined to overlook quality control and fall short on backend obligations, such as warranties and customer service. This typically leads to customer complaints. Meanwhile, cash shortfalls may lead to delayed payments to vendors and lenders. At some point, these parties will likely start complaining as well.

Do the Managing

Make no mistake: growing your business is an important and, in many cases, necessary goal. But if you don’t manage that growth, it could manage you — into a crisis. Contact us for help building reasonable financial objectives into your strategic planning process.
© 2022

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Shine a Light on Sales Prospects to Brighten the Days Ahead

When it comes to sales, most businesses labor under two major mandates: 1) Keep selling to existing customers, and 2) Find new ones.

To accomplish the former, your sales staff probably gets some help from the marketing and customer service departments. Succeeding at the latter may be more difficult. Yet perhaps the most discernible way a sales department can help boost a company’s bottom line is to win over prospects consistently and manageably.

Laser Focus on Lead Generation

Does your marketing department help you generate leads by doing things such as maintaining an easily searchable database of potential customers for your products or services? If not, it’s probably time to refine or possibly even overhaul your lead generation process.

Customer relationship management (CRM) software can help. When salespeople have a clear picture of a likely buyer, they’ll be able to better focus their efforts. If you haven’t invested in CRM software, or significantly upgraded yours in a while, this is something to strongly consider.

Reduce Wasted Time and Effort

There’s really no aspect of a business that can’t be improved by waste reduction. Effective salespeople spend their time with prospects who are the most likely to buy from them, not with those who might maybe buy something someday but will take a monumental effort to win over.

A worthy prospect generally has clearly discernible and fulfillable needs, a readily available decision maker, strong and verifiable financials, and a timely need or desire to buy. Apply these qualifications to any person or entity with whom you’re considering doing business. If a sale appears highly doubtful from the get-go, it’s probably best to move on.

Ask the Right Questions, Then Listen

When talking with prospects, your sales team must know what draws buyers to your company. Sales staffers who make great presentations but don’t ask effective questions about prospects’ needs are typically doomed to mediocrity.

They say the most effective salespeople spend 20% of their time talking and 80% listening. Whether these percentages are completely accurate is hard to say but, after making their initial pitch, a good salesperson actively listens to the prospect’s responses and then asks insightful questions based on solid research.

Be a Problem Solver

Your sales staff needs to know — going in — how your product or service can solve a prospect’s problem or accomplish a goal. Without a clear offer of a solution, what motivation does the prospect really have to spend money?

Preparation is key. Be sure you’re adequately investing in industry and market research, as well as the continued education of your sales team, to position yourself as a problem solver for your customer base.

The Sales are Out There

Businesses face great challenges right now in the form of inflation, rising interest rates and persistent supply chain slowdowns. Nonetheless, the economy soldiers on and there are customers out there looking to buy. Contact us for help quantifying your sales process so you can identify feasible ways to improve it.
© 2022

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Work Opportunity Tax Credit Provides Help to Employers

In today’s tough job market and economy, the Work Opportunity Tax Credit (WOTC) may help employers. Many business owners are hiring and should be aware that the WOTC is available to employers that hire workers from targeted groups who face significant barriers to employment. The credit is worth as much as $2,400 for each eligible employee ($4,800, $5,600 and $9,600 for certain veterans and $9,000 for “long-term family assistance recipients”). It’s generally limited to eligible employees who begin work for the employer before January 1, 2026.

The IRS recently issued some updated information on the pre-screening and certification processes. To satisfy a requirement to pre-screen a job applicant, a pre-screening notice must be completed by the job applicant and the employer on or before the day a job offer is made. This is done by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit.

Which New Hires Qualify?

An employer is eligible for the credit only for qualified wages paid to members of a targeted group. These groups are:

1. Qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program,
2. Qualified veterans,
3. Qualified ex-felons,
4. Designated community residents,
5. Vocational rehabilitation referrals,
6. Qualified summer youth employees,
7. Qualified members of families in the Supplemental Nutritional Assistance Program (SNAP),
8. Qualified Supplemental Security Income recipients,
9. Long-term family assistance recipients, and
10. Long-term unemployed individuals.

Other Rules and Requirements

There are a number of requirements to qualify for the credit. For example, there’s a minimum requirement that each employee must have completed at least 120 hours of service for the employer. Also, the credit isn’t available for certain employees who are related to or who previously worked for the employer.

There are different rules and credit amounts for certain employees. The maximum credit available for the first-year wages is $2,400 for each employee, $4,000 for long-term family assistance recipients, and $4,800, $5,600 or $9,600 for certain veterans. Additionally, for long-term family assistance recipients, there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit of $9,000 over two years.

For summer youth employees, the wages must be paid for services performed during any 90-day period between May 1 and September 15. The maximum WOTC credit available for summer youth employees is $1,200 per employee.

A Beneficial Credit

In some cases, employers may elect not to claim the WOTC. And in limited circumstances, the rules may prohibit the credit or require an allocation of it. However, for most employers hiring from targeted groups, the credit can be beneficial. Contact us with questions or for more information about your situation.
© 2022

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2022 Q4 Tax Calendar: Key Deadlines for Businesses and Other Employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2022. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

Note: Certain tax-filing and tax-payment deadlines may be postponed for taxpayers who reside in or have businesses in federally declared disaster areas.

Monday, October 3

The last day you can initially set up a SIMPLE IRA plan, provided you (or any predecessor employer) didn’t previously maintain a SIMPLE IRA plan. If you’re a new employer that comes into existence after October 1 of the year, you can establish a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence.

Monday, October 17

• If a calendar-year C corporation that filed an automatic six-month extension:
o File a 2021 income tax return (Form 1120) and pay any tax, interest and penalties due.
o Make contributions for 2021 to certain employer-sponsored retirement plans.

Monday, October 31

• Report income tax withholding and FICA taxes for third quarter 2022 (Form 941) and pay any tax due. (See exception below under “November 10.”)

Thursday, November 10

• Report income tax withholding and FICA taxes for third quarter 2022 (Form 941), if you deposited on time (and in full) all of the associated taxes due.

Thursday, December 15

• If a calendar-year C corporation, pay the fourth installment of 2022 estimated income taxes.

Contact us if you’d like more information about the filing requirements and to ensure you’re meeting all applicable deadlines.
© 2022

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Hey, Watch the Language! (In Your Employee Handbook)

Every company needs an employee handbook to ensure that everyone understands the policies, procedures and rules of the organization.

An Employee’s Genetic Information Is a Protected Class

The Genetics Information Nondiscrimination Act of 2008 (GINA) protects employees from discrimination based on their genetic information. GINA also prohibits health insurance carriers and group health plans from using genetic information to deny coverage.

Typical employee handbooks outline the nondiscrimination requirements of the Equal Employment Opportunity Commission to not base employment decisions on factors such as gender, age, pregnancy, race, color, religion, country of origin, citizenship, mental or physical disability, or military service or veteran status. Employers who haven’t already done so should add genetic information to this list.

In addition, ensure that you also list any factors required by state and local law, which might include political affiliation, sexual orientation, gender identity, familial status and marital status.

However, an improperly written handbook can inadvertently create a binding obligation that can be used against you.

What you don’t want is for the documents to be interpreted as an employment contract. Keep this in mind when crafting or revising your employee handbook, so you can lower the risk of legal claims by litigious employees. Here’s a list of dos and don’ts:

Don’t use phrases such as “permanent position” or “the company promises.” There should be no statements that you don’t intend, or may not be able, to honor.

Don’t leave explanations of the results and consequences of actions open to interpretation. Be clear, concise and comprehensive.

Do include a disclaimer that the handbook isn’t and shouldn’t be considered an employment contract.

Do reserve the right to use your discretion in individual cases involving policy statements or procedures.

Do reserve the right to make changes to the handbook at any time, without notice.

Do require employees to affirm in writing that they have read the handbook, including disclaimer provisions — and that they understand it’s a general presentation, not a contract.

Many states have held that employee handbooks can be enforceable contracts. Some courts have even found that handbooks create a presumption that the parties intended it to be a contract. This forces the employer to prove to a jury that a contract wasn’t intended.

However, there are instances where courts have found handbooks unenforceable as contracts for reasons such as:

- The terms were so ambiguous that the parties couldn’t have intended to create a contract.

- The handbooks were distributed to employees after they started working for the company.

An “at will” termination clause was included.

Although these exceptions exist in some states, don’t rely on them when drafting , revising and distributing handbook. It’s a good idea to get an attorney’s help when spelling out policies and procedures. By doing so, you’ll reduce the chance of a costly, time-consuming and disruptive legal battle.

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